To: From: Liz Brady/OAG Date: 11/12/2013 01:31 PM Jennifer Meale/OAG@OAG, Trish Conners/OAG@OAG Subject: Fw: REMARKS AS PREPARED FOR DELIVERY BY ASSISTANT ATTORNEY GENERAL BILL BAER AT THE CONFERENCE CALL REGARDING THE JUSTICE DEPARTMENT 'S PROPOSED SETTLEMENT WITH US AIRWAYS AND AMERICAN AIRLINES ----- Forwarded by Liz Brady/OAG on 11/12/2013 01:31 PM ----From: To: Date: Subject: "Myers, Emily" "Myers, Emily" 11/12/2013 01:19 PM FW: REMARKS AS PREPARED FOR DELIVERY BY ASSISTANT ATTORNEY GENERAL BILL BAER AT THE CONFERENCE CALL REGARDING THE JUSTICE DEPARTMENT'S PROPOSED SETTLEMENT WITH US AIRWAYS AND AMERICAN AIRLINES     From: USDOJ-Office of Public Affairs (SMO) [mailto:USDOJ-Office.of.Public.Affairs@usdoj.gov] Sent: Tuesday, November 12, 2013 1:15 PM To: USDOJ-Office of Public Affairs (SMO) Subject: REMARKS AS PREPARED FOR DELIVERY BY ASSISTANT ATTORNEY GENERAL BILL BAER AT THE CONFERENCE CALL REGARDING THE JUSTICE DEPARTMENT’S PROPOSED SETTLEMENT WITH US AIRWAYS AND AMERICAN AIRLINES ______________________________________________________________________________ FOR IMMEDIATE RELEASE AT TUESDAY, NOVEMBER 12, 2013 (202) 514-2007 WWW.JUSTICE.GOV TTY (866) 544-5309 Remarks as Prepared for Delivery by Assistant Attorney General Bill Baer AT the Conference Call Regarding the Justice Department’s PROPOSED SETTLEMENT WITH US Airways AND American Airlines WASHINGTON, D.C. Good afternoon. Thanks for joining me on this call. As you have all seen by now, today the Department of Justice filed a proposed settlement with US Airways and American Airlines that, if approved by the court, would resolve our lawsuit challenging their proposed merger. Under the agreement, we are requiring US Airways and American Airlines to divest critically important facilities at seven key airports across the country. Specifically, the parties will divest 104 air carrier slots at Reagan National here in D.C., 34 slots at LaGuardia in New York, and 2 gates and ground facilities at each of Logan in Boston, O’Hare in Chicago, LAX in Los Angeles, Miami and Dallas Love Field. These divestitures are the largest ever in an airline merger and will allow low cost carriers to fly more direct and connecting flights throughout the country each day. This is a game changer. As the Attorney General said in this morning’s press release, this agreement has the potential to shift the landscape of the airline industry. As you know, we filed a lawsuit to block this merger out of concerns about the potential reduction in competition for air travel throughout the country. This settlement addresses those concerns and opens up the marketplace as never before. It will disrupt today’s cozy relationships among the incumbent legacy carriers and provide consumers with more choices and more competitive airfares. New York, Washington, Los Angeles, Chicago, Boston, Miami and Dallas are among the largest, most important business centers in the country. But due to access limitations – such as slot and gate constraints – key airports in these cities are among the most difficult for an airline to enter and establish a meaningful presence. The divestitures announced today changes that limiting dynamic. Making slots and gates available to low cost carriers will lower barriers to entry, providing the incentive and ability for those carriers to invest in new capacity, and positioning those carriers to provide significant new competition system-wide. The low cost carriers that acquire the slots and gates will be able to offer increased competition not just on direct flights to and from these key airports, but also on connecting flights nationwide. How do we know this? Because, in the past, providing even modest competitive opportunities for the LCC’s has made a real difference. A few years ago, when JetBlue started service from Reagan National, prices to Boston dropped 30 percent and consumers saved $50 million per year. And those savings came from just 16 slots, or 8 round trips a day. This agreement divests those slots – currently subleased from American – and makes available 88 more at Reagan National. Southwest’s entry into Newark Liberty airport after the United-Continental merger shows how consumers benefit from increased competition on both non-stop and one-stop routes. In 2010, Southwest acquired 36 divested slots at Newark Liberty, and added direct service to six cities – but with connections to more than 60 more. That new competition benefited consumers: on the nonstop routes alone fares dropped more than 10 percent and passenger traffic increased by 36 percent. The combined slot divestitures announced at Reagan National and LaGuardia today –138 in total – are almost four times the size of the United divestitures to Southwest at Newark Liberty. The additional gate divestitures at five other major airports around the country will amplify the procompetitive impact of this settlement. Non-stop and one-stop opportunities for both leisure and business travelers will increase. When we filed this lawsuit, I explained that this merger would eliminate the head-to-head competition between US Airways and American, risked increased coordination between the remaining three legacy carriers – New American, United and Delta – and increased the parties’ dominance at Reagan National. This settlement addresses each of these concerns. In important ways this outcome is better than a full stop injunction. By lowering barriers to enter and compete, this settlement will enable low cost  carriers to expand their presence, injecting new competition into the marketplace. By divesting all of the 104 air carrier slots that American Airlines owns today at  Reagan National, the settlement will allow JetBlue to keep competing with the slots it currently subleases from American and further expands competition by placing the other 88 slots in the hands of low cost carriers. Thus, the settlement not just prevents the increased dominance of US Airways at Reagan National, it provides for expanded competition at this airport. In designing the remedy, we were mindful of concerns that the merger would lead to fewer flights from Washington to small and medium-sized cities. The settlement allows the parties to retain the small aircraft commuter slots at Reagan National intended to serve small and medium-sized cities. The parties have pledged to do just that in an agreement with the Department of Transportation which requires them to use those slots exclusively for service to small, non-hub and medium-sized airports. The state attorneys general who have joined in our settlement have also secured additional relief specific to their states in a separate settlement with the parties. As you are aware, we were preparing to go to trial. And, I can assure you that we were confident in the evidence we would have presented at trial. That said, why settle this case? Because in the ways I have discussed, this settlement improves on a problematic status quo. It provides more competition than exists today in this industry. That is good news for consumers all across the country who will benefit from more choices and more competitive airfares. I’m proud of our team, proud of our collaboration with the Attorneys General of the seven states who joined in this settlement and proud of what we have accomplished for U.S. consumers. I’m happy to take your questions. ### DO NOT REPLY TO THIS MESSAGE. IF YOU HAVE QUESTIONS, PLEASE USE THE CONTACTS IN THE MESSAGE OR CALL THE OFFICE OF PUBLIC AFFAIRS AT 202?514?2007. Page 1 of 1 Attorney General Pam Bondi News Release November 12, 2013 Contact: Whitney Ray Phone: (850) 245-0150 Attorney General Pam Bondi Announces Airline Settlement that Supports Florida’s Economy and Provides Additional Consumer Choice for Air Travel TALLAHASSEE, Fla.—Florida Attorney General Pam Bondi today announced that her office has reached an agreement over the proposed merger between US Airways and American Airlines. The agreement will help retain and create jobs in Florida, boosting the economy, and provide for excellent airline travel options for consumers. Under the agreement, New American will continue to operate a hub in Miami for three years and continue for five years to serve every airport in Florida now served by the two airlines. “I am thrilled that we have reached an agreement that will not only keep jobs in Florida, but also will lead to additional jobs in our great state,” stated Attorney General Pam Bondi. “The agreement also ensures that air travelers have ample options before them. I have a great working relationship with American Airlines Chairman and CEO Tom Horton and look forward to continuing that relationship as we bring jobs to Florida.” The States also joined a settlement with the United States Department of Justice requiring the airlines to divest slots at Reagan National in Washington D.C., LaGuardia in New York City as well as gates at Boston, Chicago, Dallas-Love Field, Los Angeles International and Miami. Slots are required for take offs and landings at DCA and LGA because of congestion. The divestitures will enable new carriers to enter the Washington, D.C. and New York markets. The same will happen as the result of gate divestitures. Attorney General Bondi was joined in these Settlements by the Attorneys General of: Arizona, Michigan, Pennsylvania, Tennessee, Virginia and the District of Columbia. To: 'Christopher Hunt' cc: "'Liz.Brady@myfloridalegal.com'" , "Townsend, Jay" From: "Hurley, Patrick" , "Harman, Sunil" Subject: RE: Correspondence Date: 05/14/2013 05:12 PM Chris – As you requested, I have attached letters from both Mayor Marks and Sunil Harman, the City’s  Director of Aviation, relating to the proposed merger.  Let me know if you have other  questions.  Pat Hurley   Patrick E. Hurley, Senior Asst. City Attorney  City of Tallahassee  City Hall (Box A‐5)  300 S. Adams Street, Tallahassee, FL  32301  tel: (850) 891‐8554  fax: (850) 891‐8973  Patrick.Hurley@talgov.com    From: Christopher Hunt [mailto:Christopher.Hunt@myfloridalegal.com] Sent: Tuesday, May 14, 2013 3:46 PM To: Hurley, Patrick Cc: Liz Brady Subject: Correspondence Good afternoon Pat. Please provide Liz & I with copies of the letters discussed during our telephone conversation today. Thank you. Sunil Harman Letter of Support.pdf Mayor's Letter to Sec LaHood.pdf Of?ce of the Mayor. City of Tallahassee 300 South Adams Street I Tallahassee, FL 32301 850.891.2000 May 10, 2013 The Honorable Ray LaHood Secretary United States Department of Transportation West Building, 1200 New Jersey Avenue SE, 9th Floor Washington, DC. 20590-9898 Dear Secretary LaHood: I write this letter on behalf of my constituents and our community in Tallahassee, Florida, to urge you to support the proposed merger between US Airways and American Airlines. As our state?s capital and located in the heart of the Panhandle, Tallahassee represents an important political, economic, and geographic center for the state of Florida. While the new American Airlines stands to become one of the largest aviation companies in the world, Tallahassee stands to bene?t from gaining access to a more connected, competitive, and ?nancial sound airline as a result of the merger. In particular, if the merger is approved, the new American Airlines will have the unique capacity and network to connect Washington?s Reagan National Airport (DCA) with smaller communities, like Tallahassee, that otherwise would not see direct air service to our Nation?s capital. Unfortunately, I have learned that others are using this merger in an attempt to force reallocations of slots currently reserved for US Airways and American Airlines at Reagan National Airport which would mean the cancellation of direct ?ights to Tallahassee. I am asking you to oppose any such changes. I hope you will move expeditiously to approve the proposed merger between US Airways and American Airlines without further conditions. Please do not hesitate to contact me or my staff, should yOu have any questions or feedback concerning this merger and Tallahassee. Thank you for your time. Sincerely}r__7 I I John?s,? Mayor Co: The Honorable William J. Baer, Esq., Assistant Attorney General, Department of Justice, Antitrust Division The Honorable Amy Klobuchar, Chair, Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights The Honorable Mike Lee, Ranking Member, Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights 3300 Capital Circle. SW. Suite 1 Tallahassee. FL 32310 850-891-7802 FAX: 850-891-7837 TDD: 711 - FlvTallahassee com f\ ALLAHASSEE Altronr April 26, 2013 The Honorable Ray LaHood Secretary, US. Department of Transportation West Building, 1200 New Jersey Avenue SE, 9th Floor Washington, DC 20590-9898 Most Livable City in America Dear Secretary LaHood, As director of Tallahassee Regional Airport, I am writing to register my support for the US Airlines-American Airlines merger. I urge you to approve the merger without any additional changes that would disrupt service to small and medium market cities, like Tallahassee, that would be serviced by the new, joint airline. As you know, direct and non-stop ?ights provide importance economic bene?ts to smaller cities, rural regions, and more remote areas throughout the United States. These ?ights facilitate connections, not only for local residents who are afforded simpler travel options, but also for the local economy, businesses, and entrepreneurs looking to broaden their economic ties with other regions in Florida and throughout the nation. We have been proud to offer direct service between Tallahassee Regional Airport, a market of nearly one million residents, and Washington, Ronald Reagan National Airport (DCA), and we are relying on the new American Airlines to see that these ?ights continue. Thank you for your consideration. With approval of the merger in its current form, we would be ecstatic to welcome the world?s largest airline I look forward to monitoring the progress of this case. Tallahassee Regional Airport Cc: The Honorable William I. Baer, Esq., Assistant Attorney General, Department of Justice, Antitrust Division The Honorable Amy Klobuchar, Chair, Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights The Honorable Mike Lee, Ranking Member, Senate Subcommittee on AntitrUst, Competition Policy and Consumer Rights GIL ZIFFER Commissioner NANCY MILLER Commissioner SCOTT MADDOX Commissioner ANDREW GILLUM Commissioner JOHN R. MARKS. [11 Mayor SAM M. MCCALL rirv Ailrlilnr LEWIS E. SHELLEY Cilv Anm'nmv ANITA F. THOMPSON Cilv Manaaer JAMES COOKIE. 1V (in; Treasurer-Clerk Case Document 1-1 Filed 08/13/13 Page 1 of 2 CIVIL COVER SHEET .1544 (Rev. 5/12 DC) I. PLAINTIFFS UNITED STATES OF AMERICA STATE OF ARIZONA, ET AL COUNTY OF RESIDENCE OF FIRST LISTED PLAINTIFF (EXCEPT IN US. PLAINTIFF CASES) DEFENDAN TS AMR CORPORATION US AIRWAYS GROUP, INC. COUNTY OF RESIDENCE or- FIRST LISTED DEFENDANT 88888 (IN US. PLAINTIFF CASES ONLY) NOTE 1N LAND CASES, USE THE LOCATION OF THE TRACT OF LAND INVOLVED ATTORNEYS (FIRM NAME, ADDRESS, AND TELEPHONE NUMBER) US. Department of Justice Antitrust Division 450 5th Street, NW, Suite 7100 202-305-0128 ATTORNEYS (IF II. BASIS OF JURISDICTION CITIZENSHIP OF PRINCIPAL PARTIES (PLACE AN IN ONE BOX FOR (PLACE AN IN ONE BOX ONLY) PLAINTIFF AND ONE BOX FOR DEFENDANT) TOR DIVERSITY CASES PTF DFT PTF DH 1 US. Government 0 3 Federal Question Plam?? (U -S- Govemmem Not a Party) Citizen of this State 0 1 1 Incorporated or Principal Place 0 4 4 of Business in This State 0 2 US. Government 0 4 Diversity Citizen of Another State 0 2 2 hcmrated and Pn-ncipal 5 5 Defendant (Indicate Citizenship of . . . . . Place of Busmess in Another Stale ?nes ?cm In) Citizen or Subject of a 3 3 Foreign Country Foreigi Nation 0 6 6 IV. CASE ASSIGNMENT AND NATURE OF SUIT (Place an in one category, A-N, that best represents your Cause of Action and in a corresponding Nature of Suit) A. Antitrust B. Personal Injmy/ Malpractice I: 310 Airplane I: 315 Airplane Product Liability 320 Assault, Libel Slander 330 Federal Employers Liability 340 Marine I: 345 Marine Product Liability El 350 Motor Vehicle I: 355 Motor Vehicle Product Liability 360 Other Personal Injury I: 362 Medical Malpractice 365 Product Liability 367 Health Care/Pharmaceutical Personal Injury Product Liability El 368 Asbestos Product Liability [El 410 Antirust C. Administrative Agency Review El 151 Medicare Act Social Security 861 HIA (1395a) 862 Black Lung (923) 863 (405(g)) El 864 Title XVI El 865 RSI (405(g)) Other Statutes 891 Agricultural Acts 893 Environmental Matters El 890 Other Statutory Actions (If Administrative Agency is Involved) D. Temporary Restraining Order/Preliminary Injunction Any nature of suit from any category may be selected for this category of case assignment. *(If Antitrust, then A governs)* E. General Civil (Other) OR 0 F. Pro Se General Civil Real Pro Bankru tc Forfeiture/Penalty I I210 Land Condemnation I I422 Appeal 27 USC 158 625 Drug Related Seizure of orec osure ?lt rawa - roperty 220 423 hd l28 USC 157 21 USC 881 230 Rent, Lease Ejectment 690 Other 240 Torts to Land Prisoner Petitions 245 Tort Product Liability 535 Death Pen?? :1 290 All Other Real Pro erty 540 Mandamus 0'11" 550 Civil Rights 375 False Claims Act Personal Pronertv Prison conditions State Reapportionment 370 Other Fraud 560 Civil Detainee Conditions D430 Banks Banking 371 Truth in Lending of Con?nement D450 380 Other Personal Property Rates/etc. Damage Proiertv Rights 460 Deportation Property Damage Naturalization Product Liability El 830 Pm" Application 840 Trademark 465 Other Immigration Actions I 470 Racketeer In?uenced 870 Taxes (L plaintiff or . . Corrupt Organization defendant) El 871 IRS?Third Party 26 USC 7609 D480 Consumer Credit D490 Cable/Satellite Tv E1850 Securities/Commodities/ Exchange 896 Arbitration D899 Administrative Procedure Act/Review or Appeal of Agency Decision D950 Constitutionality of State Statutes D890 Other Statutory Actions (if not administrative agency reyiew or Privacy Act) Case Document 1-1 Filed 08/13/13 Page 2 of 2 G. Habeas orpus/ 22 5 5 530 Habeas Corpus - General 510 Motion/Vacate Sentence 463 Habeas Corpus Alien Detainee H. Employment 0 J. Student Loan Discrimination I. FOL4/Privaqv Act 895 Freedom of Information Act 890 Other Statutory Actions (if Privacy Act) 442 Civil Rights Employment (criteria: race, gender/sex, 152 Recovery of Defaulted Student Loan national origin, (excluding veterans) discrimination, disability, age, religion, retaliation) *(If pro se, select this deck)* *(If pro 59, select this deck)* K. (non-employment) 710 Fair Labor Standards Act El 720 Labor/Mgmt. Relations 740 Labor Railway Act 751 Family and Medical Leave Act 790 Other Labor Litigation 791 Empl. Ret. Inc. Security Act 0 L. Other Civil Rights 0 M. Contract 0 N. Three-Judge (non-employment) our! 110 Insurance [:1441 voting (if not Voting Rights 120 Marine I: 441 Rights voting Act) I: 130 Miller Act (if voting Rights Act) D443 Housing/Accommodations 140 Negotiable Instrument D440 Other Ci?'l Rights 150 Recovery of Overpayment D445 Americans w/Disabilities Enforcement of Employment Judgment D446 Americans w/Disabilities 153 Recovery of Overpayment Other of Veteran?s Bene?ts D448 Education 160 Stockholder?s Suits 190 Other Contracts 195 Contract Product Liability 196 Franchise V. ORIGIN (9 1 Original 0 2 Remand Proceeding from State Court 0 3 Remanded from Appellate Court 0 4 Reinstated or Reopened 5 Transferred from another district (specify) 0 6 Multi-district 7 Appeal to Litigation District Judge from Mag. Judge VI. CAUSE OF ACTION (CITE THE CIVIL STATUTE UNDER WHICH YOU ARE FILING AND WRITE A BRIEF STATEMENT or CAUSE.) 15 U.S.C. Section 18. Proposed merger between US Airways and American would likely substantially lessen competition. VII. REQUESTED IN CHECK IF THIS IS A CLASS DEIVIAND CheCk YES only if demanded in complaint COMPLAINT ACTION UNDERFRC 23 JURY DEMAND: YES NO RELATED (sec lmm?mm?) YEsl I N0 Ifyes, please complete related case form IF ANY DATE: 3 SIGNATLRE OF ATTORNEY OF RECORD INSTRUCTIONS FOR COMPLETING CIVIL COVER SHEET JS-44 Authority for Civil Cover Sheet The 5-44 civil cover sheet and the information contained herein neither replaces nor supplements the ?lings and services of pleadings or other papers as required by law, except as provided by local rules of court. This form approved by the Judicial Conference of the United States in September 1974, is required for the use of the Clerk of Court for the purpose of the civil docket sheet. Consequently, a civil cover sheet is submitted to the Clerk of Court for each civil complaint ?led. Listed below are tips for completing the civil cover sheet. These tips coincide with the Roman Numerals on the cover sheet. I. COUNTY OF RESIDENCE OF FIRST LISTED County of residence: Use 11001 to indicate plainti?' if resident of Washington DC, 88888 if plainti?' is resident of United States but not Washington DC, and 99999 if plainti?' is outside the United States. under Section II. CITIZENSHIP OF PRINCIPAL PARTIES: This section is completed only if diversity of citizenship was selected as the Basis of Jurisdiction CASE ASSIGNMENT AND NATURE OF SUIT: The assignment of a judge to your case will depend on the category you select that best represents the cause of action found in your complaint. You may select only category. You must also select corresponding nature of suit found under the category of the case. VI. CAUSE OF ACTION: Cite the US. Civil Statute under which you are ?ling and write a brief statement of the primary cause. RELATED IF ANY: Ifyou indicated that there is a related case, you must complete a related case form which may be obtained from the Clerk?s Of?ce. Because of the need for accurate and complete information, you should endure the accuracy of the information provided prior to signing the form Page 1 of 37 CLOSED,TYPE-A U.S. District Court District of Columbia (Washington, DC) CIVIL DOCKET FOR CASE #: 1:13-cv-01236-CKK UNITED STATES OF AMERICA et al v. US AIRWAYS GROUP INC. et al Assigned to: Judge Colleen Kollar-Kotelly Cause: 15:1 Antitrust Litigation Date Filed: 08/13/2013 Date Terminated: 04/25/2014 Jury Demand: None Nature of Suit: 410 Anti-Trust Jurisdiction: Federal Question Special Master RICHARD A. LEVIE Plaintiff UNITED STATES OF AMERICA represented by Mark William Ryan MAYER BROWN LLP 1999 K Street, NW Washington, DC 20006 (202) 263-3338 Email: mryan@mayerbrown.com LEAD ATTORNEY ATTORNEY TO BE NOTICED Michael D. Billiel U.S. DEPARTMENT OF JUSTICE 450 Fifth Street, NW Suite 8114 Washington, DC 20530 (202) 307-6666 Fax: (202) 307-2784 Email: michael.billiel@usdoj.gov LEAD ATTORNEY ATTORNEY TO BE NOTICED Katharine Stevens Mitchell-Tombras United States Department of Justice Antitrust Division 450 Fifth Street, NW Suite 4000 Washington, DC 20001 (202) 532-4923 Email: katharine.mitchell@usdoj.gov ATTORNEY TO BE NOTICED Kathleen Suzanne O'neill US DEPARTMENT OF JUSTICE, ANTITRUST DIVISION 3/11/2016 Page 2 of 37 450 Fifth Street, NW Suite 8000 Washington, DC 20530 (202) 307-2931 Email: kathleen.oneill@usdoj.gov ATTORNEY TO BE NOTICED William H. Stallings MAYER BROWN LLP 1999 K Street, NW Washington, DC 20006 (202) 263-3807 Fax: (202) 830-0328 Email: wstallings@mayerbrown.com ATTORNEY TO BE NOTICED Ryan J. Danks U.S. DEPARTMENT OF JUSTICE Antitrust Division 950 Pennsylvania Avenue, NW Room 3112 Washington, DC 20001 (202) 305-0128 Fax: (202) 514-6525 Email: ryan.danks@usdoj.gov ATTORNEY TO BE NOTICED Plaintiff STATE OF ARIZONA represented by Nancy M. Bonnell OFFICE OF THE ARIZONA ATTORNEY GENERAL 1275 W. Washington Street Phoenix, AZ 85007-2926 (602) 542-7728 Fax: (602) 542-9088 Email: nancy.bonnell@azag.gov LEAD ATTORNEY ATTORNEY TO BE NOTICED Susan V. Myers OFFICE OF THE ARIZONA ATTORNEY GENERAL Antitrust Unit 1275 West Washington Phoenix, AZ 85007 (602) 542-7768 Email: susan.myers@azag.gov ATTORNEY TO BE NOTICED Plaintiff DISTRICT OF COLUMBIA represented by 3/11/2016 Page 3 of 37 Bennett C. Rushkoff OFFICE OF THE ATTORNEY GENERAL Public Advocacy Section 441 4th Street, NW Suite 600-S Washington, DC 20001 (202) 727-5173 Fax: (202) 727-6546 Email: bennett.rushkoff@dc.gov LEAD ATTORNEY ATTORNEY TO BE NOTICED Nicholas Alan Bush DC OFFICE OF THE ATTORNEY GENERAL 441 Fourth Street, NW Suite 600-S Washington, DC 20001 (202) 442-9841 Email: nicholas.bush@dc.gov ATTORNEY TO BE NOTICED Plaintiff STATE OF FLORIDA represented by Lizabeth A. Brady FLORIDA OFFICE OF THE ATTORNEY GENERAL PL-01, The Capitol Tallahassee, FL 32399 (850) 414-3851 Email: liz.brady@myfloridalegal.com LEAD ATTORNEY ATTORNEY TO BE NOTICED Christopher R. Hunt OFFICE OF THE FLORIDA ATTORNEY GENERAL PL-01, The Capitol Tallahassee, FL 32399 (850) 414-3300 Email: christopher.hunt@myfloridalegal.com ATTORNEY TO BE NOTICED Plaintiff COMMONWEALTH OF PENNSYLVANIA represented by James A. Donahue , III OFFICE OF THE ATTORNEY GENERAL Antitrust Section 14th Floor Strawberry Square 3/11/2016 Page 4 of 37 Harrisburg, PA 17011 (717) 705-2523 Fax: (717) 705-7110 Email: jdonahue@attorneygeneral.gov LEAD ATTORNEY ATTORNEY TO BE NOTICED Jennifer Ann Thomson OFFICE OF THE ATTORNEY GENERAL Commonwealth of Pennsylvania Strawberry Square 14th Floor Harrisburg, PA 17120 (717) 787-4530 Email: jthomson@attorneygeneral.gov ATTORNEY TO BE NOTICED Plaintiff STATE OF TENNESSEE represented by Victor J. Domen , Jr. TENNESSEE ATTORNEY GENERAL'S OFFICE Public Interest Division 500 Charlotte Avenue Nashville, TN 37202 (615) 253-3327 Fax: (615) 532-6951 Email: vic.domen@ag.tn.gov LEAD ATTORNEY ATTORNEY TO BE NOTICED Plaintiff STATE OF TEXAS TERMINATED: 10/08/2013 represented by Kayna Stavast-Piper Attorney General of Texas P.O. Box 12548 Austin, TX 78711-2548 Email: kayna.stavastpiper@texasattorneygeneral.gov TERMINATED: 10/24/2013 Mark Levy ATTORNEY GENERAL OF TEXAS Antitrust Section P.O. BOX 12548 Austin, TX 78711 (512) 936-1847 Email: mark.levy@texasattorneygeneral.gov TERMINATED: 10/24/2013 Plaintiff 3/11/2016 Page 5 of 37 COMMONWEALTH OF VIRGINIA represented by Sarah Oxenham Allen OFFICE OF THE ATTORNEY GENERAL Consumer Protection Section 900 E. Main Street Richmond, VA 23219 (804) 786-6557 Fax: (804) 786-0122 Email: soallen@oag.state.va.us LEAD ATTORNEY ATTORNEY TO BE NOTICED Matthew Ryan Hull OFFICE OF THE ATTORNEY GENERAL Consumer Protection Section 900 East Main Street Richmond, VA 23219 (804) 371-2084 Email: mhull@oag.state.va.us ATTORNEY TO BE NOTICED Plaintiff STATE OF MICHIGAN represented by D. J. Pascoe MICHIGAN DEPARTMENT OF ATTORNEY GENERAL Corporate Oversight Division 525 W. Ottawa G. Mennen Williams Building, 6th Floor Lansing, MI 48909 (517) 373-1160 Email: pascoed1@michigan.gov LEAD ATTORNEY ATTORNEY TO BE NOTICED V. Defendant US AIRWAYS GROUP INC represented by Richard G. Parker O'MELVENY & MYERS LLP 1625 Eye Street, NW Washington, DC 20006 (202) 383-5380 Fax: (202) 383-5414 Email: rparker@omm.com LEAD ATTORNEY ATTORNEY TO BE NOTICED Steven Gill Bradbury DECHERT LLP 3/11/2016 Page 6 of 37 1775 I Street, NW Washington, DC 20006 (202) 261-3483 Fax: (202) 514-0539 Email: steven.bradbury@dechert.com LEAD ATTORNEY ATTORNEY TO BE NOTICED Andrew J. Forman CADWALADER, WICKERSHAM & TAFT LLP 700 6th Street, NW Washington, DC 20001 (202) 862-2243 Email: andrew.forman@cwt.com ATTORNEY TO BE NOTICED Charles F Rule CADWALADER, WICKERSHAM & TAFT LLP 700 Sixth Street, NW Washington, DC 20001 (202) 862-2420 Fax: (202) 862-2400 Email: Rick.Rule@cwt.com ATTORNEY TO BE NOTICED Courtney B. Dyer O'MELVENY & MYERS, LLP 1625 I Street, NW Washington, DC 20006 (202) 383-5215 Fax: (202) 383-5414 Email: cdyer@omm.com ATTORNEY TO BE NOTICED Daniel J. Howley CADWALADER, WICKERSHAM & TAFT LLP 700 6th Street, NW Washington, DC 20001 (202) 862-2326 Email: daniel.howley@cwt.com ATTORNEY TO BE NOTICED Gorav Jindal DECHERT LLP 1900 K Street, NW Washington, DC 20006 (202) 261-3435 Email: gorav.jindal@dechert.com ATTORNEY TO BE NOTICED 3/11/2016 Page 7 of 37 Henry C. Thumann O'MELVENY & MYERS LLP 1625 Eye Street, NW Washington, DC 20006 (202) 383-5101 Fax: (202) 383-5414 Email: hthumann@omm.com ATTORNEY TO BE NOTICED Katrina M. Robson O'MELVENY & MYERS, LLP 1625 I Street, NW Washington, DC 20006 (202) 220-5052 Fax: (202) 383-5414 Email: krobson@omm.com ATTORNEY TO BE NOTICED Kenneth R. O'Rourke O'MELVENY & MYERS LLP 400 South Hope Street 18th floor Los Angeles, CA 90071 (213) 430-6000 Fax: (213) 430-6407 Email: korourke@omm.com ATTORNEY TO BE NOTICED Paul T. Denis DECHERT, LLP 1900 K Street NW Suite 1200 Washington, DC 20006 (202) 261-3430 Fax: (202) 261-3333 Email: paul.denis@dechert.com ATTORNEY TO BE NOTICED Paul H. Friedman DECHERT LLP 1900 K Street, NW Suite 1200 Washington, DC 20006 (202) 261-3398 Fax: 202-261-3333 Email: paul.friedman@dechert.com ATTORNEY TO BE NOTICED Defendant AMR CORPORATION represented by 3/11/2016 Page 8 of 37 John M. Majoras JONES DAY 51 Louisiana Avenue, NW Washington, DC 20001-2113 (614) 281-3835 Fax: (202) 626-1700 Email: jmmajoras@jonesday.com LEAD ATTORNEY ATTORNEY TO BE NOTICED Mary Jean Moltenbrey PAUL HASTINGS LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 Fax: (202) 777-4555 Email: mjmoltenbrey@paulhastings.com LEAD ATTORNEY ATTORNEY TO BE NOTICED Paula W. Render JONES DAY 77 West Wacker Drive Chicago, IL 60601 (312) 269-1555 Email: prender@jonesday.com LEAD ATTORNEY ATTORNEY TO BE NOTICED Christopher Nathan Thatch JONES DAY 51 Louisiana Avenue, NW Washington, DC 20001 (202) 879-4658 Fax: (202) 626-1700 Email: cthatch@jonesday.com ATTORNEY TO BE NOTICED John Bruce McDonald JONES DAY 51 Louisiana Avenue, NW Washington, DC 20001 (202) 879-5570 Email: bmcdonald@jonesday.com ATTORNEY TO BE NOTICED Michael S. Fried JONES DAY 51 Louisiana Avenue, NW Washington, DC 20001 (202) 879-3434 3/11/2016 Page 9 of 37 Fax: (202) 626-1700 Email: msfried@jonesday.com ATTORNEY TO BE NOTICED Rosanna K McCalips JONES DAY Business and Tort Litigation 51 Louisiana Avenue, NW Washington, DC 20001 (202) 879-3898 Fax: (202) 626-1700 Email: rkmccalips@jonesday.com ATTORNEY TO BE NOTICED Scott Mitchell Flicker PAUL, HASTINGS, JANOFSKY & WALKER, L.L.P. 875 15th Street, NW 10th Floor Washington, DC 20005 (202) 551-1726 Email: scottflicker@paulhastings.com ATTORNEY TO BE NOTICED Movant STATE OF OKLAHOMA represented by Patrick R. Wyrick ATTORNEY GENERAL OF OKLAHOMA 313 N.E. 21st Street Oklahoma City, OK 73105 (405) 522-4448 Email: patrick.wyrick@oag.ok.gov LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus ALLIED PILOTS ASSOCIATION represented by Filiberto Agusti STEPTOE & JOHNSON LLP 1330 Connecticut Avenue, NW Washington, DC 20036-1795 (202) 429-6428 Fax: (202) 429-3902 Email: fagusti@steptoe.com LEAD ATTORNEY ATTORNEY TO BE NOTICED Robert Wallace Fleishman STEPTOE & JOHNSON, L.L.P. 1330 Connecticut Avenue, NW Washington, DC 20036 (202) 429-3000 3/11/2016 Page 10 of 37 Email: rfleishman@steptoe.com LEAD ATTORNEY ATTORNEY TO BE NOTICED Shannen Wayne Coffin STEPTOE & JOHNSON LLP 1330 Connecticut Avenue, NW Washington, DC 20036 (202) 429-6255 Fax: (202) 429-3902 Email: scoffin@steptoe.com LEAD ATTORNEY ATTORNEY TO BE NOTICED Darin Matthew Dalmat JAMES & HOFFMAN, P.C. 1130 Connecticut Avenue, NW Suite 950 Washington, DC 20036 (202) 496-0500 Fax: (202) 496-0555 Email: dmdalmat@jamhoff.com ATTORNEY TO BE NOTICED Edgar N. James JAMES & HOFFMAN, P.C. 1130 Connecticut Avenue, NW Suite 950 Washington, DC 20036 (202) 496-0500 Fax: (202) 496-0555 Email: ejames@jamhoff.com ATTORNEY TO BE NOTICED Amicus ASSOCIATION OF PROFESSIONAL FLIGHT ATTENDANTS represented by Robert S. Clayman GUERRIERI, CLAYMAN, BARTOS & PARCELLI, P.C. 1900 M Street, NW Suite 700 Washington, DC 20036-2243 (202) 624-7400 Fax: (202) 624-7420 Email: rclayman@geclaw.com LEAD ATTORNEY ATTORNEY TO BE NOTICED N. Skelly Harper GUERRIERI, CLAYMAN, BARTOS & PARCELLI, P.C. 1900 M Street, NW 3/11/2016 Page 11 of 37 Suite 700 Washington, DC 20036 (202) 624-7400 Email: sharper@geclaw.com ATTORNEY TO BE NOTICED Amicus ASSOCIATION OF FLIGHT ATTENDANTS-CWA represented by Edward James Gilmartin ASSOCIATION OF FLIGHT ATTENDANTS-CWA 501 Third Street, NW Washington, DC 20001 (202) 253-9712 Fax: (202) 434-0690 Email: egilmart@cwa-union.org LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus TRANSPORT WORKERS UNION OF AMERICA represented by Jeffrey Blumenfeld LOWENSTEIN SANDLER, LLP 1250 Connecticut Avenue, NW Washington, DC 20036 (202) 255-6300 Email: jblumenfeld@lowenstein.com LEAD ATTORNEY ATTORNEY TO BE NOTICED Richard S. Edelman Mooney, Green, Saindon, Murphy and Welch PC 1920 L Street, N.W. Suite 400 Washington, DC 20036 (202) 783-0010 Fax: (202) 783-6088 Email: redelman@mooneygreen.com LEAD ATTORNEY ATTORNEY TO BE NOTICED Sharon L. Levine LOWENSTEIN SANDLER LLP 65 Livingston Avenue Roseland, NJ 07068 (973)597-2500 Fax: (973)597-2375 LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED Amicus 3/11/2016 Page 12 of 37 OFFICIAL COMMITTEE OF UNSECURED CREDITORS represented by Albert L. Hogan , III SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 155 North Wacker Drive Suite 2700 Chicago, IL 60606-1720 (312) 407-0785 Fax: (312) 407-8572 LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED Gregory Bestor Craig SKADDEN ARPS SLATE MEAGHER & FLOM LLP 1440 New York Avenue, NW Washington, DC 20005 (202) 371-7400 Fax: (202) 393-5760 Email: Gregory.Craig@skadden.com LEAD ATTORNEY ATTORNEY TO BE NOTICED James A. Keyte SKADDEN, ARPS, SLATE, MEAGHER & FLOM, LLP 4 Times Square New York, NY 10036-6522 (212) 735-2583 Fax: (917) 777-2583 LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED Jay M. Goffman SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 4 Times Square New York, NY 10036 (212) 735-2120 Fax: (917) 777-2120 LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED John Wm Butler , Jr. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 155 North Wacker Drive Suite 2700 Chicago, IL 60606-1720 (312) 407-0730 3/11/2016 Page 13 of 37 Fax: (312) 407-8501 LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED Kenneth B. Schwartz SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 4 Times Square New York, NY 10036 (212) 735-2731 Fax: (917) 777-2731 LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED Amicus COMMUNICATIONS WORKERS OF AMERICA, AFL-CIO represented by Mary Katherine O'Melveny LAW OFFICES OF MARY K O'MELVENY 1 2022 Columbia Rd N.W. Suite 3315 Washington, DC 20009 (202) 387-0697 Fax: (202) 434-1219 Email: maryo.loboratty@gmail.com LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus DALLAS/FORT WORTH INTERNATIONAL AIRPORT BOARD represented by David H. Bamberger DLA PIPER LLP (US) 500 Eighth Street, NW Washington, DC 20004 (202) 799-4500 Fax: (202) 799-5500 Email: david.bamberger@dlapiper.com LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus CITY OF CHARLOTTE CHARLOTTE DOUGLAS INTERNATIONAL AIRPORT represented by David H. Bamberger (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus CITY OF PHILADELPHIA represented by David H. Bamberger (See above for address) 3/11/2016 Page 14 of 37 LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus CITY OF PHOENIX - PHOENIX SKY HARBOR INTERNATIONAL AIRPORT represented by David H. Bamberger (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus CHARLOTTE CHAMBER OF COMMERCE represented by Michael Deuel Sullivan WILKINSON BARKER KNAUER, LLP 2300 N Street, NW Suite 700 Washington, DC 20037 (202) 783-4141 Fax: (202) 783-5851 Email: msullivan@wbklaw.com ATTORNEY TO BE NOTICED Amicus CHICAGOLAND CHAMBER OF COMMERCE represented by Michael Deuel Sullivan (See above for address) ATTORNEY TO BE NOTICED Amicus DALLAS REGIONAL CHAMBER represented by Michael Deuel Sullivan (See above for address) ATTORNEY TO BE NOTICED Amicus FORT WORTH CHAMBER OF COMMERCE represented by Michael Deuel Sullivan (See above for address) ATTORNEY TO BE NOTICED Amicus GREATER PHILADELPHIA CHAMBER OF COMMERCE represented by Michael Deuel Sullivan (See above for address) ATTORNEY TO BE NOTICED Amicus GREATER PHOENIX CHAMBER OF COMMERCE represented by Michael Deuel Sullivan (See above for address) ATTORNEY TO BE NOTICED Amicus ONEWORLD ALLIANCE, LLC represented by Douglas W. Baruch FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP 3/11/2016 Page 15 of 37 801 17th Street, NW Washington, DC 20006 (202) 639-7000 Fax: (202) 639-7003 Email: douglas.baruch@friedfrank.com LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus US AIRLINE PILOTS ASSOCIATION represented by Kevin Clark Maclay CAPLIN & DRYSDALE One Thomas Circle, NW Suite 1100 Washington, DC 20005 (202) 862-5000 Email: kmaclay@capdale.com LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus CAROLYN FJORD represented by Theodore Frank Schwartz 7751 Carondelet Avenue Suite 204 Clayton, MO 63105 (314) 863-4654 Fax: (314) 862-4357 Email: theodore@schwartzschwartz.com LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus KATHERINE ARCELL represented by Theodore Frank Schwartz (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus KEITH DEAN BRADY represented by Theodore Frank Schwartz (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus JOSE M. 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CONWAY represented by 3/11/2016 Page 16 of 37 Theodore Frank Schwartz (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus JAN MARIE BROWN represented by Theodore Frank Schwartz (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus ROSEMARY D'AUGUSTA represented by Theodore Frank Schwartz (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus BRENDA KAY DAVIS represented by Theodore Frank Schwartz (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus PAMELA FAUST represented by Theodore Frank Schwartz (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus DON FREELAND represented by Theodore Frank Schwartz (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus DONALD FRY represented by Theodore Frank Schwartz (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus GABRIEL GARAVANIAN represented by Theodore Frank Schwartz (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus HARRY GARAVANIAN represented by Theodore Frank Schwartz (See above for address) 3/11/2016 Page 17 of 37 LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus YVONNE GARDNER represented by Theodore Frank Schwartz (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus LEE GENTRY represented by Theodore Frank Schwartz (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus VALARIE JOLLY represented by Theodore Frank Schwartz (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus GAIL KOSACH represented by Theodore Frank Schwartz (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus JUDY CRANDELL represented by Theodore Frank Schwartz (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus MICHAEL C. MALANEY represented by Theodore Frank Schwartz (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus LEN MARAZZO represented by Theodore Frank Schwartz (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED Amicus LISA MCCARTHY represented by Theodore Frank Schwartz (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED 3/11/2016 Amicus SOUTHWEST AIRLINES CO. Amicus VIRGIN AMERICA INC Amicus ANIERICAN AN TITRUST INSTITUTE Page 18 of 37 represented by Alden Lewis Atkins VINSON ELKINS LLP 2200 Avenue, NW Suite 500W Washington, DC 20037 (202) 639?6613 Fax: (202) 879-8813 Email: aatkins@velaw.com LEAD ATTORNEY ATTORNEY TO BE NOTICED represented by J. Robert Robertson HOGAN LOVELLS US LLP 555 Thirteenth Street, NW Washington, DC 20004 (202) 637-5774 Fax: (202) 637-5910 Email: LEAD A ORNE ATTORNEY TO BE NOTICED represented by Phillip Craig Zane PO. Box 7155 Arlington, VA 22207-7155 (202) 329-9845 Fax: (240) 525-8736 Email: pczane@gmail.com LEAD A ORNE ATTORNEY TO BE NOTICED Date Filed Docket Text 08/13/2013 Ib?t COMPLAINT against All Defendants (Fee Status:Filing Fee Waived) ?led by STATE OF TENNESSEE, DISTRICT OF COLUMBIA, STATE OF TEXAS, STATE OF ARIZONA, COMMONWEALTH OF VIRGINIA, STATE OF FLORIDA, UNITED STATES OF AMERICA, OMIVIONWEALTH OF (Attachments: 1 Civil Cover Sheet, 2 Summons for US Airways Group, Inc., 3 Summons for AMR Corporation)(Danks, Ryan) (Main Docrunent 1 replaced on 8/13/2013) (td, (Entered: 08/13/2013) 08/13/2013 IN NOTICE of Corrected Civil Cover Sheet by UNITED STATES OF AMERICA (Danks, Ryan) (Entered: 08/13/2013) 08/13/2013 Case Assigned to Judge Colleen Kollar-Kotelly. (sth, (Entered: 08/ 13/2013) 08/13/2013 Electronic Summons (2) Issued as to AMR CORPORATION, US AIRWAYS GROUP INC. (Attachments: I Summons, 2 Summons)(sth, (Entered: 08/13/2013) 3/11/2016 Page 19 of 37 08/16/2013 l4; ORDER Establishing Procedures for Filing for Cases Assigned to Judge Colleen Kollar-Kotelly, signed on August 16, 2013. (SM) (Entered: 08/ 1 6/201 3) 08/21/2013 I?m NOTICE of Appearance by Lizabeth A. Brady on behalf of STATE OF FLORIDA (Brady, Lizabeth) (Entered: 08/21/2013) 08/21/2013 NOTICE of Appearance by Nicholas Alan Bush on behalf of DISTRICT OF COLUMBIA (Bush, Nicholas) (Entered: 08/21/2013) 08/21/2013 NOTICE of Appearance by Bennett C. Rushkoff on behalf of DISTRICT OF COLUMBIA (Rushkoff, Bennett) (Entered: 08/21/2013) 08/22/2013 loc NOTICE of Appearance by Sarah Oxenham Allen on behalf of COMMONWEALTH OF VIRGINIA (Allen, Sarah) (Entered: 08/22/2013) 08/22/2013 lo MOTION for Leave to Appear Pro Hac Vice :Attorney Name- Kenneth R. O'Rourke, :Firm- O'Melveny Myers LLP, :Address- 400 South Hope Street, Los Angeles, CA 90071. Phone No. - (213) 430-6000. Fax No. - (213) 430- 6407 by US AIRWAYS GROUP INC (Attachments: 1 Declaration, 2 Text of Proposed Order)(Dyer, Courtney) (Entered: 08/22/2013) 08/22/2013 NOTICE of Joint Request for Trial Scheduling Conference by AIVIR CORPORATION, US AIRWAYS GROUP INC (Dyer, Courtney) (Entered: 08/22/2013) 08/22/2013 MOTION for Trial Date by AMR CORPORATION, US AIRWAYS GROUP INC (Attachments: 1 Text of Proposed Order)(Dyer, Comtney) (Entered: 08/ 22/ 20 3) 08/22/2013 LCVR 7.1 CERTIFICATE OF DISCLOSURE of Corporate Af?liations and Financial Interests by US AIRWAYS GROUP INC (Dyer, omtney) (Entered: 08/22/2013) 08/22/2013 NOTICE of Appearance by Matthew Ryan Hull on behalf of COMMONWEALTH OF VIRGINIA (Hull, Matthew) (Entered: 08/22/2013) 08/22/2013 Corporate Disclosure Statement by AMR CORPORATION. (McCalips, Rosanna) (Entered: 08/22/2013) 08/22/2013 NOTICE of Appearance by Richard G. Parker on behalf of US AIRWAYS GROUP INC (Parker, Richard) (Entered: 08/22/2013) 08/22/2013 NOTICE of Appearance by John M. Majoras on behalf of AMR CORPORATION (Majoras, John) (Entered: 08/22/2013) 08/22/2013 NOTICE of Appearance by Michael S. Fried on behalf of AMR CORPORATION (Fried, Michael) (Entered: 08/22/2013) 08/22/2013 NOTICE of Appearance by Rosanna McCalips on behalf of AIVIR CORPORATION (McCalips, Rosanna) (Entered: 08/22/2013) 08/22/2013 NOTICE of Appearance by Hemy C. Thumann on behalf of US AIRWAYS GROUP INC (Thumann, Hemy) (Entered: 08/22/2013) 08/23/2013 ORDER. The parties shall abide by the procedures and schedule set forth herein. Signed by Judge Colleen Kollar-Kotelly on August 23, 2013. (Entered: 08/23/2013) 3/11/2016 08/23/2013 Page 20 of 37 MOTION for Leave to File Amicus Curiae Brief By Allied Pilots Association, Association of Professional Flight Attendants, Association of Flight Attendants-CWA and ranport Workers Union of America by ALLIED PILOTS ASSOCIATION, ASSOCIATION OF FLIGHT ATTENDANTS- CWA, ASSOCIATION OF PROFESSIONAL FLIGHT ATTENDAN TS, TRANSPORT WORKERS UNION OF AMERICA. (Attachments: 1 Exhibit Amicus Curiae Brief, 2 Exhibit Exhibit 1 to Amicus Curiae Brief, 3 Text of Proposed Shannen) Modi?ed to add ?lers on 8/26/2013 (znmw, (Entered: 08/23/2013) 08/23/2013 ENTERED IN of Appearance by Shannen W. Coffin on behalf of ALLIED PILOTS ASSOCIATION (Cof?n, Shannen) Modi?ed on 8/26/2013 (rdj). (Entered: 08/23/2013) 08/23/2013 ENTERED IN of Appearance by Filiberto Agusti on behalf of ALLIED PILOTS ASSOCIATION (Agusti, Filiberto) Modi?ed on 8/26/2013 (rdj). (Entered: 08/23/2013) 08/23/2013 Set/Reset Deadlines/Hearings: Plaintiffs' Response due by 8/27/2013. Defendants' Reply due by 8/28/2013. Joint Status Report due by 8/28/2013. Initial Scheduling Conference set for 8/30/2013 09:30 AM in Courtroom 28A before Judge Colleen Kollar-Kotelly. (dot) (Entered: 08/23/2013) 08/23/2013 MINUTE ORDER granting 2 Motion for Admission Pro Hac Vice as to Kenneth R. O'Rourke. Signed by Judge Colleen Kollar-Kotelly on August 23, 2013. (SM) (Entered: 08/23/2013) 08/23/2013 I5: NOTICE of Appearance by Victor J. Domen, Jr on behalf of STATE OF TENNESSEE (Domen, Victor) (Entered: 08/23/2013) 08/23/2013 NOTICE of Appearance by Shannen W. Cof?n on behalf of ALLIED PILOTS ASSOCIATION (Cof?n, Shannen) (Main Document 25 replaced on 8/26/2013) (zmnw, (Entered: 08/23/2013) 08/23/2013 NOTICE of Appearance by Filiberto Agusti on behalf of ALLIED PILOTS ASSOCIATION (Agusti, Filiberto) (Main Document 26 replaced on 8/26/2013) (zmnw, (Entered: 08/23/2013) 08/23/2013 NOTICE of Appearance by Edgar Neville James on behalf of ALLIED PILOTS ASSOCIATION (James, Edgar) (Entered: 08/23/2013) 08/23/2013 NOTICE of Appearance by Darin M. Dalmat on behalf of ALLIED PILOTS ASSOCIATION (Dahnat, Darin) (Entered: 08/23/2013) 08/26/2013 NOTICE of Appearance by Paul T. Denis on behalf of US AIRWAYS GROUP INC (Denis, Paul) (Entered: 08/26/2013) 08/26/2013 NOTICE OF CORRECTED DOCKET ENTRY: re 5 Notice of Appearance, Notice of Appearance was entered in error at the request of counsel and c01msel re?led said pleadings as . (rdj) (Entered: 08/26/2013) 08/26/2013 NOTICE of Appearance by Charles Rule on behalf of US AIRWAYS GROUP INC (Rule, Charles) (Entered: 08/26/2013) 08/27/2013 NOTICE of Appearance by Robert Wallace Fleishman on behalf of ALLIED PILOTS ASSOCIATION (F leishman, Robert) (Entered: 08/27/2013) 08/27/2013 3/11/2016 Page 21 of 37 NOTICE of Appearance by Mark William Ryan on behalf of UNITED STATES OF A1VIERICA (Ryan, Mark) (Entered: 08/27/2013) 08/27/2013 NOTICE of Appearance by Christopher Raymond Hunt on behalf of STATE OF FLORIDA (Hunt, Christopher) (Entered: 08/27/2013) 08/27/2013 NOTICE of Appearance by Nancy M. Bonnell on behalf of STATE OF ARIZONA (Bonnell, Nancy) (Entered: 08/27/2013) 08/27/2013 NOTICE of Appearance by Steven Gill Bradbury on behalf of US AIRWAYS GROUP INC (Bradbury, Steven) (Entered: 08/27/2013) 08/27/2013 NOTICE of Appearance by Susan V. Myers on behalf of STATE OF ARIZONA (Myers, Susan) (Entered: 08/27/2013) 08/27/2013 RESPONSE re l_l MOTION for Trial Date ?led by COMMONWEALTH OF COMMONWEALTH OF VIRGINIA, DISTRICT OF COLUMBIA, STATE OF ARIZONA, STATE OF FLORIDA, STATE OF TENNESSEE, STATE OF TEXAS, UNITED STATES OF AMERICA. (Attachments: 1 Exhibit 1, 2 Exhibit 2, 3 Exhibit 3)(Ryan, Mark) (Entered: 08/27/2013) 08/27/2013 NOTICE of Appearance by Robert S. layman on behalf of ASSOCIATION OF PROFESSIONAL FLIGHT ATTENDANTS (C layman, Robert) (Entered: 08/2 7/201 3) 08/27/2013 NOTICE of Appearance by N. Skelly Harper on behalf of ASSOCIATION OF PROFESSIONAL FLIGHT ATTENDANT (Harper, N.) (Entered: 08/2 7/201 3) 08/27/2013 NOTICE of Appearance by Jennifer Ann Thomson on behalf of COMMONWEALTH OF (Thomson, Jennifer) (Entered: 08/2 7/201 3) 08/27/2013 NOTICE of Appearance by Mary Jean Moltenbrey on behalf of AMR CORPORATION (Moltenbrey, Mary) (Entered: 08/27/2013) 08/27/2013 NOTICE of Appearance by Scott Mitchell Flicker on behalf of AMR CORPORATION (Flicker, Scott) (Entered: 08/27/2013) 08/28/2013 ENTERED IN of Appearance by Mark Levy on behalf of STATE OF TEXAS (Levy, Mark) Modi?ed on 8/29/2013 (rdj). (Entered: 08/2 8/201 3) 08/28/2013 REPLY to opposition to motion re MOTION for Trial Date ?led by AMR CORPORATION, US AIRWAYS GROUP INC. (Attachments: 1 Exhibit A) (Dyer, Courtney) (Entered: 08/28/2013) 08/28/2013 MEET AND ONFER STATEMENT. (Danks, Ryan) (Entered: 08/28/2013) 08/28/2013 MOTION for Leave to File Amicus Curiae Brief by OFFICIAL COMMITTEE OF UNSECURED REDITORS (Attachments: 1 Exhibit 1 - Amicus Brief, 2 Text of Proposed Order)(Craig, Gregory) (Entered: 08/28/2013) 08/28/2013 ENTERED IN of Appearance by Kayna Stavast-Piper on behalf of STATE OF TEXAS (Stavast?Piper, Kayna) Modi?ed on 8/29/2013 (rdj). (Entered: 08/28/2013) 3/11/2016 08/29/2013 Page 22 of 37 ORDER. The parties shall be prepared to address the issues set forth in this Order during the initial scheduling conference. The parties shall immediately begin serving written discovery to the extent possible. The Plaintiffs shall be permitted to propound up to 10 interrogatories (including subparts) to each Defendant. The Defendants shall be permitted to propound 11p to 15 interrogatories (including subparts) to the Plaintiffs collectively. Signed by Judge Colleen Kollar-Kotelly on 8/29/13. (Entered: 08/29/2013) 08/29/2013 MINUTE ORDER (paperless). The Allied Pilots Association et al.'s A Motion for Leave to File Amicus Curiae Brief and the Of?cial Committee of Unsecured Creditors' Motion for Leave to File Amicus Curiae Brief are GRANTED. Signed by Judge Colleen Kollar-Kotelly on 8/29/2013. (Entered: 08/29/2013) 08/29/2013 NOTICE OF CORRECTED DOCKET ENTRY: re Notice of Appearance, 4_3 Notice of Appearance was entered in error at the request of counsel and counsel will re?le said pleading. (rdj) (Entered: 08/29/2013) 08/29/2013 NOTICE of Appearance by Mark Levy on behalf of STATE OF TEXAS (Levy, Mark) (Entered: 08/29/2013) 08/29/2013 NOTICE of Appearance by Kayna Stavast-Piper on behalf of STATE OF TEXAS (Stavast-Piper, Kayna) (Entered: 08/29/2013) 08/29/2013 NOTICE of Lodging of Proposed Protective Order by CORPORATION, US AIRWAYS GROUP INC (Attachments: 1 Text of Proposed Order)(Dyer, Courtney) (Entered: 08/29/2013) 08/29/2013 NOTICE of Appearance by William H. Stallings on behalf of UNITED STATES OF ANIERICA (Stallings, William) (Entered: 08/29/2013) 08/29/2013 NOTICE of Appearance by Kathleen Suzanne O'neill on behalf of UNITED STATES OF AMERICA (O'neill, Kathleen) (Entered: 08/29/2013) 08/29/2013 NOTICE of Appearance by Katharine Stevens Mitchell-Tombras on behalf of UNITED STATES OF AMERICA (Mitchell-Tombras, Katharine) (Entered: 08/29/2013) 08/29/2013 AMICUS BRIEF by ALLIED PILOTS ASSOC IATION, ASSOCIATION OF FLIGHT ATTENDANT S-C WA, AS SOCLATION OF PROFESSIONAL FLIGHT ATTENDANT S, TRANSPORT WORKERS UNION OF AMERICA. (Attachments: 1 Exhibit)(td, (Entered: 08/30/2013) 08/29/2013 AIVIICUS BRIEF by OFFICIAL COMMITTEE OF UNSECURED CREDITORS. (td, (Entered: 08/30/2013) 08/30/2013 STIPULATED PROTECTIVE ORDER. Signed by Judge Colleen Kollar- Kotelly on 8/30/13. (Entered: 08/30/2013) 08/30/2013 ORDER. Trial in this matter shall commence on November 25, 2013. The Court shall hold a status conference on October 1, 2013, at 10:30 AM to discuss trial procedures and pre- and post-trial brie?ng. If there are any issues the parties would like for the Court to address during the status hearing, the parties shall ?le a joint status report by no later than September 30, 2013 at 12:00 PM brie?ng outlining the issue(s). See text of Order for further details. Signed by Judge Colleen Kollar-Kotelly on 8/ 30/ 13. (Entered: 08/30/2013) 3/11/2016 Page 23 of 37 08/30/2013 MOTION for Leave to Appear Pro Hac Vice :Attomey Name- John Wm. Butler, Jr., :Finn- Skadden, Arps, Slate, Meagher Flom LLP, :Address- 155 North Wacker Drive, Chicago, IL 60606-1720. Phone No. - (312) 407?0730. Fax No. - (312) 407-8501 by OFFICML COMMITTEE OF UNSECURED CREDITORS (Attachments: 1 Declaration of John Wm. Butler, Jr., 2 Text of Proposed Order)(Craig, Gregory) (Entered: 08/30/2013) 08/30/2013 MOTION for Leave to Appear Pro Hac Vice :Attorney Name? Albert L. Hogan, :Firm- Skadden, Arps, Slate, Meagher Flom LLP, :Address- 155 North Wacker Drive, Chicago, IL 60606-1720. Phone No. - (312) 407-0785. Fax No. (312) 407-8572 by OFFICIAL COMMITTEE OF UNSECURED CREDITORS (Attachments: 1 Declaration of Albert L. Hogan, Text of Proposed Order)(Craig, Gregory) (Entered: 08/30/2013) 08/30/2013 ENTERED IN of Appearance by Rosanna McCalips on behalf of AMR CORPORATION (Attachments: 1 Declaration of Paula Render, 2 Text of Proposed Order)(McCalips, Rosanna) Modi?ed on 9/3/2013 (jf, (Entered: 08/30/2013) 08/30/2013 IN MOTION for Leave to Appear Pro Hac Vice :Attomey Name- Jay M. Gof?nan, :Finn- Skadden, Arps, Slate, Meagher Flom LLP, :Address- 4 Times Square, New York, New York 10036-6522. Phone No. - (212) 735- 2120. Fax No. - (917) 777-2120 by OFFICIAL COMMITTEE OF UNSECURED REDITORS (Attachments: 1 Declaration of Jay M. Goffman, 2 Text of Proposed Order)(Craig, Gregory) (Entered: 08/30/2013) 08/30/2013 MOTION for Leave to Appear Pro Hac Vice :Attorney Name- Paula Render, :Finn- Jones Day, :Address- 77 West Wacker Drive Suite 3500 Chicago, IL 60601. Phone No. - 312-269?1555. Fax No. - 312.782.8585 by AMR CORPORATION (Attachments: 1 Declaration of Paula Render, 2 Text of Proposed Order)(McCalips, Rosanna) (Entered: 08/30/2013) 08/30/2013 MOTION for Leave to Appear Pro Hac Vice :Attomey Name- James A. Keyte, :Finn? Skadden, Arps, Slate, Meagher Flom LLP, :Address- 4 Times Square, New York, New York 10036-6522. Phone No. - (212) 735-2583. Fax No. - (917) 777-2583 by OFFICIAL COMMITTEE OF UNSECURED CREDITORS (Attachments: 1 Declaration of James A. Keyte, Text of Proposed Order)(Craig, Gregory) (Entered: 08/30/2013) 08/30/2013 MOTION for Leave to Appear Pro Hac Vice :Attorney Name- Kenneth B. Schwartz, :Finn- Skadden, Arps, Slate, Meagher Flom LLP, :Address- 4 Times Square, New York, New York 10036-6522. Phone No. - (212) 735- 2731. Fax No. - (917) 777-2731 by OFFICIAL COMMITTEE OF UNSECURED CREDITORS (Attachments: 1 Declaration of Kenneth B. Schwartz, 2 Text of Proposed Order)(Craig, Gregory) (Entered: 08/30/2013) 08/30/2013 Minute Entry for proceedings held before Judge Colleen Kollar-Kotelly: Initial Scheduling Conference held on 8/30/2013. Joint proposed order due by 9/4/2013. Joint Status Report due by 9/30/2013. Bench Trial set for 11/25/2013 09:00 AM in Courtroom 28A before Judge Colleen Kollar-Kotelly. Status Conference set for 10/1/2013 10:30 AM in Courtroom 28A before Judge Colleen Kollar-Kotelly. (Court Reporter Lisa Foradori.) (dot (Entered: 09/ 04/ 20 1 3) 09/03/2013 3/11/2016 Page 24 of 37 NOTICE OF ERROR re 6_1 Notice of Appearance; emailed to cc'd 76 associated attorneys The PDF ?le you docketed contained errors: 1. Incorrect event used, 2. Please re?le document, 3. using the motion(s) event (if, (Entered: 09/03/2013) 09/04/2013 NOTICE of Appearance by James A. Donahue, on behalf of COMMONWEALTH OF (Donahue, James) (Entered: 09/04/2013) 09/04/2013 NOTICE of Lodging of Proposed Scheduling and Case Management Order by AMR CORPORATION, US AIRWAYS GROUP INC (Attachments: 1 Exhibit 1)(Dyer, Courtney) (Entered: 09/04/201 3) 09/04/2013 NOTICE of Lodging of Proposed Order Appointing Special Master by AMR CORPORATION, US AIRWAYS GROUP INC (Attachments: Exhibit 1) (Dyer, Courtney) (Entered: 09/04/2013) 09/04/2013 MINUTE ORDER granting Motion for Admission Pro Hac Vice as to Paula W. Render. Signed by Judge Colleen Kollar?Kotelly on September 4, 2013. (SM) (Entered: 09/04/2013) 09/04/2013 ORDER: Upon consideration of Motions for Admission pro hac vice, the Court makes the following rulings CONTINGENT upon EACH attorney certifying to the Court that he is familiar with the Local Rules of this Court: granting Motion for Admission Pro Hac Vice as to John Wm. Butler, Jr.; granting Motion for Admission Pro Hac Vice as to Albert L. Hogan, granting Motion for Admission Pro Hac Vice as to Jay M. Goffman; granting Motion for Admission Pro Hac Vice as to James A. Keyte; granting g5 Motion for Admission Pro Hac Vice as to Kenneth B. Schwartz. Signed by Judge Colleen Kollar-Kotelly on September 4, 2013. (SM) (Entered: 09/04/2013) 09/04/2013 ORDER appointing Hon. Richard A. Levie (Ret.) special master pursuant to Federal Rule of Civil Procedure 53. Signed by Judge Colleen Kollar-Kotelly on 9/4/13. (Entered: 09/04/2013) 09/04/2013 AFFIDAVIT of Hon. Richard A. Levie (Ret.) pursuant to Federal Rule of Civil Procedure 53(b)(3) and 28 U.S.C. 455. (Entered: 09/04/2013) 09/04/2013 SCHEDULING AND CASE MANAGEMENT ORDER. Signed by Judge Colleen Kollar-Kotelly on 9/4/13. (Entered: 09/04/2013) 09/05/2013 NOTICE of Amended Complaint by UNITED STATES OF AMERICA (Danks, Ryan) (Entered: 09/05/2013) 09/05/2013 AMENDED COMPLAINT against All Defendants ?led by STATE OF TEXAS, STATE OF ARIZONA, UNITED STATES OF AMERICA, STATE OF TENNESSEE, DISTRICT OF COLUMBIA, COMMONWEALTH OF VIRGINIA, STATE OF FLORIDA, OMIVIONWEALTH OF STATE OF MICHIGAN .(Danks, Ryan) (Entered: 09/05/2013) 09/05/2013 NOTICE of Appearance by Kenneth R. O'Rourke on behalf of US AIRWAYS GROUP INC (O'Rourke, Kenneth) (Entered: 09/05/2013) 09/06/2013 NOTICE of Pro Hac Vice Counsel 's Certification of Familiarity with the Local Rules of this Court by OFFICIAL COMMITTEE OF UNSECURED 3/11/2016 Page 25 of 37 CREDITORS (Attachments: 1 Declaration of John Wm. Butler, Jr., 2 Declaration of James A. Keyte, 3 Declaration of Albert L. Hogan, Declaration of Jay M. Gof?nan, .5. Declaration of Kenneth B. Schwartz) (Craig, Gregory) (Entered: 09/06/2013) 09/09/2013 NOTICE of Appearance by Katrina M. Robson on behalf of US AIRWAYS GROUP INC (Robson, Katrina) (Entered: 09/09/2013) 09/09/2013 NOTICE of Appearance by Paul H. Friedman on behalf of US AIRWAYS GROUP INC (Friedman, Paul) (Entered: 09/09/2013) 09/10/2013 NOTICE of Appearance by Christopher N. Thatch on behalf of AMR CORPORATION (Thatch, Christopher) (Entered: 09/10/2013) 09/10/2013 ANSWER to Amended Complaint, by US AIRWAYS GROUP INC. Related document: Amended Complaint, ?led by COMMONWEALTH OF STATE OF FLORIDA, UNITED STATES OF AMERICA, DISTRICT OF COLUMBIA, COMMONWEALTH OF VIRGINIA, STATE OF TEXAS, STATE OF MICI-HGAN, STATE OF TENNESSEE, STATE OF Courtney) (Entered: 09/10/2013) 09/10/2013 ANSWER to Amended Complaint, by AMR CORPORATION. Related docmnent: Amended Complaint, ?led by COMMONWEALTH OF STATE OF FLORIDA, UNITED STATES OF AIVIERICA, DISTRICT OF COLUMBIA, OIVIMONWEALTH OF VIRGINIA, STATE OF TEXAS, STATE OF MICHIGAN, STATE OF TENNESSEE, STATE OF Rosanna) (Entered: 09/10/2013) 09/11/2013 NOTICE OF ERROR re Answer to Amended Complaint; emailed to cdyer@omm.com, cc'd 87 associated attorneys -- The PDF ?le you docketed contained errors: 1. In future, ?ling attorney's (C. Dyer) name/signature must be included in the signature block. (znmw, (Entered: 09/11/2013) 09/12/2013 NOTICE of Appearance by Gorav indal on behalf of US AIRWAYS GROUP INC (Jindal, Gorav) (Entered: 09/ 12/2013) 09/18/2013 loo NOTICE of Appearance by Andrew J. Fonnan on behalf of US AIRWAYS GROUP INC (Forman, Andrew) (Entered: 09/ 18/2013) 09/18/2013 '00 NOTICE of Appearance by Daniel J. Howley on behalf of US AIRWAYS GROUP INC (Howley, Daniel) (Entered: 09/ 18/2013) 09/20/2013 NOTICE of Submission to Special Master by AMR CORPORATION, US AIRWAYS GROUP INC (Attachments: 1 Exhibit 1, 2 Exhibit 2, 3 Exhibit 3)(Dyer, Courtney) (Entered: 09/20/2013) 09/20/2013 104 MOTION to ompel by AMR CORPORATION and US AIRWAYS GROUP INC (See docket entry to View doc1unent.) (ztnr, (Entered: 10/10/2013) 09/24/2013 NOTICE of Submission to Special Master by AMR CORPORATION, US AIRWAYS GROUP INC (Attachments: I Exhibit 1, 2 Exhibit 2, 3 Exhibit 3)(Dyer, Courtney) (Entered: 09/24/2013) 09/24/2013 MOTION to ompel by AMR CORPORATION and US AIRWAYS GROUP INC (See docket entry to View document.) (ztnr, (Entered: 10/10/2013) 09/26/2013 3/11/2016 Page 26 of 37 NOTICE of Submission to Special Master by UNITED STATES OF AMERICA (Attachments: 1 Exhibit 1, 2 Exhibit 2)(Danks, Ryan) (Entered: 09/26/2013) 09/26/2013 NOTICE of Submission to Special Master by UNITED STATES OF AMERICA (Attachments: Exhibit 1)(Danks, Ryan) (Entered: 09/26/2013) 09/26/2013 LEAVE TO FILE DENIED- Amicus Curiae by Mike Friemann.Signed by Judge Colleen Kollar-Kotelly on 9/ 18/13. This document is unavailable as the Court denied its ?ling. (td, (Entered: 09/26/2013) 09/27/2013 NOTICE of Submission to Special Master by AMZR CORPORATION, US AIRWAYS GROUP INC (Attachments: Exhibit)(Dyer, Courtney) (Entered: 09/27/2013) 09/29/2013 NOTICE of Submission to Special Master by AMR CORPORATION, US AIRWAYS GROUP INC (Attachments: Exhibit)(Dyer, Courtney) (Entered: 09/29/2013) 09/30/2013 MEET AND ONFER STATEMENT. (Dyer, Courtney) (Entered: 09/ 3 0/20 1 3) 10/01/2013 IS MOTION to Stay Proceedings by UNITED STATES OF AMERICA (Danks, Ryan) (Entered: 10/01/2013) 10/01/2013 MINUTE ORDER (paperless). The orut held a Status Conference in this matter at 10:30 AM on October 1, 2013, at which the parties mutually agreed on the following matters. At the request of the parties, the orut expands the scope of the referral to the Special Master to include the treatment of information designated as "con?dential", including whether such information should be ?led under seal. Furthermore, by no later than OCTOBER 15, 2013, the parties shall provide the Court with a Joint Trial Procedures Order governing trial-related dates and procedures. The Court provided the parties with a list of dates by which certain materials should be submitted to the Court, but left to the parties whether to set earlier dates if more convenient. A Status Hearing in this matter will be held on OCTOBER 30, 2013 at 4:00 PM. By no later than 5:00 PM on OCTOBER 28, 2013, the parties shall ?le a Joint Status Report alerting the Court as to any issues that require the ourt's attention at this Status Hearing. Finally, a Pre-Trial Conference in this matter will be held on NOVEMBER 21, 2013 at 10:30 AM. Signed by Judge Colleen Kollar- Kotelly on October 1, 2013. (Entered: 10/01/2013) 10/01/2013 I8 ORDER Denying Plaintiff the United States of America's 9_2 Motion for a Stay of Litigation in Light of Lapse of Appropriations. Signed by Judge Colleen Kollar-Kotelly on October 1, 2013. (Entered: 10/01/2013) 10/01/2013 ENTERED IN of Settlement by STATE OF TEXAS (Levy, Mark) Modi?ed on 10/2/2013 (znmw, (Entered: 10/01/2013) 10/01/2013 Minute Entry for proceedings held before Judge Colleen Kollar-Kotelly: Status Conference held on 10/1/2013. Joint Status Report due by 10/28/2013. Bench Trial set for 11/25/2013 09:00 AM in Courtroom 28A before Judge Colleen Kollar-Kotelly. Pretrial Conference set for 11/21/2013 10:30 AM in Courtroom 28A before Judge Colleen Kollar?Kotelly. Status Conference set for 10/30/2013 04:00 PM in Courtroom 28A before Judge Colleen Kollar-Kotelly. (Court Reporter Lisa Foradori.) (dot) (Entered: 10/07/2013) 3/11/2016 Page 27 of 37 MOTION to Dismiss by STATE OF TEXAS (Attachments: 1 Text of Proposed Order)(Levy, Mark) (Entered: 10/02/2013) 10/02/2013 lo 'Jl 10/02/2013 NOTICE OF ERROR re 9_4 Notice of Settlement; emailed to mark.levy@texasattomeygeneral. gov, cc'd 91 associated attorneys -- The PDF ?le you docketed contained errors: 1. Incorrect header/caption/case number, 2. Please re?le document, 3. Entered in error; Incorrect format (letter); Please re?le in accordance with local rules. (znmw, (Entered: 10/02/2013) 10/02/2013 MOTION to Intervene by TRANSPORT WORKERS UNION OF AMERICA (Edehnan, Richard) (Entered: 10/02/2013) 10/03/2013 MOTION for Leave to Appear Pro Hac Vice :Attomey Name- Sharon L. Levine, Esq., :Finn- Lowenstein Sandler LLP, :Address- 65 Livingston Avenue, Roseland, NJ. 07068. Phone No. - 973-597-2500. Fax No. - 973-597- 23 75 by TRANSPORT WORKERS UNION OF AMERICA (Blumenfeld, Jeffrey) (Entered: 10/03/2013) 10/07/2013 MINUTE ORDER (paperless). The Court is in receipt of the Motion of Transport Workers Union to Intervene as of Right. This motion fails to comply with the requirements of Fed. R. Civ. P. 24(c) which requires that a motion to intervene be accompanied by a pleading that sets out the claim or defense for which intervention is sought." In the interests of time, if the proposed intervenor does not ?le the required pleading by 6:00 PM on OCTOBER 7, 2013, this motion will be stricken for failure to comply with the applicable rules. Should the proposed intervenor ?le the required pleading by this time, Plaintiffs and Defendants are requested to ?le a brief response of no longer than three (3) pages indicating their position on the proposed intervention by no later than 5:00 PM on OCTOBER 8, 2013. The proposed intervenor may ?le a response of no longer than three (3) pages to these ?lings by Plaintiffs and Defendants by no later than 5:00 PM on OCTOBER 9, 2013. Signed by Judge Colleen Kollar-Kotelly on October 7, 2013. (Entered: 10/07/201 3) 10/07/2013 Set/Reset Deadlines: Plaintiffs and Defendants are requested to ?le a brief response of no longer than three (3) pages indicating their position due by 10/ 8/2013 proposed intervenor may ?le a response of no longer than three (3) pages due by 10/9/2013. (tcb) (Entered: 10/07/2013) 10/07/2013 Amended MOTION to Intervene or, Alternatively to Appear as Amicus Curiae by TRANSPORT WORKERS UNION OF AMERICA (Blumenfeld, Jeffrey). Added MOTION for Leave to File Amicus Brief on 10/8/2013 (znmw, (Entered: 10/07/2013) 10/07/2013 1 1 ORDER granting with prejudice Motion to Dismiss as to Plaintiff State of Texas. Signed by Judge Colleen Kollar-Kotelly on 10/ 7/ 13. (dot) (Entered: 10/08/2013) 10/08/2013 99 RESPONSE re Amended MOTION to Intervene 0r, Alternatively to Appear as Amicus Curiae MOTION for Leave to File ?led by UNITED STATES OF AMERICA. (Ryan, Mark) (Entered: 10/08/2013) 10/08/2013 L00 RESPONSE re Amended MOTION to Intervene 0r, Alternative/y to Appear as Amicus Curiae MOTION for Leave to File ?led by AMR CORPORATION, US AIRWAYS GROUP INC. (Dyer, orutney) (Entered: 10/08/2013) 3/11/2016 Page 28 of 37 10/09/2013 L02 RESPONSE re Amended MOTION to Intervene or, Alternatively to Appear as Amicus Curiae MOTION for Leave to File ?led by TRANSPORT WORKERS UNION OF AMERICA. (Blrunenfeld, Jeffrey) (Entered: 10/09/2013) 10/09/2013 1 DJ ORDER GRANTING IN PART AND DENYING IN PART Amended Motion of Transport Workers Union to Intervene as of Right or, Alternatively, to Appear as Amicus Curiae. Transport Workers Union's request to intervene as of right is DENIED. Transport Workers Union's request to appear as amicus curiae is GRANTED. Signed by Judge Colleen Kollar-Kotelly on October 9, 2013. (Entered: 10/09/2013) 10/10/2013 REDAC TED REPORT AND REC OMIVIENDATION No. 1 re 104 MOTION to ompel ?led by US AIRWAYS GROUP INC, AMR CORPORATION. Signed by Judge Richard A. Levie (Ret.) on 10/ 10/ 13. (Attachments: 1 Text of Proposed Order Proposed Order) (Levie, Richard) Modi?ed on 10/10/2013 to replace document with redacted version. (ztnr, (Entered: 10/10/2013) 10/10/2013 1 \l REPORT AND RECOMMENDATION No. 2 re 105 MOTION to ompel ?led by US AIRWAYS GROUP INC, AMR CORPORATION. Signed by Judge Richard A. Levie (Ret.) on 10/10/13. (Attachments: 1 Text of Proposed Order) (Levie, Richard) (Entered: 10/10/2013) 10/10/2013 MINUTE ORDER granting Motion for Admission Pro Hac Vice as to Sharon L. Levine, CONTINGENT upon Attorney Levine certifying to the Court that she is familiar with the Local Rules of this Court. Signed by Judge Colleen Kollar-Kotelly on October 10, 2013. (SM) (Entered: 10/10/2013) 10/15/2013 MINUTE ORDER (paperless). At the request of the Special Master, the Court is extending by two business days the deadline for the parties to provide the Court with a Joint Trial Procedures Order. Accordingly, the Court requests that the parties ?le their Joint Trial Procedures Order by no later than 5:00 PM on OCTOBER 17, 2013. Signed by Judge Colleen Kollar-Kotelly on October 15, 2013. (Entered: 10/15/2013) 10/ 15/2013 MINUTE ORDER - With consent of the parties, the Status Conference set for October 30, 2013, at 4 pm. has been moved to an earlier time. Accordingly, the Status Conference set for October 30, 2013, shall be held at 10:30 am. in Courtroom 28A. Signed by Judge Colleen Kollar-Kotelly on October 15, 2013. (SM) (Entered: 10/15/2013) 10/15/2013 Set/Reset Hearings: Status Conference set for 10/30/2013 10:30 AM in Courtroom 28A before Judge Colleen Kollar-Kotelly. (dot) (Entered: 10/ 1 6/201 3) 10/17/2013 1 00 NOTICE 0f Lodging of Joint Proposed Trial Procedures Order by AMR CORPORATION, US AIRWAYS GROUP INC (Attachments: 1 Text of Proposed Order)(Dyer, Courtney) (Entered: 10/17/2013) 10/21/2013 1 \0 MOTION for Leave to File Merits Amicus Brief by ALLIED PILOTS ASSOCIATION, ASSOCIATION OF FLIGHT ATTENDANT S-CWA, ASSOCIATION OF PROFESSIONAL FLIGHT ATTENDAN TS, COMMUNICATIONS WORKERS OF AMERICA, AF L-CIO (Attachments: 1 Text of Proposed Order Proposed Order)(Agusti, Filiberto) Modi?ed to add ?ler on 10/22/2013 (zmnw, (Entered: 10/21/2013) 3/11/2016 10/23/2013 Page 29 of 37 NOTICE of Appearance by Patrick R. Wyrick on behalf of State of Oklahoma (Wyrick, Patrick) (Entered: 10/23/2013) 10/23/2013 p?r p?n NOTICE of Intent to File Amicus Curiae Brief by Oklahoma Attorney General E. Scott Pruitt by State of Oklahoma (Wyrick, Patrick) (Entered: 10/23/2013) 10/28/2013 p?i Ix.) MOTION for Leave to File Amicus Brief by WORTH INTERNATIONAL AIRPORT BOARD, CITY OF CHARLOTTE - CHARLOTTE DOUGLAS INTERNATIONAL AIRPORT, CITY OF PHILADELPHIA, CITY OF PHOENIX - PHOENIX SKY HARBOR INTERNATIONAL AIRPORT (Attachments: 1 Text of Proposed Order Proposed Order)(Bamberger, David) (Entered: 10/28/2013) 10/28/2013 LIJ MOTION for Leave to File Amicus Curiae Merits Brief In Support of Defendants by OFFICML ONIMITTEE OF UNSECURED REDITORS (Attachments: 1 Text of Proposed Order)(Craig, Gregory) (Entered: 10/2 8/201 3) 10/28/2013 43 SUPPLEMENTAL MEMORANDUM to re 1_09 MOTION for Leave to File Merits Amicus Brief Supplement to Motion For Leave to File Merits Brief Amici Curiae of A llied Pilots Association, Association of Professional Flight Attendants, The Association of lightAttendants-CWA and the Comrmmication Workers of America, AFL-CIO (C WA) In Support of Defendants ?led by ALLIED PILOTS ASSOCIATION. (Attachments: 1 Text of Proposed Order) (Agusti, Filiberto) (Entered: 10/28/2013) 10/28/2013 ORDER granting 1_12 Motion for Leave to File Amicus Curiae Brief. The aforementioned parties shall be permitted to ?le a brief amicus curiae addressing the merits of the case. Said brief must be ?led no later than 4/30/2014. Signed by Judge Colleen Kollar-Kotelly on 10/28/13. (dot (Entered: 10/28/2013) 10/28/2013 0\ MEET AND ONFER STATEMENT. (Attachments: 1 Exhibit 1)(Dyer, Courtney) (Entered: 10/28/2013) 10/28/2013 \1 AMENDED ORDER granting Motion for Leave to File Amicus Curiae Brief. The aforementioned parties shall be permitted to ?le a brief amicus curiae addressing the merits of the case. Said brief must be ?led by no later than November 15, 2013. This Order supersedes Order which had an incorrect date by which the brief must be ?led. Signed by Judge Colleen Kollar?Kotelly on October 28, 2013. (SM) (Entered: 10/28/2013) 10/28/2013 Set/Reset Deadlines: Amicus Curiae Brief due by 11/15/2013. (dot (Entered: 10/29/2013) 10/29/2013 00 ENTERED IN for Leave to File Amicus Curiae Merits Brief In Support of Defendants by CHARLOTTE CHAMBER OF COMMERCE, HICAGOLAND CHAMBER OF COMMERCE, DALLAS REGIONAL CHAMBER, FORT WORTH CHAMBER OF COMMERCE, GREATER PHILADELPHIA CHAMBER OF COMIVIERCE, GREATER PHOENIX OF COMMERCE (Attachments: 1 Text of Proposed Order Proposed Order)(Sullivan, Michael) Modi?ed on 10/ 30/2013 (rdj). (Entered: 10/29/2013) 10/29/2013 0 NOTICE of Appearance by Michael Deuel Sullivan on behalf of CHARLOTTE CHAMBER OF COMMERCE, CI-HCAGOLAND CHAMBER 3/11/2016 Page 30 of 37 OF COMMERCE, DALLAS REGIONAL CHAMBER, FORT WORTH CHAMBER OF COMMERCE, GREATER PHILADELPHIA CHAMBER OF COMMERCE, GREATER PHOENIX CHAMBER OF COMMERCE (Sullivan, Michael) (Entered: 10/29/2013) 10/29/2013 12 MOTION for Leave to Appear Pro Hac Vice :Attorney Name- David E. Keltner, :Finn? Kelly Hart Halhnan LLP, :Address- 201 Main Street, Suite 2500, Fort Worth, TX 76102. Phone No. - (817) 332-2500. Fax No. - (817) 878-9280 by CHARLOTTE CHAMBER OF COMMERCE, CHICAGOLAND CHAMBER OF COMMERCE, DALLAS REGIONAL CHAMBER, FORT WORTH CHAMBER OF COMMERCE, GREATER PHILADELPHIA CHAMBER OF COMMERCE, GREATER PHOENIX CHAMBER OF COMMERCE (Attachments: 1 Declaration, 2 Text of Proposed Order) (Sullivan, Michael) (Entered: 10/29/2013) 10/29/2013 Ix) p?n MOTION for Leave to Appear Pro Hac Vice :Attorney Name- Jody S. Sanders, :Firm- Kelly Hart Halhnan LLP, :Address- 201 Main Street, Suite 2500, Fort Worth, TX 76102. Phone No. - (817) 332-2500. Fax No. - (817) 878-9280 by CHARLOTTE CHAMBER OF CHICAGOLAND CHAMBER OF COMMERCE, DALLAS REGIONAL CHAMBER, FORT WORTH CHAMBER OF COMMERCE, GREATER PHILADELPHIA CHAMBER OF COMIVEERC E, GREATER PHOENIX CHAMBER OF OMIVIERC (Attachments: 1 Declaration of Jody S. Sanders, 2 Text of Proposed Order) (Sullivan, Michael) (Entered: 10/29/2013) 10/29/2013 2 Ix.) MOTION for Leave to Appear Pro Hac Vice :Attorney Name- Marianne M. Auld, :Finn- Kelly Hart Halhnan LLP, :Address- 201 Main Street, Suite 2500, Fort Worth, TX 76102. Phone No. - (817) 332-2500. Fax No. - (817) 878-9280 by CHARLOTTE CHAMBER OF COMMERCE, CHICAGOLAND CHAMBER OF COMIVIERCE, DALLAS REGIONAL CHAMBER, FORT WORTH CHAMBER OF COMMERCE, GREATER PHILADELPHIA CHAMBER OF COMMERCE, GREATER PHOENIX CHAMBER OF COMMERCE (Attachments: 1 Declaration of Marianne M. Auld, 2 Text of Proposed Order)(Sullivan, Michael) (Entered: 10/29/2013) 10/29/2013 12 DJ Amended MOTION for Leave to File Amicus Curiae Merits Brief In Support of Defendants by CHARLOTTE CHAMBER OF COMMERCE, CHICAGOLAND CHAMBER OF COMMERCE, DALLAS REGIONAL CHAMBER, FORT WORTH CHAMBER OF COMMERCE, GREATER PHILADELPHIA CHAMBER OF OMIVIERC E, GREATER PHOENIX CHAMBER OF COMMERCE (Attachments: 1 Exhibit, Text of Proposed Order)(Sullivan, Michael) (Entered: 10/29/2013) 10/30/2013 12" MOTION for Leave to File Amicus Curiae Brief in Support of Defendants by Oneworld Alliance, LLC (Attachments: 1 Text of Proposed Order)(Baruch, Douglas) (Entered: 10/30/2013) 10/30/2013 1 5 NOTICE of Appearance by Douglas W. Baruch on behalf of Oneworld Alliance, LLC (Baruch, Douglas) (Entered: 10/30/2013) 10/30/2013 1 Ch MOTION for Leave to Appear Pro Hac Vice :Attorney Name- Peter S. Guryan, :Firm- Fried, Frank, Harris, Shriver Jacobson LLP, :Address- One New York Plaza, New York, New York 10004. Phone No. - 212-859-8477. Fax No. - 212-859-4000 by Oneworld Alliance, LLC (Attachments: 1 Declaration of 3/11/2016 Page 31 of 37 Peter S. Guryan, 2 Text of Proposed Order)(Baruch, Douglas) (Entered: 10/30/2013) 10/30/2013 1 \1 MOTION for Leave to Appear Pro Hac Vice :Attorney Name- Peter L. Simmons, :Finn? Fried, Frank, Harris, Shriver Jacobson LLP, :Address- One New York Plaza, New York, New York 10004. Phone No. - 212-859-8455. Fax No. 212?859-4000 by Oneworld Alliance, LLC (Attachments: 1 Declaration of Peter L. Simmons, 2 Text of Proposed Order)(Baruch, Douglas) (Entered: 10/30/2013) 10/30/2013 Minute Entry for proceedings held before Judge Colleen Kollar-Kotelly: Status Conference held on 10/30/2013. Bench Trial set for 11/25/2013 09:00 AM in Courtroom 28A before Judge Colleen Kollar-Kotelly. Pretrial Conference set for 11/21/2013 10:30 AM in Courtroom 28A before Judge Colleen Kollar- Kotelly. (Court Reporter Lisa Foradori.) (dot) (Entered: 10/30/2013) 10/30/2013 NOTIC OF CORRECTED DOCKET ENTRY: re 1_l8 MOTION for Leave to File Amicus Curiae Merits Brief In Support of Defendants was entered in error at the request of counsel and counsel re?led said pleading as entry . (rdj) (Entered: 10/30/2013) 10/30/2013 1 TRIAL PROCEDURES ORDER. In order to administer this civil action in a manner fair to the litigants and consistent with the Parties' interest in completing this litigation in the shortest possible time and at the least possible cost, it is hereby ORDERED that the Parties shall comply with each of the directives set forth in this Order. Signed by Judge Colleen Kollar-Kotelly on October 30, 2013. (Entered: 10/30/2013) 00 10/30/2013 1 0 ORDER Granting One World Alliance, LLC's Motion for Leave to File Amicus Curiae Brief in Support of Defendants. Signed by Judge Colleen Kollar-Kotelly on October 30, 2013. (Entered: 10/30/2013) 10/30/2013 1 OJ ORDER Granting Motion for Leave to File Merits Brief Amici Curiae of Allied Pilots Association, Association of Professional Flight Attendants, the Association of Flight Attendants-C WA and the ommunications Workers of America, AF L-CIO (C WA) in Support of Defendants. Signed by Judge Colleen Kollar-Kotelly on October 30, 2013. (Entered: 10/ 30/2013) 10/30/2013 Lu p?n AMENDED ORDER. In its October 28, 2013 Order, this Court granted the request of the Dallas/Fort Worth International Airport Board, the City of Charlotte Charlotte Douglas International Airport, the City of Philadelphia, and the City of Phoenix Phoenix Sky Harbor International Airport Workers Union to appear as amicus curiae in this matter. This Amended Order sets out the terms of this amicus curiae participation. Signed by Judge Colleen Kollar- Kotelly on October 30, 2013. (Entered: 10/30/2013) 10/30/2013 MINUTE ORDER (paperless). The Motion of Of?cial Committee of Unsecured Creditors for Leave to File Amicus Curiae Merits Brief in Support of Defendants indicates that the United States objects to the ?ling of this amicus brief. The Court requests that by no later than 12:00 PM on November 4, 2013, the United States either ?le a brief response of no longer than three (3) pages indicating the basis for this objection, or indicate to the orut that it is no longer objecting to this ?ling. In addition, the Motion for Leave to File Merits Brief Amici Curiae of the Charlotte Chamber of Commerce, the Chicagoland Chamber of Commerce, the Dallas Regional Chamber, the Fort 3/11/2016 Page 32 of 37 Worth Chamber of ommerce, the Greater Philadelphia Chamber of Commerce, and the Greater Phoenix Chamber of Commerce in Support of Defendants indicates that the United States objects to the ?ling of this amicus brief. The Court requests that by no later than 12:00 PM on November 4, 2013, the United States ?le a brief response of no longer than three (3) pages indicating the basis for this objection, or indicate to the Court that it is no longer objecting to this ?ling. Signed by Judge Colleen Kollar-Kotelly on October 30, 2013. (Entered: 10/30/2013) 10/31/2013 1 DJ MOTION for Leave to File Motion of the US Airline Pilots Association for Leave to Participate as Amicus Curiae and Memorandum In Support Thereof by US AIRLINE PILOTS ASSOCIATION (Attachments: 1 Text of Proposed Order)(Maclay, Kevin) (Entered: 10/31/2013) 11/01/2013 p?I O.) NOTICE of Appearance by John Bruce McDonald on behalf of AMR CORPORATION (McDonald, John) (Entered: 11/01/2013) 11/01/2013 1 DJ .b NOTICE of Plainit?s' Withdrawal of Objections to Motions by Various Non- Parties to File Amicus Curiae Briefs in this Matter by UNITED STATES OF AMERICA (Danks, Ryan) (Entered: 11/01/2013) 11/04/2013 MINUTE ORDER (paperless). The Motion of the US Airline Pilots Association for Leave to Participate as Amicus Curiae and Memorandum in Support Thereof indicates that Defendants do not consent to the ?ling of this amicus brief. The 01111 requests that by no later than 12:00 PM on November 5, 2013, Defendants either ?le a brief response of no longer than three (3) pages indicating the basis for this objection, or indicate to the Court that they are no longer objecting to this ?ling. Signed by Judge Colleen Kollar-Kotelly on November 4, 2013. (Entered: 1 1/04/2013) 11/04/2013 p_l ORDER Granting l_l3 Motion of Of?cial Committee of Unsecm?ed Creditors for Leave to File Amicus Curiae Merits Brief in Support of Defendants. Signed by Judge Colleen Kollar-Kotelly on November 4, 2013. (Entered: 1 1/04/2013) 11/04/2013 13 Ch ORDER Granting Motion for Leave to File Merits Brief Amici Curiae of the Charlotte Chamber of ommerce, the Chicagoland Chamber of ommerce, the Dallas Regional Chamber, the Fort Worth Chamber of ommerce, the Greater Philadelphia Chamber of ommerce, and the Greater Phoenix Chamber of Cormnerce in Support of Defendants. Signed by Judge Colleen Kollar-Kotelly on November 4, 2013. (Entered: 11/04/2013) 11/04/2013 NOTICE of Hearing: Telephone Conference set for 11/4/2013 03:00 PM in ourtroom 28A before Judge Colleen Kollar-Kotelly. (dot) (Entered: 1 1/04/2013) MOTION for Leave to File 0 FILE BRIEF AMICI CURAE BY CAROLYN FJORD, AL. IN SUPPORT OF PLAINTIFFS by Carolyn Fjord, KATHERINE ARC ELL, KEITH DEAN BRADY, JOSE BRITO, ROBERT D. CONWAY, JAN MARIE BROWN, ROSEMARY BRENDA KAY DAVIS, PAMELA FAUST, DON FREELAND, DONALD FRY, GABRIEL GARAVANTAN, HARRY GARAVANTAN, YVONNE GARDNER, LEE GENTRY, VALARIE JOLLY, GAIL KOSAC H, JUDY CRANDELL, MICHAEL C. MALANEY, LEN MARAZZO, LISA MCCARTHY (Attachments: 1 Appendix APPENDIX A, 2 Text of 11/04/2013 1 U) \l 3/11/2016 Page 33 of 37 Proposed Order PROPOSED ORDER ON MOTION FOR LEAVE TO FILE AMICUS CURAE)(Schwartz, Theodore) Modi?ed event title on 11/5/2013 (znmw, (Entered: 11/04/2013) 11/04/2013 MINUTE ORDER (paperless). The Motion for Leave to File Brief Amici Curiae by Carolyn Fjord, Et Al. in Support of Plaintiffs indicates that Defendants do not consent to the ?ling of this amicus brief. The Court requests that by no later than 12:00 PM on November 6, 2013, Defendants either ?le a brief response of no longer than three (3) pages indicating the basis for this objection, or indicate to the Court that they are no longer objecting to this ?ling. Signed by Judge Colleen Kollar-Kotelly on November 4, 2013. (Entered: 11/04/2013) 11/05/2013 p?r LN 00 RESPONSE re MOTION for Leave to File Motion of the US Airline Pilots Association for Leave to Participate as Anticus Curiae and Memorandum In Support Thereof ?led by AMR CORPORATION, US AIRWAYS GROUP INC. (Dyer, Courtney) (Entered: 11/05/2013) 11/05/2013 p?r DJ \0 NOTICE of Withdrawal of Objection to Motion of Carolyn Fjord, et al. to Participate as Amicus Curiae by AMR CORPORATION, US AIRWAYS GROUP INC (Dyer, Courtney) (Entered: 11/05/2013) 11/05/2013 14 ORDER Granting Motion for Leave to File Brief Amici Curiae by Carolyn Fjord, et al. in Support of Plaintiffs. Signed by Judge Colleen Kollar-Kotelly on November 5, 2013. (Entered: 11/05/2013) 11/05/2013 ORDER Granting Motion of US Airline Pilots Association for Leave to Participate as Amicus Curiae. Signed by Judge Colleen Kollar-Kotelly on November 5, 2013. (Entered: 1 1/05/2013) 11/07/2013 MOTION for Leave to File Amicus Curiae Brief by SOUTHWEST AIRLINES O. (Attachments: 1 Text of Proposed Alden) (Entered: 1 1/07/2013) 11/07/2013 ORDER Granting l_42 Motion for Leave to File Amicus Curiae Brief by Southwest Airlines. Signed by Judge Colleen Kollar-Kotelly on November 7, 2013. (Entered: 11/07/2013) 11/11/2013 WITHDRAWN PURSUANT TO DOCKET ENTRY NO. 1._52 . . . . . MOTION for Leave to File Anticus Curiae Brief by VIRGIN AMERICA INC (Attachments: 1 Text of Proposed Order)(Robertson, J.) Modi?ed on 11/13/2013 (td, (Entered: 11/11/2013) 11/11/2013 'Jl ORDER Granting Motion for Leave to File Amicus Curiae Brief by Virgin America. Signed by Judge Colleen Kollar-Kotelly on November 11, 2013. (Entered: 11/11/2013) 11/12/2013 ?6 NOTICE of Appearance by Michael D. Billiel on behalf of UNITED STATES OF AIVHSRICA (Billiel, Michael) (Entered: 11/12/2013) 11/12/2013 p?r \1 NOTICE OF TUNNEY ACT REQUIREMENTS by UNITED STATES OF AMERICA. (Attachments: 1 Exhibit Asset Preservation Order and Stipulation, Exhibit Proposed Final Judgment)(Billiel, Michael) (Entered: 1 1/12/2013) 11/12/2013 p?r 00 COMPETITIVE IMPACT STATEMENT by UNITED STATES OF AMERICA. (Billiel, Michael) (Entered: 1 1/12/2013) 3/11/2016 Page 34 of 37 11/12/2013 Joint MOTION for Settlement by OF (Attachments: 1 Text of Proposed Order)(Donahue, James) (Entered: 11/12/2013) 11/12/2013 h?I 'Jl ASSET PRESERVATION ORDER AND STIPULATION. Signed by Judge Colleen Kollar?Kotelly on 11/12/13. (dot (Entered: 11/12/2013) 11/12/2013 p?A 'Jl p?a SUPPLEMENTAL STIPULATED ORDER granting Motion for Settlement. Signed by Judge Colleen Kollar-Kotelly on 11/ 12/13. (dot) (Entered: 1 1/12/2013) 11/13/2013 p?n (J1 NOTICE OF WITHDRAWAL OF MOTION by VIRGIN AMERICA INC (Robertson, J.) (Entered: 1 1/13/2013) 11/13/2013 p?i ?11 JJ ORDER. Pursuant to the Asset Preservation Order and Stipulation, all deadlines in this matter established by the Scheduling and Case Management Order and Trial Procedures Order are stayed. This includes the November 15, 2013 deadline for the ?ling of amicus curiae briefs. Accordingly, amici who have been granted leave to ?le should not ?le briefs with the Court at this time. Instead, if they have objections to the proposed settlement agreement, they should use the procedures provided by the Antitrust Procedures and Penalties Act 15 U.S.C. 16, for making these concerns known. Signed by Judge Colleen Kollar-Kotelly on November 13, 2013. (Entered: 11/13/2013) any 11/20/2013 ?Jr ORDER Setting out procedures for compliance with the Antitrust Procedlu?es and Penalties Act (Tunney Act), 15 U.S.C. Signed by Judge Colleen Kollar-Kotelly on November 20, 2013. (Entered: 11/20/2013) 12/09/2013 NOIIC OF TUNNEY ACT REQUIREMENTS by CORPORATION, US AIRWAYS GROUP INC. (Denis, Paul) (Entered: 12/09/2013) 12/13/2013 p?i 0\ Corporate Disclosure Statement by US AIRWAYS GROUP INC. (Jindal, Gorav) (Entered: 12/ 13/2013) 02/26/2014 p?1 'Ji \l Unopposed MOTION for Order for Extension of Time by UNITED STATES OF AMERICA (Billiel, Michael) (Entered: 02/26/2014) 02/26/2014 p?a 00 ORDER granting Unopposed Motion for Federal Register Publication of the Response of Plaintiff United States of Public Comments on the Proposed Final Judgment; Set/Reset Deadlines: Response due by 3/ 10/2014. Signed by Judge Colleen Kollar-Kotelly on 2/26/14. (dot) (Entered: 02/26/2014) 03/10/2014 p?i 'Jl RESPONSE TO PUBLIC COMMENTS in Antitrust Case by UNITED STATES OF AMERICA. (Attachments: Appendix)(Billiel, Michael) (Entered: 03/10/2014) 03/10/2014 NOTICE OF TUNNEY ACT REQUIREMENTS by CORPORATION, US AIRWAYS GROUP INC. (Jindal, Gorav) (Entered: 03/ 10/2014) 03/13/2014 MOTION to Approve Consent Judgment by UNITED STATES OF AMERICA (Attachments: 1 Text of Proposed Order, 2 Exhibit Certi?cate of Compliance with APPA)(Billiel, Michael) (Entered: 03/ 13/2014) 03/13/2014 1_62 ORDER. The record in this case shall remain open 1mtil 5:00 PM on APRIL 3, 2014. The Court will rule on the United States' Motion for Entry of the Proposed Final Judgment based on the record in this case as it exists at that 3/11/2016 Page 35 of 37 time. Signed by Judge Colleen Kollar-Kotelly on March 13, 2014. (Entered: 03/13/2014) 04/01/2014 1 OJ Unopposed MOTION for Leave to File Amicus Curiae Brief by AMERICAN AN TITRUST INSTITUTE (Attachments: 1 Exhibit Proposed Amicus Brief, Exhibit LCVR 7.1 Statement)(Zane, Phillip) (Entered: 04/01/2014) 04/03/2014 1_64 ENTERED IN Curiae APPEARANCE entered by Theodore Frank Schwartz on behalf of CAROLYN FJORD. (Attachments: 1 Declaration, Text of Proposed Order)(Schwartz, Theodore) Modi?ed on 4/4/2014 (znmw, (Entered: 04/03/2014) 04/04/2014 NOTICE OF ERROR re l6_4 Amicus Curiae Appearance; emailed to cc?d 115 associated attorneys -- The PDF ?le you docketed contained errors: 1. Incorrect event used, 2. Please re?le document, 3. Entered in error; Re?le as a Motion for Leave to File (znmw, (Entered: 04/04/2014) 04/04/2014 1 MOTION for Leave to File Brief Amici Curiae (Corrective Filing) by KATHERINE ARCELL, KEITH DEAN BRADY, JOSE M. BRITO, JAN MARIE BROWN, ROBERT D. CONWAY, JUDY CRANDELL, ROSEMARY BRENDA KAY DAVIS, PAMELA FAUST, CAROLYN FJORD, DON FREELAND, DONALD FRY, GABRIEL GARAVANIAN, HARRY GARAVANIAN, YVONNE GARDNER, LEE GENTRY, VALARIE JOLLY, GAIL KOSAC H, MICHAEL C. MALANEY, LEN MARAZZO, LISA MCCARTHY (Attachments: 1 Declaration in Support of Motion, Text of Proposed Order)(Schwartz, Theodore) (Entered: 04/04/2014) 04/25/2014 1 0\ ORDER. On March 11, 2014, the Comt Clerk's Of?ce received an e-mail to its online suggestion box from a private citizen who objected to the parties' settlement in this case. As an attachment to this Order, the Court provides a version of this e-mail with personally identifying information redacted. An unredacted version of this e-mail is maintained in the ourt's ?les. Signed by Judge Colleen Kollar-Kotelly on April 25, 2014. (Entered: 04/25/2014) 04/25/2014 1 \1 ORDER GRANTING Unopposed Motion of the American Antitrust Institute for Leave to File Brief as Amicus Curiae to Reply to the Response of Plaintiff United States to Public Comments on the Proposed Final Judgment; GRANTING IN PART AND DENYING IN PART Unopposed Motion for Leave to File Brief Amici Curiae by Carolyn Fjord, et al. and in Opposition to Plaintiffs Motion for Entry of Final Judgment and for a Hearing on the Proposed Final Judgment. Signed by Judge Colleen Kollar-Kotelly on April 25, 2014. (Entered: 04/25/2014) 04/25/2014 1 00 ORDER GRANTING United States' Motion for Entry of the Proposed Final Judgment. Signed by Judge Colleen Kollar?Kotelly on April 25, 2014. (Entered: 04/25/2014) 04/25/2014 1_69 MEMORANDUM OPINION. Signed by Judge Colleen Kollar-Kotelly on April 25, 2014. (Entered: 04/25/2014) 04/25/2014 FINAL JUDGMENT. Signed by Judge Colleen Kollar-Kotelly on April 25, 2014. (Entered: 04/25/2014) 3/11/2016 04/25/2014 Page 36 of 37 AMICUS BRIEF by AMERICAN ANT ITRUST INSTITUTE. (znmw, (Entered: 04/28/2014) 04/25/2014 p?i \l Ix.) LCVR 7.1 CERTIFICATE OF DISCLOSURE of Corporate Af?liations and Financial Interests by AMERICAN AN TITRUST INSTITUTE (znmw, (Entered: 04/28/2014) 04/25/2014 p?a LN AMICUS BRIEF by KATHERINE ARCELL, KEITH DEAN BRADT, JOSE M. BRITO, JAN MARIE BROWN, ROBERT D. CONWAY, JUDY CRANDELL, ROSEMARY BRENDA KAY DAVIS, PAMELA FAUST, CAROLYN FJORD, DON FREELAND, DONALD FRY, GABRIEL GARAVANIAN, HARRY GARAVANIAN, YVONNE GARDNER, LEE GENTRY, VALARIE JOLLY, GAIL KOSACH, MICHAEL C. MALANEY, LEN MARAZZO, LISA MCCARTHY. (znmw, (Entered: 04/28/2014) 08/04/2014 1_74 TRANSCRIPT OF PROCEEDINGS before Judge Colleen Kollar-Kotelly held on 8-30-13; Page Numbers: 1-78. Date of Issuance:8-4-14. Court Reporter/Transcriber Lisa M. Foradori, Telephone number 202-354-3269, Court Reporter Email Address the ?rst 90 days after this ?ling date, the transcript may be viewed at the courthouse at a public terminal or purchased from the court reporter referenced above. After 90 days, the transcript may be accessed via PACER. Other transcript formats, (multi-page, condensed, CD or ASCII) may be purchased from the court RE REDACTION OF TRANSCRIPTS: The parties have twenty-one days to ?le with the court and the court reporter any request to redact personal identi?ers ?om this transcript. If no such requests are ?led, the transcript will be made available to the public via PACER without redaction after 90 days. The policy, which includes the ?ve personal identi?ers speci?cally covered, is located on our website at Redaction Request due 8/25/2014. Redacted Transcript Deadline set for 9/4/2014. Release of Transcript Restriction set for Lisa) (Entered: 08/04/2014) 08/04/2014 TRANSCRIPT OF PROCEEDINGS before Judge Colleen Kollar?Kotelly held on 10-1-13; Page Numbers: 1-13. Date of Court Reporter/Transcriber Lisa M. Foradori, Telephone number 202-3 54-3269, Court Reporter Email Address the ?rst 90 days after this ?ling date, the transcript may be viewed at the courthouse at a public terminal or purchased from the court reporter referenced above. After 90 days, the transcript may be accessed via PACER. Other transcript formats, (multi-page, condensed, CD or ASCII) may be purchased from the court RE REDACTION OF TRANSCRIPTS: The parties have twenty-one days to ?le with the court and the court reporter any request to redact personal identi?ers from this transcript. If no such requests are ?led, the transcript will be made available to the public via PACER without redaction after 90 days. The policy, which includes the ?ve personal identi?ers speci?cally covered, is located on our website at Redaction Request due 8/25/2014. Redacted Transcript Deadline set for 9/4/2014. Release of Transcript Restriction set for Lisa) (Entered: 08/04/2014) 08/04/2014 \l TRANSCRIPT OF PROCEEDINGS before Judge Colleen Kollar-Kotelly held on 10-30-13; Page Nlunbers: 1-15. Date of Court 3/11/2016 Reporter/Transcriber Lisa M. Foradori, Telephone number 202-354-3269, Court Reporter Email Address the ?rst 90 days after this ?ling date, the transcript may be Viewed at the courthouse at a public terminal or purchased from the court reporter referenced above. After 90 days, the transcript may be accessed via PACER. Other transcript formats, (multi-page, condensed, CD or ASCII) may be purchased from the court RE REDACTION OF TRANSCRIPTS: The parties have twenty-one days to ?le with the court and the court reporter any request to redact personal identi?ers from this transcript. If no such requests are ?led, the transcript will be made available to the public via PACER without redaction after 90 days. The policy, which includes the ?ve personal identi?ers speci?cally covered, is located on our website at Redaction Request due 8/25/2014. Redacted Transcript Deadline set for 9/4/2014. Release of Transcript Restriction set for Lisa) (Entered: 08/04/2014) Page 37 of 37 PACER Service Center Transaction Receipt 03/11/2016 08:21 :27 PACER . I Client Logm: Code: PRR Search 1 l3-cv- Description: Docket Report Criteria 0123 6- CKK Bubble 26 Cost: 2.60 Pages: 3/11/2016 Case Document 1-3 Filed 08/13/13 Page 1 of 7? CLEAR FORM A0 440 (Rev. 12/09; DC 03/10) Summons in a Civil Action UNITED STATES DISTRICT COURT for the District of Columbia United States of America, et al Plamn? V. Civil Action No. 13-1236 US Airways Group, Inc. AMR Corporation Defendant SUNINIONS IN A CIVIL ACTION To: (Defendant's name and address) AMR Corporation 4333 Amon Carter Boulevard Fort Worth, TX 76155 A lawsuit has been ?led against you. Within 21 days after service of this srumnons on you (not counting the day you received it) or 60 days if you are the United States or a United States agency. or an of?cer or employee of the United States described in Fed. R. Civ. P. 12 or (3) you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion be served on the plaintiff or plaintiff attorney, whose name and address are: United States of America c/o Ryan J. Danks US. Department of Justice--Antitrust Division 450 5th Street NW, Suite 8000 Washington, DC. 20530 If you fail to respond. judgment by default will be entered against you for the relief demanded in the complaint. You also must ?le your answer or motion with the court. ANGELA D. CAESAR, CLERK OF COURT Date: 08/13/2013 Signature of Clerk or Deputy Clerk Case Document 1-3 Filed 08/13/13 Page 2 of 2 A0 440 (Rev. 12/09; DC 03/10) Summons in a Civil Action (Page 2) Civil Action No. 13-1236 PROOF OF SERVICE (This section should not be ?led with the court unless required by Fed. R. Civ. P. 4 This summons for (name ofindividual and title, ifany) was received by me on (date) I personally served the summons on the individual at (place) 01] (date) or II I left the summons at the individual?s residence or usual place of abode with (name) . a person of suitable age and discretion who resides there. on (date) and mailed a copy to the individual?s last known address; or II I served the on (name ofindividual) . who is designated by law to accept service of process on behalf of (name oforganization) 011 (date) 2 01' CI I retmned the summons tmexecuted because or Other (specify): My fees are for travel and for services. for a total of o_oo . I declare tulder penalty of perjury that this information is true. Date: Server ?s signature Printed name and title Server ?3 address Additional information regarding attempted service. etc: Case Document 1-2 Filed 08/13/13 Page 1 of 7? CLEAR FORM A0 440 (Rev. 12/09; DC 03/10) Summons in a Civil Action UNITED STATES DISTRICT COURT for the District of Columbia United States of America, et al Plamn? V. Civil Action No. 13-1236 US Airways Group, Inc. AMR Corporation Defendant SUNINIONS IN A CIVIL ACTION To: (Defendant's name and address) AMR Corporation 4333 Amon Carter Boulevard Fort Worth, TX 76155 A lawsuit has been ?led against you. Within 21 days after service of this srumnons on you (not counting the day you received it) or 60 days if you are the United States or a United States agency. or an of?cer or employee of the United States described in Fed. R. Civ. P. 12 or (3) you must serve on the plaintiff an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion be served on the plaintiff or plaintiff attorney, whose name and address are: United States of America c/o Ryan J. Danks US. Department of Justice--Antitrust Division 450 5th Street NW, Suite 8000 Washington, DC. 20530 If you fail to respond. judgment by default will be entered against you for the relief demanded in the complaint. You also must ?le your answer or motion with the court. ANGELA D. CAESAR, CLERK OF COURT Date: 08/13/2013 Signature of Clerk or Deputy Clerk Case Document 1-2 Filed 08/13/13 Page 2 of 2 A0 440 (Rev. 12/09; DC 03/10) Summons in a Civil Action (Page 2) Civil Action No. 13-1236 PROOF OF SERVICE (This section should not be ?led with the court unless required by Fed. R. Civ. P. 4 This summons for (name ofindividual and title, ifany) was received by me on (date) I personally served the summons on the individual at (place) 01] (date) or II I left the summons at the individual?s residence or usual place of abode with (name) . a person of suitable age and discretion who resides there. on (date) and mailed a copy to the individual?s last known address; or II I served the on (name ofindividual) . who is designated by law to accept service of process on behalf of (name oforganization) 011 (date) 2 01' CI I retmned the summons tmexecuted because or Other (specify): My fees are for travel and for services. for a total of o_oo . I declare tulder penalty of perjury that this information is true. Date: Server ?s signature Printed name and title Server ?3 address Additional information regarding attempted service. etc: Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 1 of 56 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA 450 Fifth Street Northwest, Suite 8000 Washington, DC 20530 STATE OF ARIZONA 1275 West Washington Phoenix, AZ 85007 DISTRICT OF COLUMBIA 441 Fourth Street Northwest, Suite 600 South Washington, DC 20001 STATE OF FLORIDA PL-01, The Capitol Tallahassee, FL 32399 COMMONWEALTH OF PENNSYLVANIA 14th Floor, Strawberry Square Harrisburg, PA 17120 STATE OF TENNESSEE 500 Charlotte Avenue Nashville, TN 37202 STATE OF TEXAS 300 W.15th Street, 7th Floor Austin, TX 78701 and Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 2 of 56 COMMONWEALTH OF VIRGINIA 900 East Main Street Richmond, VA 23219 Plaintiffs, v. US AIRWAYS GROUP, INC. 111 W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION 4333 Amon Carter Boulevard Fort Worth, TX 76155 Defendants. COMPLAINT The United States of America, acting under the direction of the Attorney General of the United States, and the States of Arizona, Florida, Tennessee, Texas, the Commonwealths of Pennsylvania and Virginia, and the District of Columbia (“Plaintiff States”), acting by and through their respective Attorneys General, bring this civil action under federal antitrust law to enjoin the planned merger of two of the nation’s five major airlines, US Airways Group, Inc. (“US Airways”) and AMR Corporation (“American”), and to obtain equitable and other relief as appropriate. 2 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 3 of 56 I. INTRODUCTION 1. Millions of passengers depend on the airline industry to travel quickly, efficiently, and safely between various cities in the United States and throughout the world. Since 1978, the nation has relied on competition among airlines to promote affordability, innovation, and service and quality improvements. In recent years, however, the major airlines have, in tandem, raised fares, imposed new and higher fees, and reduced service. Competition has diminished and consumers have paid a heavy price. This merger—by creating the world’s largest airline— would, in the words of US Airways’ management, “finish[ ] industry evolution.” It would reduce the number of major domestic airlines from five to four, and the number of “legacy” airlines—today, Delta, United, American, and US Airways—from four to three. In so doing, it threatens substantial harm to consumers. Because of the size of the airline industry, if this merger were approved, even a small increase in the price of airline tickets, checked bags, or flight change fees would cause hundreds of millions of dollars of harm to American consumers annually. 2. American and US Airways compete directly on thousands of heavily traveled nonstop and connecting routes. Millions of passengers benefit each year from head-to-head competition that this merger would eliminate. With less competition, airlines can cut service and raise prices with less fear of competitive responses from rivals. 3. This merger will leave three very similar legacy airlines—Delta, United, and the new American—that past experience shows increasingly prefer tacit coordination over full-throated competition. By further reducing the number of legacy airlines and aligning the economic incentives of those that remain, the merger of US Airways and American would make it easier for the remaining airlines to cooperate, rather than compete, on price and service. That enhanced 3 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 4 of 56 cooperation is unlikely to be significantly disrupted by Southwest and JetBlue, which, while offering important competition on the routes they fly, have less extensive domestic and international route networks than the legacy airlines. 4. US Airways’ own executives—who would run the new American—have long been “proponents of consolidation.” US Airways believes that the industry—before 2005—had “too many” competitors, causing an “irrational business model.” Since 2005, there has been a wave of consolidation in the industry. US Airways has cheered these successive mergers, with its CEO stating in 2011 that “fewer airlines” is a “good thing.” US Airways’ President explained this thinking that same year: “Three successful fare increases – [we are] able to pass along to customers because of consolidation.” (emphasis added). Similarly, he boasted at a 2012 industry conference: “Consolidation has also . . . allowed the industry to do things like ancillary revenues [e.g., checked bag and ticket change fees] . . . . That is a structural permanent change to the industry and one that’s impossible to overstate the benefit from it.” In essence, industry consolidation has left fewer, more-similar airlines, making it easier for the remaining airlines to raise prices, impose new or higher baggage and other ancillary fees, and reduce capacity and service. This merger positions US Airways’ management to continue the trend—at the expense of consumers. 5. US Airways intends to do just that. If this merger were approved, US Airways would no longer need to offer low-fare options for certain travelers. For example, US Airways employs “Advantage Fares,” an aggressive discounting strategy aimed at undercutting the other legacy airlines’ nonstop fares with cheaper connecting service. US Airways’ hubs are in cities that generate less lucrative nonstop traffic than the other legacy airlines’ hubs. To compensate, US 4 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 5 of 56 Airways uses its Advantage Fares to attract additional passengers on flights connecting through its hubs. 6. The other legacy airlines take a different approach. If, for example, United offers nonstop service on a route, and Delta and American offer connecting service on that same route, Delta and American typically charge the same price for their connecting service as United charges for its nonstop service. As American executives observed, the legacy airlines “generally respect the pricing of the non-stop carrier [on a given route],” even though it means offering connecting service at the same price as nonstop service. But American, Delta, and United frequently do charge lower prices for their connecting service on routes where US Airways offers nonstop service. They do so to respond to US Airways’ use of Advantage Fares on other routes. 7. If the merger were approved, US Airways’ economic rationale for offering Advantage Fares would likely go away. The merged airline’s cost of sticking with US Airways’ one-stop, low-price strategy would increase. Delta and United would likely undercut the merged firm on a larger number of nonstop routes. At the same time, the revenues generated from Advantage Fares would shrink as American’s current nonstop routes would cease to be targets for Advantage Fares. The bottom line is that the merged airline would likely abandon Advantage Fares, eliminating significant competition and causing consumers to pay hundreds of millions of dollars more. 8. Consumers will likely also be harmed by the planned merger because American had a standalone plan to emerge from bankruptcy poised to grow. American planned to expand domestically and internationally, adding service on nearly 115 new routes. To support its plan, American recently made the largest aircraft order in industry history. 5 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 6 of 56 9. American’s standalone plan would have bucked current industry trends toward capacity reductions and less competition. US Airways called American’s growth plan “industry destabilizing” and worried that American’s plan would cause other carriers to react “with their own enhanced growth plans . . . .” The result would be to increase competitive pressures throughout the industry. After the merger, US Airways’ current executives—who would manage the merged firm—would be able to abandon American’s efforts to expand and instead continue the industry’s march toward higher prices and less service. As its CEO candidly stated earlier this year, US Airways views this merger as “the last major piece needed to fully rationalize the industry.” 10. Passengers to and from the Washington, D.C. area are likely to be particularly hurt. To serve Ronald Reagan Washington National Airport (“Reagan National”), a carrier must have “slots,” which are government-issued rights to take off and land. US Airways currently holds 55% of the slots at Reagan National and the merger would increase the percentage of slots held by the combined firm to 69%. The combined airline would have a monopoly on 63% of the nonstop routes served out of the airport. Competition at Reagan National cannot flourish where one airline increasingly controls an essential ingredient to competition. Without slots, other airlines cannot enter or expand the number of flights that they offer on other routes. As a result, Washington, D.C. area passengers would likely see higher prices and fewer choices if the merger were approved. 11. Notwithstanding their prior unequivocal statements about the effects of consolidation, the defendants will likely claim that the elimination of American as a standalone competitor will benefit consumers. They will argue that Advantage Fares will continue, existing capacity levels and growth plans will be maintained, and unspecified or unverified “synergies” will materialize, 6 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 7 of 56 creating the possibility of lower fares. The American public has seen this before. Commenting on a commitment to maintain service levels made by two other airlines seeking approval for a merger in 2010, the CEO of US Airways said: “I’m hopeful they’re just saying what they need . . . to get this [transaction] approved.” By making claims about benefits that are at odds with their prior statements on the likely effects of this merger, that is precisely what the merging parties’ executives are doing here—saying what they believe needs to be said to pass antitrust scrutiny. 12. There is no reason to accept the likely anticompetitive consequences of this merger. Both airlines are confident they can and will compete effectively as standalone companies. A revitalized American is fully capable of emerging from bankruptcy proceedings on its own with a competitive cost structure, profitable existing business, and plans for growth. US Airways today is competing vigorously and earning record profits. Executives of both airlines have repeatedly stated that they do not need this merger to succeed. 13. The merger between US Airways and American would likely substantially lessen competition, and tend to create a monopoly, in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. Therefore, this merger should be permanently enjoined. II. JURISDICTION, INTERSTATE COMMERCE, AND VENUE 14. The United States brings this action, and this Court has subject-matter jurisdiction over this action, under Section 15 of the Clayton Act, as amended, 15 U.S.C. § 25, to prevent and restrain US Airways and American Airlines from violating Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18. 15. The Plaintiff States bring this action under Section 16 of the Clayton Act, 15 U.S.C. § 26, to prevent and restrain US Airways and American Airlines from violating Section 7 of the 7 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 8 of 56 Clayton Act, as amended, 15 U.S.C. § 18. The Plaintiff States, by and through their respective Attorneys General, bring this action as parens patriae on behalf of the citizens, general welfare, and economy of each of their states. 16. The defendants are engaged in, and their activities substantially affect, interstate commerce, and commerce in each of the Plaintiff States. US Airways and American Airlines each annually transport millions of passengers across state lines throughout this country, generating billions of dollars in revenue while doing so. 17. Venue is proper under Section 12 of the Clayton Act, 15 U.S.C. § 22. This Court also has personal jurisdiction over each defendant. Both defendants are found and transact business in this judicial district. III. THE DEFENDANTS AND THE TRANSACTION 18. Defendant US Airways Group, Inc., is a Delaware corporation headquartered in Tempe, Arizona. Last year, it flew over fifty million passengers to approximately 200 locations worldwide, taking in more than $13 billion in revenue. US Airways operates hubs in Phoenix, Charlotte, Philadelphia, and Washington, D.C. 19. US Airways is performing exceptionally well. In 2012, it enjoyed record profits. It is operating at high load factors—the percentage of seats sold on its flights—and has a national and international route network, alliances with international airlines, a strong brand name, modern equipment, and a competitive cost structure. In mid-2012, US Airways’ CEO, touting the airline’s “record second quarter results,” told Dow Jones that the company “has a great business model that works and we certainly don’t need to merge with another airline.” 20. Defendant AMR Corporation is a Delaware corporation headquartered in Fort Worth, Texas. AMR Corporation is the parent company of American Airlines. Last year, American 8 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 9 of 56 flew over eighty million passengers to approximately 250 locations worldwide, taking in more than $24 billion in revenue. American operates hubs in New York, Los Angeles, Chicago, Dallas, and Miami. The American Airlines brand is “one of the most recognized . . . in the world.” 21. In November 2011, American filed for bankruptcy reorganization and is currently under the supervision of the Bankruptcy Court for the Southern District of New York. American adopted and implemented a standalone business plan designed “to restore American to industry leadership, profitability and growth.” While in bankruptcy, American management “pursued and successfully implemented” key provisions of this plan, including revenue and network enhancements, as well as “restructuring efforts [that] have encompassed labor cost savings, managerial efficiencies, fleet reconfiguration, and other economies . . . .” That work has paid off. American reported that its revenue growth has “outpaced” the industry since entering bankruptcy and in its most recent quarterly results reported a company record-high $5.6 billion in revenues, with $357 million in profits. Under experienced and sophisticated senior management, American’s restructuring process has positioned it to produce “industry leading profitability.” As recently as January 8, 2013, American’s management presented plans to emerge from bankruptcy that would increase the destinations American serves in the United States and the frequency of its flights, and position American to compete independently as a profitable airline with aggressive plans for growth. 22. US Airways sees American the same way. Its CEO observed in December 2011 that “A[merican] is not going away, they will be stronger post-bankruptcy because they will have less debt and reduced labor costs.” A US Airways’ executive vice president similarly wrote in July 2012 that “[t]here is NO question about AMR’s ability to survive on a standalone basis.” 9 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 10 of 56 23. US Airways and American agreed to merge on February 13, 2013. US Airways shareholders would own 28 percent of the combined airline, while American shareholders, creditors, labor unions, and employees would own 72 percent. The merged airline would operate under the American brand name, but the new American would be run by US Airways management. IV. THE RELEVANT MARKETS A. Scheduled Air Passenger Service Between Cities 24. Domestic scheduled air passenger service enables consumers to travel quickly and efficiently between various cities in the United States. Air travel offers passengers significant time savings and convenience over other forms of travel. For example, a flight from Washington, D.C. to Detroit takes just over an hour of flight time. Driving between the two cities takes at least eight hours. A train between the two cities takes more than fifteen hours. 25. Due to time savings and convenience afforded by scheduled air passenger service, few passengers would substitute other modes of transportation (car, bus, or train) for scheduled air passenger service in response to a small but significant industry-wide fare increase. Another way to say this, as described in the Fed. Trade Comm’n & U.S. Dep’t of Justice Horizontal Merger Guidelines (2010), and endorsed by courts in this Circuit, is that a hypothetical monopolist of all domestic scheduled air passenger service likely would increase its prices by at least a small but significant and non-transitory amount. Scheduled air passenger service, therefore, constitutes a line of commerce and a relevant product market within the meaning of Section 7 of the Clayton Act. 26. A “city pair” is comprised of a flight’s departure and arrival cities. For example, a flight departing from Washington and arriving in Chicago makes up the Washington-Chicago city pair. 10 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 11 of 56 Passengers seek to depart from airports close to where they live and work, and arrive at airports close to their intended destinations. Most airline travel is related to business, family events, and vacations. Thus, most passengers book flights with their origins and destinations predetermined. Few passengers who wish to fly from one city to another would likely switch to flights between other cities in response to a small but significant and non-transitory fare increase. 27. Airlines customarily set fares on a city pair basis. For each city pair, the degree and nature of the competition from other airlines generally plays a large role in an airline’s pricing decision. 28. Therefore, a hypothetical monopolist of scheduled air passenger service between specific cities likely would increase its prices by at least a small but significant and non-transitory amount. Accordingly, each city pair is a relevant geographic market and section of the country under Section 7 of the Clayton Act. 29. Consumer preferences also play a role in airline pricing and are relevant for the purpose of analyzing the likely effects of the proposed merger. Some passengers prefer nonstop service because it saves travel time; some passengers prefer buying tickets at the last minute; others prefer service at a particular airport within a metropolitan area. For example, most business customers traveling to and from downtown Washington prefer service at Reagan National over other airports in the Washington, D.C. metropolitan area. Through a variety of fare restrictions and rules, airlines can profitably raise prices for some of these passengers without raising prices for others. Thus, the competitive effects of the proposed merger may vary among passengers depending on their preferences for particular types of service or particular airports. 11 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 12 of 56 B. Takeoff and Landing Slots at Reagan National Airport 30. Reagan National is one of only four airports in the country requiring slots for takeoffs and landings. Slots are expensive (often valued at over $2 million per slot), difficult to obtain, and only rarely change hands between airlines. There are no alternatives to slots for airlines seeking to enter or expand their service at Reagan National. 31. Reagan National is across the Potomac River from Washington, D.C., and, due to its proximity to the city and direct service via the Metro, airlines actively seek to serve passengers flying into and out of Reagan National. Airlines do not view service at other airports as adequate substitutes for service offered at Reagan National for certain passengers, and thus they are unlikely to switch away from buying or leasing slots at Reagan National in response to a small but significant increase in the price of slots. Airlines pay significant sums for slots at Reagan National, despite having the option of serving passengers through the region’s other airports. A hypothetical monopolist of slots at Reagan National likely would increase its prices by at least a small but significant and non-transitory amount. Thus, slots at Reagan National Airport constitute a line of commerce, section of the country, and relevant market within the meaning of Section 7 of the Clayton Act. V. THE MERGER IS LIKELY TO RESULT IN ANTICOMPETITIVE EFFECTS A. Industry Background 32. Today, four network or “legacy” airlines remain in the United States: American, US Airways, United, and Delta. These four have extensive national and international networks, connections to hundreds of destinations, established brand names, and strong frequent flyer reward programs. In addition, there are non-network airlines, including Southwest Airlines and a handful of smaller firms, which typically do not offer “hub-and-spoke” service. 12 Case Document 1 Filed 08/13/13 Page 13 of 56 33. Airlines compete in many ways. One is the price of a ticket. Airlines also compete based on: nonstop versus connecting ?ights; number of destinations served; convenient ?ight schedules; passenger comfort and seating policies; choices for classes of service; carry-on baggage policies; the degree of personal service at ticket comrters and boarding areas: onboard meal and drink service; in-?ight entertainment; and the quality and generosity of frequent ?yer programs. 34. Since 2005, the US. airline industry has undergone signi?cant consolidation. The consolidation ?wave? started with the 2005 merger between US Airways and America West, creating today?s US Airways. In 2008, Delta and Northwest Airlines merged; in 2010, United and Continental merged; and in 2011, Southwest Airlines and AirTran merged. The chart below, in which one of US Airways? executive vice presidents referred to industry consolidation as the ?New Holy Grail,? demonstrates that since 2005 the munber of major airlines has dropped from nine to ?ve. New Order: New Holy Grail - Industry Consolidation The major airlines have consolidated to 5 from 9 since 2005 2005 2008 201 0 u-s Ainiun's Al Fly with A Q) A TA IT ?rm-:5 .1 b. flil?Tl?illi AmericanAirlines? Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 14 of 56 35. Increasing consolidation among large airlines has hurt passengers. The major airlines have copied each other in raising fares, imposing new fees on travelers, reducing or eliminating service on a number of city pairs, and downgrading amenities. An August 2012 presentation from US Airways observes that consolidation has resulted in “Fewer and Larger Competitors.” The structural change to “fewer and larger competitors” has allowed “[t]he industry” to “reap the benefits.” Those benefits to the industry are touted by US Airways in the same presentation as including “capacity reductions” and new “ancillary revenues” like bag fees. B. Many Relevant Markets Are Highly Concentrated and the Planned Merger Would Significantly Increase that Concentration 36. In 2005, there were nine major airlines. If this merger were approved, there would be only four. The three remaining legacy airlines and Southwest would account for over 80% of the domestic scheduled passenger service market, with the new American becoming the biggest airline in the world. 37. Market concentration is one useful indicator of the level of competitive vigor in a market, and the likely competitive effects of a merger. The more concentrated a market, and the more a transaction would increase concentration in a market, the more likely it is that a transaction would result in a meaningful reduction in competition. Concentration in relevant markets is typically measured by the Herfindahl-Hirschman Index (“HHI”). Markets in which the HHI exceeds 2,500 points are considered highly concentrated. Post-merger increases in HHI of more than 200 points are considered to be significant increases in concentration. 38. In more than 1,000 of the city pair markets in which American and US Airways currently compete head-to-head, the post-merger HHI would exceed 2,500 points and the merger would increase the HHI by more than 200 points. For example, on the Charlotte-Dallas city pair, the post-merger HHI will increase by 4,648 to 9,319 (out of 10,000). In these markets, US Airways 14 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 15 of 56 and American annually serve more than 14 million passengers and collect more than $6 billion in fares. The substantial increases in concentration in these highly concentrated markets demonstrate that in these relevant markets, the merger is presumed, as a matter of law, to be anticompetitive. The relevant markets described in this paragraph are listed in Appendix A. 39. Other city pairs across the country would likely be affected by the loss of competition stemming from this planned merger. In some of these markets, US Airways and American compete head-to-head, often offering consumers discounted fares. If approved, this merger will likely end much of that discounting, significantly harming consumers in the process. Moreover, the loss of competition in these markets would increase the likelihood that the remaining airlines can coordinate to raise price, reduce output, and diminish the quality of their services. In these relevant markets, the merger is likely also to substantially lessen competition. 40. In the market for slots at Reagan National, the merger would result in a highly concentrated market, with a post-merger HHI of 4,959. The merger would also significantly increase concentration by 1,493 points. As a result, the merger should be presumed, as a matter of law, to be anticompetitive. C. This Merger Would Increase the Likelihood of Coordinated Behavior Among the Remaining Network Airlines Causing Higher Fares, Higher Fees, and More Limited Service 41. The structure of the airline industry is already conducive to coordinated behavior: Few large players dominate the industry; each transaction is small; and most pricing is readily transparent. 42. For example, the legacy airlines closely watch the pricing moves of their competitors. When one airline “leads” a price increase, other airlines frequently respond by following with price increases of their own. The initiating carrier will lead the price increase and then see if the 15 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 16 of 56 other carriers will match the increase. If they do not, the initiating carrier will generally withdraw the increase shortly thereafter. 43. The legacy airlines also use what they call “cross-market initiatives,” or “CMIs,” to deter aggressive discounting and prevent fare wars. A CMI occurs where two or more airlines compete against each other on multiple routes. If an airline offers discounted fares in one market, an affected competitor often responds with discounts in another market—a CMI—where the discounting airline prefers a higher fare. CMIs often cause an airline to withdraw fare discounts. For example, in the fall of 2009, US Airways lowered fares and relaxed restrictions on flights out of Detroit (a Delta stronghold) to Philadelphia. Delta responded by offering lower fares and relaxed restrictions from Boston to Washington (a US Airways stronghold). US Airways’ team lead for pricing observed Delta’s move and concluded “[w]e have more to lose in BOSWAS . . . I think we need to bail on the [Detroit-Philadelphia] changes.” 44. There is also past express coordinated behavior in the industry. For example, all airlines have complete, accurate, and real-time access to every detail of every airline’s published fare structure on every route through the airline-owned Airline Tariff Publishing Company (“ATPCO”). US Airways’ management has called ATPCO “a dedicated price-telegraph network for the industry.” The airlines use ATPCO to monitor and analyze each other’s fares and fare changes and implement strategies designed to coordinate pricing. Airlines have previously used ATPCO to engage in coordinated behavior. In 1992, the United States filed a lawsuit to stop several airlines, including both defendants, from using their ATPCO filings as a signaling device to facilitate agreements on fares. That lawsuit resulted in a consent decree, now expired. 45. US Airways also has communicated directly with a competitor when it was upset by that competitor’s efforts to compete more aggressively. In 2010, one of US Airways’ larger rivals 16 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 17 of 56 extended a “triple miles” promotion that set off a market share battle among legacy carriers. The rival airline was also expanding into new markets and was rumored to be returning planes to its fleet that had been mothballed during the recession. US Airways’ CEO complained about these aggressive maneuvers, stating to his senior executives that such actions were “hurting [the rival airline’s] profitability – and unfortunately everyone else’s.” US Airways’ senior management debated over email about how best to get the rival airline’s attention and bring it back in line with the rest of the industry. In that email thread, US Airways’ CEO urged the other executives to “portray[ ] these guys as idiots to Wall Street and anyone else who’ll listen.” Ultimately, to make sure the message was received, US Airways’ CEO forwarded the email chain—and its candid discussion about how aggressive competition would be bad for the industry—directly to the CEO of the rival airline. (The rival’s CEO immediately responded that it was an inappropriate communication that he was referring to his general counsel.) 46. Coordination becomes easier as the number of major airlines dwindles and their business models converge. If not stopped, the merger would likely substantially enhance the ability of the industry to coordinate on fares, ancillary fees, and service reductions by creating, in the words of US Airways executives, a “Level Big 3”of network carriers, each with similar sizes, costs, and structures. 47. Southwest, the only major, non-network airline, and other smaller carriers have networks and business models that differ significantly from the legacy airlines. Traditionally, Southwest and other smaller carriers have been less likely to participate in coordinated pricing or service reductions. For example, Southwest does not charge customers for a first checked bag or ticket change fees. Yet that has not deterred the legacy carriers from continuing, and even increasing, those fees. In November 2011, a senior US Airways executive explained to her boss the reason: 17 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 18 of 56 “Our employees know full well that the real competition for us is [American], [Delta], and [United]. Yes we compete with Southwest and JetBlue, but the product is different and the customer base is also different.” 1. The Merger Would Likely Result in the Elimination of US Airways’ Advantage Fares 48. On routes where one legacy airline offers nonstop service, the other legacies “generally respect the pricing of the non-stop carrier,” as American has put it. Thus, if American offers nonstop service from Washington to Dallas at $800 round-trip, United and Delta will, “[d]espite having a service disadvantage,” price their connecting fares at the level of American’s nonstop fares. The legacy carriers do this because if one airline, say Delta, were to undercut fares in markets where American offers nonstop service, American would likely do the same in Delta’s nonstop markets. To Delta, the cost of being undercut in its nonstop markets exceeds the benefit it would receive from winning additional passengers in American nonstop markets. 49. US Airways, alone among the legacy carriers, has a different cost-benefit analysis for pricing connecting routes. Although it too is a national network carrier, US Airways has hubs in cities that generate less revenue from passengers flying nonstop than the other legacy airlines’ hubs. Because US Airways’ hubs generate less revenue from passengers flying nonstop, US Airways must gain more revenue from connecting passengers. It gets that revenue by offering connecting service that is up to 40% cheaper than other airlines’ nonstop service. US Airways calls this program “Advantage Fares.” 50. Millions of consumers have benefitted. Advantage Fares offer consumers, especially those who purchase tickets at the last minute, meaningfully lower fares. The screenshot below from ITA Software, Airfare Matrix (“ITA”), taken on August 12, 2013, for travel departing on 18 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 19 of 56 August 13 and returning August 14 from Miami to Cincinnati, shows the benefits of US Airways’ Advantage Fare program to passengers 1: American is the only airline on this route to offer nonstop service, charging $740. Delta and United do not meaningfully compete. Both charge more for their connecting service than American charges for nonstop service. Thus, on this particular route, a passenger who chose Delta or United would pay more for an inferior product. In contrast, US Airways’ fares today are significantly lower than American’s fares, and offer consumers a real choice. Those consumers who are more price conscious receive the benefit of a substantially lower-fare option. In this case, a customer who purchased a US Airways one-stop ticket would save $269 compared to American’s nonstop service. 51. The benefits from Advantage Fares extend to hundreds of other routes, including those where more than one carrier offers nonstop service. The screenshot below from ITA, taken on August 12, 2013, for travel departing on August 13 and returning August 14 from New York to Houston, demonstrates just how dramatic the savings can be: 1 “Multiple Airlines” refers to an itinerary where a passenger uses different airlines for their departing and returning flights. 19 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 20 of 56 US Airways’ connecting fare is $870 cheaper than the other legacy carriers’ nonstop flights, and beats JetBlue and AirTran’s fares by more than $300. Although Southwest does not participate in the standard online travel sites, a cross-check against the Southwest website demonstrates that US Airways also beats Southwest’s $887 nonstop fare by more than $300. 52. Other airlines have chosen to respond to Advantage Fares with their own low connecting fares in markets where US Airways has nonstop service. That is, the other legacy airlines undercut US Airways’ nonstop fares the same way that US Airways undercuts their nonstop fares. The screenshot below from ITA, taken on August 12, 2013, for travel on August 13 and returning August 14 from Charlotte to Syracuse, shows how the other legacy carriers respond to Advantage Fares to the benefit of consumers: Here, US Airways is the only airline to offer nonstop service, charging $685. Delta and United undercut that price by charging $375 and $395, respectively, for connecting service. Once again, 20 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 21 of 56 consumers benefit by having the option of far less expensive connecting service. A customer who buys a Delta one-stop flight saves $310 over US Airways’ nonstop service. 53. There are over 100 routes where other carriers offer nonstop service on which US Airways does not offer Advantage Fares. Consumers in these markets are not given the option of a low-cost connecting alternative and are forced to pay significantly more for service. For example, US Airways does not currently offer Advantage Fares on flights from Cincinnati to Pittsburgh. Without the option of a low connecting fare, consumers see significantly higher prices, as illustrated by a screenshot from ITA, taken on August 12, 2013, for travel on August 13 and returning August 14: . 54. Advantage Fares have proven highly disruptive to the industry’s overall coordinated pricing dynamic. An American executive expressed her frustration in September 2011 with US Airways’ Advantage Fares, noting that US Airways was “still way undercutting us [on flights from Boston and New York to Dallas] and getting significant share.” One response American considered was to lower its fares on the same route. Another option was “to take up this battle w/them again,” in an attempt to force US Airways to limit or abandon its strategy. 55. US Airways’ President acknowledged in September 2010 that its Advantage Fare strategy “would be different if we had a different route network . . . .” Currently, US Airways’ 21 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 22 of 56 network structure precludes Delta and United from preventing US Airways’ aggressive “onestop pricing.” Because US Airways’ hubs have relatively less nonstop traffic, the other legacy airlines cannot respond sufficiently to make Advantage Fares unprofitable. But by increasing the size and scope of US Airways’ network, the merger makes it likely that US Airways will have to discontinue its Advantage Fares. 56. American’s executives agree. American believes that Advantage Fares will be eliminated because of the merger. Internal analysis at American in October 2012 concluded that “[t]he [Advantage Fares] program would have to be eliminated in a merger with American, as American’s large non-stop markets would now be susceptible to reactionary pricing from Delta and United.” Another American executive observed that same month: “The industry will force alignment to a single approach—one that aligns with the large legacy carriers as it is revenue maximizing.” 57. US Airways believes that it currently gains “most of its advantage fare value from AA,” meaning that Advantage Fares provide substantial value for US Airways on routes where American is the legacy airline offering nonstop service. Post-merger, continuing Advantage Fares would mean that US Airways was taking that value away from itself by undercutting its own nonstop prices. Plainly, this would make no sense. Thus, for US Airways post-merger, the benefits of Advantage Fares would go down, and its costs would go up. 58. By ending Advantage Fares, the merger would eliminate lower fares for millions of consumers. Last year, more than 2.5 million round-trip passengers—including more than 250,000 passengers from the greater Washington, D.C. area; another 250,000 passengers in the Dallas-Fort Worth area; half a million passengers in the greater New York City area; and 175,000 passengers from Detroit—bought an Advantage Fare ticket. Hundreds of thousands of 22 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 23 of 56 other passengers flying nonstop on US Airways, particularly from their hubs in Phoenix, Charlotte, and Philadelphia, benefited from responsive fares offered by the legacy airlines. 2. The Merger Would Likely Lead to Increased Industry-Wide “Capacity Discipline,” Resulting in Higher Fares and Less Service 59. Legacy airlines have taken advantage of increasing consolidation to exercise “capacity discipline.” “Capacity discipline” has meant restraining growth or reducing established service. The planned merger would be a further step in that industry-wide effort. In theory, reducing unused capacity can be an efficient decision that allows a firm to reduce its costs, ultimately leading to lower consumer prices. In the airline industry, however, recent experience has shown that capacity discipline has resulted in fewer flights and higher fares. 60. Each significant legacy airline merger in recent years has been followed by substantial reductions in service and capacity. These capacity reductions have not consisted simply of cancellation of empty planes or empty seats; rather, when airlines have cut capacity after a merger, the number of passengers they carry on the affected routes has also decreased. 61. US Airways has recognized that it benefitted from this industry consolidation and the resulting capacity discipline. US Airways has long taken the position that the capacity cuts achieved through capacity discipline “enabled” fare increases and that “pricing power” results from “reduced industry capacity.” US Airways’ CEO explained to investors in 2006 that there is an “inextricable link” between removing seats and raising fares. 62. In 2005, America West—managed then by many of the same executives who currently manage US Airways—merged with US Airways. America West had hubs in Phoenix and Las Vegas while the former US Airways had hubs in Pittsburgh, Charlotte, and Philadelphia. Following the merger, the combined firm reduced capacity, including significant cuts in Pittsburgh and Las Vegas. In 2010, the Chief Financial Officer for US Airways explained: 23 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 24 of 56 We believe in the hub system. I just think there’s too many hubs. If you look across the country, you can probably pick a few that are smaller hubs and maybe duplicative to other hubs that airlines have that they could probably get out of. In our example, we merged with US Airways [and] . . . what we have done over time, which is unfortunate for the cities, but we couldn’t hold a hub in Pittsburgh and we couldn’t hold a hub in Las Vegas. So over time we have consolidated and condensed our operation back, which is really important, condensed it back to our major hubs. A post-merger US Airways analysis confirmed that it succeeded in obtaining a “3% to 4% capacity reduction.” 63. In 2006, on the heels of the America West/US Airways merger, the combined firm submitted an ultimately unsuccessful hostile bid for Delta Air Lines. US Airways’ management had concluded that a merged US Airways/Delta could reduce the combined carrier’s capacity by 10 percent, which would lead to higher revenues for the combined firm and for the industry. In 2007, following the rejection of the hostile bid, US Airways’ CEO explained to investors how the deal would have increased industry profits: It’s part of what we tried to impress upon people as we were going through our run at Delta, was that . . . it was good for US Airways [and] good for the entire industry. We’re going to take out 4% of the industry capacity as we did that. Everyone’s 2008 numbers would look a (expletive) of a lot better had that transaction happened . . . . 64. In 2008, Delta merged with Northwest Airlines. Despite promises to the contrary, the combined airline reduced capacity, including significant cuts at its former hubs in Cincinnati and Memphis. US Airways’ CEO was “quite happy” to see the merger and advocated for further consolidation. He explained that an industry structure of “five different hub and spoke airlines with who knows how many hubs across the United States . . . results in all of us fighting for the same connecting passengers over numerous hubs.” Left unsaid was that fewer airlines meant less competition and higher fares. 24 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 25 of 56 65. In May 2010, United Airlines and Continental Airlines announced their planned merger. The announcement caused speculation about the future of each airline’s hubs, including Continental’s Cleveland hub. In Congressional testimony, an industry analyst stated that he did not believe the merger would cause reductions in Cleveland. On June 18, 2010, upon seeing the testimony, US Airways’ CEO wrote an email to other US Airways executives stating, “[s]urely these guys [United/Continental] aren’t really planning to keep Cleveland open. I’m hopeful they’re just saying what they need to (including to [the analyst]) to get this approved.” United and Continental closed their deal on October 1, 2010. The combined firm has reduced capacity at nearly all of its major hubs (including Cleveland) and at many other airports where the two airlines previously competed. Similarly, Southwest/AirTran has reduced service in a number of its focus cities and on many of AirTran’s former routes following its 2011 merger. 66. The defendants are fully aware of these earlier mergers’ effects. A 2012 American Airlines analysis concluded that “following a merger, carriers tend to remove capacity or grow more slowly than the rest of the industry.” US Airways’ management concluded that although industry consolidation has been a success, as its CEO stated publicly in 2010, the industry had yet to hit its “sweet spot,” and additional consolidation was needed because the industry remained “overly fragmented.” 67. A merger with American would allow US Airways to hit the “sweet spot.” For consumers, however, it would be anything but sweet. US Airways believes that merging with American “finishes industry evolution” by accomplishing US Airways’ goal of “reduc[ing] capacity more efficiently.” When first considering a combination with American, US Airways projected that the merged firm could reduce capacity by as much as 10 percent. Similarly, American expects that the merger will lead to capacity reductions that would negatively impact 25 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 26 of 56 “communities,” “people,” “customers,” and “suppliers.” Higher fares would be right around the corner. 3. The Planned Merger Would Likely Block American’s Standalone Expansion Plans, Thwarting Likely Capacity Increases 68. American does not need this merger to thrive, let alone survive. Before the announcement of this merger, a key component of American’s standalone plan for exiting bankruptcy revolved around substantial expansion, including increases in both domestic and international flights. Thus, in 2011, American placed the largest order for new aircraft in the industry’s history. 69. US Airways executives feared that American’s standalone growth plan would disrupt the industry’s capacity discipline “momentum.” In a 2012 internal presentation, US Airways executives recognized that while “[i]ndustry mergers and capacity discipline expand margins,” American’s standalone “growth plan has potential to disrupt the new dynamic” and would “Reverse Industry Capacity Trends.” Moreover, US Airways believed that if American implemented its growth plans, other airlines would “react to AMRs plans with their own enhanced growth plans destabilizing industry.” US Airways believed that American’s standalone capacity growth would “negatively impact” industry revenues and threaten industry pricing. 70. US Airways thought that a merger with American was a “lower risk alternative” than letting American’s standalone plan come to fruition because US Airways management could maintain capacity discipline. American’s executives have observed that “the combined network would likely need to be rationalized,” especially given the merged carrier’s numerous hubs, and that it is “unlikely that [a combined US Airways/American] would pursue growth . . . .” 26 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 27 of 56 4. The Merger Would Likely Result in Higher Fees 71. Since 2008, the airline industry has increasingly charged consumers fees for services that were previously included in the price of a ticket. These so-called ancillary fees, including those for checked bags and flight changes, have become very profitable. In 2012 alone, airlines generated over $6 billion in fees for checked bags and flight changes. Even a small increase in these fees would cost consumers millions. 72. Increased consolidation has likely aided the implementation of these fees. The levels of the ancillary fees charged by the legacy carriers have been largely set in lockstep. One airline acts as the “price leader,” with others following soon after. Using this process, as a US Airways strategic plan observed, the airlines can raise their fees without suffering “market share impacts.” For example, American announced that it would charge for a first checked bag on May 21, 2008. On June 12, 2008, both United and US Airways followed American’s lead. Similarly, over a period of just two weeks this spring, all four legacy airlines increased their ticket change fee for domestic travel from $150 to $200. 73. The legacy airlines recognize that the success of any individual attempt to impose a new fee or fee increase depends on whether the other legacies follow suit. When, in July 2009, American matched the other legacy carriers by raising its checked bag fee to $20, but did not join the others in offering a $5 web discount, US Airways was faced with the decision of whether to “match” American by either eliminating its own web discount, or raising its price to $25, with a $5 discount. US Airways’ CEO gave his view: I can’t believe I’m saying this, but I think we should stand still on this for now. I recognize that increases the chances of everyone standing still . . . the [dollars] aren’t compelling enough for us to stick our necks out first. I do think D[elta] or U[nited] won’t let them have an advantage, so it’ll get matched – I’m just not sure we should go first. If a couple weeks go by and no one’s moved, we can always jump in. 27 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 28 of 56 74. Similarly, when US Airways was considering whether to raise its second checked bag fee to $100 to match Delta’s fee, a US Airways executive observed: “Wow - $100 is a lot for second bag. I would think there’s big passenger gag reflex associated with that, but if we can get it, we should charge it. Do you think we should wait for [United] or [American] to move first, though?” 75. Conversely, in 2008, when US Airways began charging passengers for soft drinks, the other legacy airlines did not follow its lead, and US Airways backed off. US Airways’ CEO explained: “With US Airways being the only network carrier to charge for drinks, we are at a disadvantage.” Had US Airways not rescinded this fee, it would have lost passengers to the other legacy airlines. 76. At times, the airlines consider new fees or fee increases, but hold off implementing them while they wait to see if other airlines will move first. For example, on April 18, United announced that it was increasing its ticket change fee from $150 to $200. American decided that “waiting for [Delta] and then moving to match if [Delta] comes along” would be its best strategy. Over the next two weeks, US Airways, Delta, and American each fell in line, leading a US Airways executive to observe on May 1: “A[merican] increased their change fees this morning. The network carriers now have the same $200 domestic . . . change fees.” 77. Post-merger, the new American would likely lead new fee increases. A December 2012 discussion between US Airways executives included the observation that after the merger, “even as the world’s largest airline we’d want to consider raising some of the baggage fees a few dollars in some of the leisure markets.” 78. New checked bag fees on flights from the United States to Europe are a likely target. Both US Airways and American have considered imposing a first checked bag fee on flights to 28 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 29 of 56 Europe but have refrained from doing so. US Airways seriously considered leading such a price move but was concerned that other airlines would not match: “We would hope that [other airlines] would follow us right away . . . but there is no guarantee . . . .” Ultimately, US Airways concluded it was “too small” to lead additional checked bag fees for flights to Europe. Postmerger, that would no longer be true. The merged firm would be the world’s largest airline, giving it sufficient size to lead industry fee and price increases across the board. 79. Some fee increases are likely to result from US Airways raising American’s existing fees. Today, “US Airways generally charges higher bag fees than AA” for travel from the United States to international destinations. Post-merger, US Airways would likely raise American’s ancillary fees to US Airways’ higher fee levels as part of a “fee harmonization” process. US Airways’ own documents estimate that “fee harmonization” would generate an additional $280 million in revenue annually—directly harming consumers by the same amount. A US Airways presentation from earlier this year analyzing the merger identifies American’s lower bag fees as a “value lever” that US Airways “will likely manage differently with tangible financial upside.” The analysis concludes that “[i]ncreasing AA baggage fees to match US creates significant revenue impact.” US Airways also plans to institute its fees ($40 on average) for the redemption of frequent flyer tickets on American’s existing frequent fliers, who currently are not charged for mileage redemption. 80. The merger would also likely reduce the quality and variety of ancillary services offered by the legacy airlines—a side effect of consolidation anticipated and embraced by US Airways’ CEO. In a 2011 email exchange lamenting the need for US Airways to deploy wireless internet on all of its airplanes, a senior US Airways executive groused: 29 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 30 of 56 [N]ext it will be more legroom. Then industry standard labor contracts. Then better wines. Then the ability to book on Facebook. Penultimately, television commercials. Then, finally, we will pay the NYSE an exorbitant fee to change our ticker symbol [from LCC]. US Airways’ CEO responded: “Easy now. Consolidation will help stop much of the stupid stuff but inflight internet is not one of them.” 81. If the planned merger is enjoined, both American and US Airways will have to compete against two larger legacy rivals, and against each other. The four legacy airlines will not look exactly the same. As the smallest of the legacy airlines, American and US Airways will have greater incentives to grow and compete aggressively through lower ancillary fees, new services, and lower fares. D. The Merger Would Eliminate Head-to-Head Competition in Hundreds of Relevant Markets and Entrench US Airways’ Dominance at Reagan National Airport 82. American and US Airways engage in head-to-head competition with nonstop service on 17 domestic routes representing about $2 billion in annual industry-wide revenues. American and US Airways also compete directly on more than a thousand routes where one or both offer connecting service, representing billions of dollars in annual revenues. The merger’s elimination of this head-to-head competition would create strong incentives for the merged airline to reduce capacity and raise fares where they previously competed. 83. The combined firm would control 69% of the slots at Reagan National Airport, almost six times more than its closest competitor. This would eliminate head-to-head competition at the airport between American and US Airways. It would also effectively foreclose entry or expansion by other airlines that might increase competition at Reagan National. 84. The need for slots is a substantial barrier to entry at Reagan National. The FAA has occasionally provided a limited number of slots for new service. In almost all cases, however, a 30 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 31 of 56 carrier wishing to begin or expand service at Reagan National must buy or lease slots from an airline that already owns them. 85. This merger would thwart any prospect for future entry or expansion at Reagan National. US Airways, which already has 55% of the airport’s slots, does not sell or lease them because any slot that goes to another airline will almost certainly be used to compete with US Airways. The merger would only increase US Airways’ incentives to hoard its slots. Today, US Airways provides nonstop service to 71 airports from Reagan National, and it faces no nonstop competitors on 55 of those routes. After this merger, the number of US Airways routes with no nonstop competition would increase to 59, leaving, at best, only 21 routes at the entire airport with more than one nonstop competitor. Unsurprisingly, Reagan National is US Airways’ second most-profitable airport. 86. Potential entrants would likely not be able to turn to other airlines to obtain slots. When allocating their slots, airlines prioritize their most profitable routes, typically those where they have a frequent, significant pattern of service. If a carrier has a small portfolio of slots, it is likely to allocate almost all of its slots to its most profitable routes. If it has additional slots beyond what is needed to serve those routes, a carrier will then work its way down to other routes or sell or lease those slots to other airlines. Over the last several years, US Airways has purchased nearly all of the slots that might otherwise be available to interested buyers. Thus, before this planned merger, American was the only airline at Reagan National with the practical ability to sell or lease additional slots. 87. In March 2010, American and JetBlue entered into an arrangement in which JetBlue traded slots at New York’s JFK International Airport to American in exchange for American trading slots at Reagan National to JetBlue. And until American reached agreement with 31 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 32 of 56 US Airways to merge, it had been negotiating to sell those slots and ten other Reagan National slots to JetBlue. 88. JetBlue’s entry on four routes, particularly Reagan National to Boston, has generated stiff price competition. Fares on the route have dropped dramatically. US Airways estimated that after JetBlue’s entry, the last-minute fare for travel between Reagan National and Boston dropped by over $700. The combined firm will have the right to terminate the JetBlue leases and thereby eliminate, or at least diminish, JetBlue as a competitor on some or all of these routes. 89. The merger would also eliminate the potential for future head-to-head competition between US Airways and American on flights at Reagan National. In 2011, US Airways planned to start service from Reagan National to Miami and St. Louis, which would directly compete with American’s existing service. US Airways argued to the Department of Transportation that this new competition would “substantial[ly] benefit[]” consumers, and so asked DOT to approve the purchase of slots from Delta that would make the service possible. DOT ultimately approved that purchase. When it developed its plan to merge with American, however, US Airways abandoned its plans to enter those markets and deprived consumers of the “substantial benefits” it had promised. 90. By acquiring American’s slot portfolio, US Airways would eliminate existing and future head-to-head competition, and effectively block other airlines’ competitive entry or expansion. VI. ABSENCE OF COUNTERVAILING FACTORS 91. New entry, or expansion by existing competitors, is unlikely to prevent or remedy the merger’s likely anticompetitive effects. New entrants into a particular market face significant barriers to success, including difficulty in obtaining access to slots and gate facilities; the effects of corporate discount programs offered by dominant incumbents; loyalty to existing frequent 32 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 33 of 56 flyer programs; an unknown brand; and the risk of aggressive responses to new entry by the dominant incumbent carrier. In addition, entry is highly unlikely on routes where the origin or destination airport is another airline’s hub, because the new entrant would face substantial challenges attracting sufficient local passengers to support service. 92. United and Delta are unlikely to expand in the event of anticompetitive price increases or capacity reductions by the merged airline. Indeed, those carriers are likely to benefit from and participate in such conduct by coordinating with the merged firm. 93. The remaining airlines in the United States, including Southwest and JetBlue, have networks and business models that are significantly different from the legacy airlines. In particular, most do not have hub-and-spoke networks. In many relevant markets, these airlines do not offer any service at all, and in other markets, many passengers view them as a less preferred alternative to the legacy carriers. Therefore, competition from Southwest, JetBlue, or other airlines would not be sufficient to prevent the anticompetitive consequences of the merger. 94. There are not sufficient acquisition-specific and cognizable efficiencies that would be passed through to U.S. consumers to rebut the presumption that competition and consumers would likely be harmed by this merger. VII. VIOLATION ALLEGED 95. The effect of the proposed merger, if approved, likely will be to lessen competition substantially, or tend to create a monopoly, in interstate trade and commerce in the relevant markets, in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. 96. Unless enjoined, the proposed merger likely would have the following effects in the relevant markets, among others: 33 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 34 of 56 (a) actual and potential competition between US Airways and American Airlines would be eliminated; (b) competition in general among network airlines would be lessened substantially; (c) ticket prices and ancillary fees would be higher than they otherwise would; (d) industry capacity would be lower than it otherwise would; (e) service would be lessened; and (f) the availability of slots at Reagan National would be significantly impaired. VIII. REQUEST FOR RELIEF 97. Plaintiffs request: (a) that US Airways’ proposed merger with American Airlines be adjudged to violate Section 7 of the Clayton Act, 15 U.S.C. § 18; (b) that Defendants be permanently enjoined from and restrained from carrying out the planned merger of US Airways and American or any other transaction that would combine the two companies; (c) that Plaintiffs be awarded their costs of this action, including attorneys’ fees to Plaintiff States; and (d) that Plaintiffs be awarded such other relief as the Court may deem just and proper. 34 Case Document 1 Filed 08/13/13 Page 35 of 56 Dated this 13?1 day of August 2013. Respectfully submitted, FOR PLAINTIFF UNITED STATES: . .C. EAR 324723) AssiStant Atto ey General for Antitrust RENATA B. HESSE (D.C. BAR #466107) Deputy Assistant Attorney General RATRICIA A. BRINK Director of Civil Enforcement MARK W. .C. BAR 359098) Dir tor}; iti ti WILLIAM H. A LIN (D.C. BAR #444924) Chief TRANSPORTATION, ENERGY AGEETURE SECTIO KATHLEEN Assistant Chief TRANSPORTATION, ENERGY AGRICULTURE SECTION Antitrust Division US. Department of ustiee 450 Fifth Street, N.W., Suite 4100 Washington, DC 20530 Telephone: {202) 305-0128 Facsimile: (202) 307-2784 E-mail: Ryan.Danks@usdoj .gov MICHAEL D. BILLIEL (D.C. BAR 394377) KATHERINE A. CELESTE J. RICHARD DOIDGE TRACY L. FISHER DAVID Z. GRINGER AMANDA D. KLOVERS CAROLINE E. LAISE JOHN M. (D.C. BAR 418313) WILLIAM M. MARTIN JOSEPH CHANDRA MAZUMDAR ROBERT D. YOUNG (DC. BAR 248260) Attorneys for the United States *Attorney of Record Case Document 1 Filed 08/13/13 Page 36 of 56 FOR PLAINTIFF STATE OF ARIZONA THOMAS C. HORNE Attorney General ERIC J. BISTROW Chief Deputy THOMAS CHENAL Chief, Public Advocacy Civil Rights Division DENA BENJAMIN Chief3 Consumer Protection Advocacy Section 1M BO ELL Antitrust ief Arizona Bar No. 0163 82 1275 West Washington Phoenix, Arizona 85007 Phone: 602?542-7728 Fax: 602-542-9088 Nancybonnell?aazagoov Case Document 1 Filed 08/13/13 Page 37 of 56 FOR PLAINTIFF DISTRICT OF COLUMBIA IRVIN B. NATHAN Attorney General for the District of Columbia ELLEN A. EFROS Deputy Attorney General, Public Interest Division RUSHKOFF 01C. Bar $6925) Chief, Public Advocacy Section AEWM, NICHOLAS A. RUSH (D.C. Bar No. 1011001) Assistant Attorney General 441 4th Street, N.W., Suite 600 South Washington, DC 20001 Ph: 202-442-9841 Fax: 202-715-7720 nicholas.bush@dc. gov Attorneys for the District of Columbia Case Document 1 Filed 08/13/13 Page 38 of 56 FOR PLAINTIFF STATE OF FLORIDA PAMELA JO BONDI Attorney General of the State of Florida PATRICIA A. Associate Deputy Attorney General Antitrust Division LIZABETH A. BRADY Chief, Multistate Antitrust Enforcement Antitrust Division CHRISTOPHER A. HUNT Assistant Attorney General Antitrust Division 9 Wk- A. BRADY Chief, Mul'tistate Antitrust Enforcement Florida Bar No. 045 7991 The Capitol Tallahassee, FL 32399-1050 Ph: 850?414?2918 Fax: 850-488-9134 Case Document 1 Filed 08/13/13 Page 39 of 56 FOR PLAINTIFF COMMONWEAITH OF KATHLEEN G. KANE Attorney General ADRIAN R. KING, JR. First Deputy Attorney General JAMES A. DONAHUE, Executive Deputy Attorney General Public Protection Division TRACY W. WERTZ Acting Chief Deputy Attorney General Antitrust Section JENNIFER A. THOMSON Deputy Attorney General Antitrust Section . WINK - a life/v6, ?me: (in; AMES A. DONAHUE, Executive Deputy Attorney Attorney General PA Bar No. 42624 Public Protection Division 14th Floor, Strawberry Square Harrisburg, PA 17120 Ph: 717?787?4530 Fax: 717-787-1190 jdonahue@attorneygeneral. gov Case Document 1 Filed 08/13/13 Page 40 of 56 FOR PLAINTIFF STATE OF TENNESSEE ROBERT E. COOPER, JR. Attorney General and Reporter DOMEN, Senior Antitrust Counsel Tennessee Bar No. 015803 500 Charlotte Avenue Nashville, TN 37202 Ph: 615-253-3327 Fax: 615-532-6951 Vic.Domen@ag.tn. gov Case Document 1 Filed 08/13/13 Page 41 of 56 FOR PLAINTIFF STATE OF TEXAS GREG ABBOTT Attorney General DANIEL HODGE First Assistant Attorney General JOHN B. SCOTT Deputy Attorney General for Civil Litigation JOHN T. Chief, Consumer Protection Division KIM VAN WINKLE Chief, Antitrust Section Consumer Protection Division AW, KZARK LEVY 1 Assistant Attorney Gen Texas Bar No. 24014555 300 w. 15th Street, 7th Floor Austin, Texas 78701 Ph: 512-936-1847 Fax: 512-320-0975 Case Document 1 Filed 08/13/13 Page 42 of 56 FOR PLAINTIFF COMMONWEALTH OF VIRGINIA KENNETH T. CUCCINELLI, II Attorney General PATRICIA L. WEST Chief Deputy Attorney General WESLEY G. RUSSELL, JR. Deputy Attorney General Civil Litigation Division DAVID B. IRVIN Senior Assistant Attorney General and Chief Consumer Protection Section SARAH OXENHAM ALLEN Assistant Attorney General Consumer Protection Section Virginia Bar No. 33217 Of?ce of the Attorney General 900 East Main Street Richmond, VA 23219 Ph: (804) 786-45557 Fax: (804) 786-0122 SOAllen@oa2.state.va.us Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 43 of 56 APPENDIX A CITY PAIRS WHERE THE MERGER IS PRESUMPTIVELY ILLEGAL x HHIs in this appendix are calculated based on publicly available airline ticket revenue data from Department of Transportation’s Airline Origin and Destination Survey (DB1B) database, available at: http://www.transtats.bts.gov/DatabaseInfo.asp?DB_ID=125&Link=0 x Routes are listed only once but include flights at all airports within the metropolitan area and in both directions. For example, the entry CITY PAIR ROUTE Charlotte, NC (CLT) - Dallas, TX (DFW) Post-Merger HHI 9319 ' HHI 4648 includes flights from Charlotte, North Carolina, to airports in and around Dallas, Texas, including both Dallas-Fort Worth International Airport (DFW) and Love Field (DAL), and it includes flights from both airports to Charlotte. Appendix - Introduction &,7< 3$,5 Charlotte, NC (CLT) - Durango, CO (DRO) Charlotte, NC (CLT) - Dallas, TX (DFW) Dallas, TX (DFW) - Philadelphia, PA (PHL) Kahului, HI (OGG) - Tampa, FL (TPA) Kapaa, HI (LIH) - St. Louis, MO (STL) Fresno, CA (FAT) - Tampa, FL (TPA) Dallas, TX (DFW) - Phoenix, AZ (PHX) Miami, FL (MIA) - Salinas, CA (MRY) Indianapolis, IN (IND) - Kahului, HI (OGG) El Paso, TX (ELP) - Fresno, CA (FAT) Columbus, OH (CMH) - Riverside, CA (PSP) Miami, FL (MIA) - Santa Barbara, CA (SBA) Kapaa, HI (LIH) - Miami, FL (MIA) El Paso, TX (ELP) - Salinas, CA (MRY) Pittsburgh, PA (PIT) - St. Croix, VI (STX) Dallas, TX (DFW) - Greensboro, NC (GSO) Hilo, HI (KOA) - Miami, FL (MIA) Hilo, HI (KOA) - St. Louis, MO (STL) Kahului, HI (OGG) - St. Louis, MO (STL) Dallas, TX (DFW) - Virginia Beach, VA (ORF) Greensboro, NC (GSO) - St. Croix, VI (STX) Salinas, CA (MRY) - St. Louis, MO (STL) El Paso, TX (ELP) - Kapaa, HI (LIH) Charlotte, NC (CLT) - Riverside, CA (PSP) Charlotte, NC (CLT) - Fresno, CA (FAT) Fresno, CA (FAT) - Milwaukee, WI (MKE) St. Thomas, VI (STT) - Washington, DC (WAS) Riverside, CA (PSP) - St. Louis, MO (STL) Dallas, TX (DFW) - Richmond, VA (RIC) Austin, TX (AUS) - Santa Barbara, CA (SBA) Charleston, WV (CRW) - New York, NY (NYC) Kahului, HI (OGG) - Omaha, NE (OMA) Austin, TX (AUS) - Salinas, CA (MRY) Charlotte, NC (CLT) - Kahului, HI (OGG) Austin, TX (AUS) - Kapaa, HI (LIH) Riverside, CA (PSP) - Tampa, FL (TPA) Milwaukee, WI (MKE) - Riverside, CA (PSP) Chicago, IL (CHI) - Charlottesville, VA (CHO) Fresno, CA (FAT) - Miami, FL (MIA) Dallas, TX (DFW) - Salinas, CA (MRY) Pittsburgh, PA (PIT) - Riverside, CA (PSP) El Paso, TX (ELP) - Honolulu, HI (HNL) 3RVW 0HUJHU ++, ' ++, 10000 4742 9319 4648 9067 4491 9040 4478 8930 4448 8659 4259 8920 4205 9540 4079 8174 4006 8320 3866 7704 3703 8042 3634 8439 3619 8415 3612 10000 3600 8117 3559 7329 3528 7785 3418 8888 3331 7780 3316 10000 3299 6982 3277 9185 3206 8016 3185 7903 3165 7185 3164 6528 3137 6753 3085 8339 3085 6499 3068 6407 3034 6897 3033 6547 3027 10000 3022 6499 3006 6968 2985 6319 2966 8865 2949 9061 2948 7448 2938 6446 2932 8116 2923 &,7< 3$,5 Fresno, CA (FAT) - Indianapolis, IN (IND) Dallas, TX (DFW) - Fresno, CA (FAT) Fresno, CA (FAT) - San Antonio, TX (SAT) Dallas, TX (DFW) - Kapaa, HI (LIH) Raleigh, NC (RDU) - St. Thomas, VI (STT) Phoenix, AZ (PHX) - St. Thomas, VI (STT) Austin, TX (AUS) - Riverside, CA (PSP) El Paso, TX (ELP) - Kahului, HI (OGG) Columbus, OH (CMH) - Fresno, CA (FAT) Austin, TX (AUS) - Fresno, CA (FAT) Kansas City, MO (MCI) - Kahului, HI (OGG) Dallas, TX (DFW) - Riverside, CA (ONT) Des Moines, IA (DSM) - Kahului, HI (OGG) Milwaukee, WI (MKE) - Kahului, HI (OGG) Kapaa, HI (LIH) - Tucson, AZ (TUS) Charlotte, NC (CLT) - Reno, NV (RNO) Dallas, TX (DFW) - Hilo, HI (KOA) Detroit, MI (DTW) - Fresno, CA (FAT) Santa Barbara, CA (SBA) - St. Louis, MO (STL) Columbus, OH (CMH) - St. Croix, VI (STX) Albuquerque, NM (ABQ) - Salinas, CA (MRY) El Paso, TX (ELP) - Hilo, HI (KOA) Atlanta, GA (ATL) - Fresno, CA (FAT) Charlotte, NC (CLT) - Tucson, AZ (TUS) Charlotte, NC (CLT) - Riverside, CA (ONT) Fresno, CA (FAT) - Pittsburgh, PA (PIT) Detroit, MI (DTW) - Riverside, CA (PSP) Albuquerque, NM (ABQ) - Kapaa, HI (LIH) Charlotte, NC (CLT) - Grand Junction, CO (GJT) Kansas City, MO (MCI) - Riverside, CA (PSP) Albuquerque, NM (ABQ) - Santa Barbara, CA (SBA) Hilo, HI (KOA) - Orlando, FL (MCO) Philadelphia, PA (PHL) - St. Thomas, VI (STT) Hartford, CT (BDL) - St. Thomas, VI (STT) Charlottesville, VA (CHO) - St. Louis, MO (STL) Dallas, TX (DFW) - Riverside, CA (PSP) Miami, FL (MIA) - Riverside, CA (PSP) Denver, CO (DEN) - St. Thomas, VI (STT) Minneapolis, MN (MSP) - St. Croix, VI (STX) Miami, FL (MIA) - Kahului, HI (OGG) Columbus, OH (CMH) - Kahului, HI (OGG) Dallas, TX (DFW) - Raleigh, NC (RDU) $33(1',; $ &,7< 3$,56 :+(5( 7+( 0(5*(5 ,6 35(68037,9(/< ,//(*$/ Appendix 1 3RVW 0HUJHU ++, ' ++, 6099 2905 8312 2899 6197 2895 7991 2892 6493 2845 6178 2843 6428 2839 6861 2808 6320 2801 7074 2795 6274 2772 8978 2770 6793 2753 6867 2717 6680 2700 6887 2672 6671 2664 6057 2662 5691 2656 8177 2621 6759 2575 9515 2574 5717 2571 5647 2567 5750 2503 6024 2501 5443 2491 6473 2484 6077 2475 5473 2455 6410 2455 5588 2454 7040 2449 5373 2444 6691 2438 8959 2428 7592 2423 5838 2407 5878 2402 7973 2388 7136 2383 7871 2354 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 44 of 56 &,7< 3$,5 Indianapolis, IN (IND) - St. Croix, VI (STX) Chicago, IL (CHI) - St. Thomas, VI (STT) Riverside, CA (PSP) - San Antonio, TX (SAT) Albuquerque, NM (ABQ) - Fresno, CA (FAT) Greensboro, NC (GSO) - Miami, FL (MIA) Charlotte, NC (CLT) - Key West, FL (EYW) Charlotte, NC (CLT) - Los Angeles, CA (SNA) Albuquerque, NM (ABQ) - Hilo, HI (KOA) Dallas, TX (DFW) - Pittsburgh, PA (PIT) Albuquerque, NM (ABQ) - Honolulu, HI (HNL) Salinas, CA (MRY) - Tucson, AZ (TUS) Indianapolis, IN (IND) - Riverside, CA (PSP) Fresno, CA (FAT) - St. Louis, MO (STL) Dallas, TX (DFW) - New York, NY (HPN) Hartford, CT (BDL) - Dallas, TX (DFW) Philadelphia, PA (PHL) - Riverside, CA (PSP) Miami, FL (MIA) - Phoenix, AZ (PHX) Atlanta, GA (ATL) - Riverside, CA (PSP) Columbia, SC (CAE) - Dallas, TX (DFW) Houston, TX (HOU) - San Juan, PR (SJU) Raleigh, NC (RDU) - San Juan, PR (SJU) Philadelphia, PA (PHL) - Tucson, AZ (TUS) Phoenix, AZ (PHX) - San Juan, PR (SJU) Chicago, IL (CHI) - Charlotte, NC (CLT) Detroit, MI (DTW) - St. Croix, VI (STX) Chattanooga, TN (CHA) - Chicago, IL (CHI) Charleston, SC (CHS) - Miami, FL (MIA) Boston, MA (BOS) - St. Thomas, VI (STT) Dallas, TX (DFW) - Reno, NV (RNO) Austin, TX (AUS) - Hilo, HI (KOA) Santa Barbara, CA (SBA) - Tucson, AZ (TUS) Boston, MA (BOS) - Key West, FL (EYW) Virginia Beach, VA (ORF) - St. Thomas, VI (STT) San Juan, PR (SJU) - Sacramento, CA (SMF) Boston, MA (BOS) - Riverside, CA (PSP) Kapaa, HI (LIH) - Orlando, FL (MCO) Greensboro, NC (GSO) - St. Thomas, VI (STT) Dallas, TX (DFW) - Savannah, GA (SAV) Hartford, CT (BDL) - Key West, FL (EYW) Dallas, TX (DFW) - Santa Barbara, CA (SBA) Kahului, HI (OGG) - San Antonio, TX (SAT) Las Vegas, NV (LAS) - San Juan, PR (SJU) 3RVW 0HUJHU ++, ' ++, 8140 2349 5759 2333 5514 2313 5708 2305 5699 2278 5573 2268 5196 2265 7026 2237 8361 2227 5692 2227 7706 2199 5055 2198 5756 2185 5037 2168 8299 2144 6764 2137 5006 2126 5169 2119 7648 2113 5695 2112 4765 2109 4757 2098 4755 2075 6008 2061 8834 2039 6818 2039 5380 2037 4871 2021 8619 2009 5363 2008 7273 2004 6327 1984 5239 1968 4709 1950 4922 1947 5457 1946 5466 1944 7094 1936 4983 1931 6048 1909 5275 1901 4883 1885 &,7< 3$,5 Nashville, TN (BNA) - St. Thomas, VI (STT) Dallas, TX (DFW) - Sacramento, CA (SMF) Charlotte, NC (CLT) - Honolulu, HI (HNL) Charleston, SC (CHS) - St. Thomas, VI (STT) Orlando, FL (MCO) - Kahului, HI (OGG) Fresno, CA (FAT) - Philadelphia, PA (PHL) Cincinnati, OH (CIN) - St. Croix, VI (STX) Charlotte, NC (CLT) - San Jose, CA (SJC) El Paso, TX (ELP) - Santa Barbara, CA (SBA) Chicago, IL (CHI) - Wilmington, NC (ILM) Kahului, HI (OGG) - Pittsburgh, PA (PIT) Omaha, NE (OMA) - Riverside, CA (PSP) Miami, FL (MIA) - Virginia Beach, VA (ORF) Austin, TX (AUS) - Kahului, HI (OGG) Anchorage, AK (ANC) - El Paso, TX (ELP) Boston, MA (BOS) - Tucson, AZ (TUS) Houston, TX (HOU) - St. Thomas, VI (STT) Dallas, TX (DFW) - Greenville, SC (GSP) Fresno, CA (FAT) - Orlando, FL (MCO) San Juan, PR (SJU) - Washington, DC (WAS) Kahului, HI (OGG) - Tucson, AZ (TUS) Boston, MA (BOS) - Fresno, CA (FAT) Fresno, CA (FAT) - Minneapolis, MN (MSP) Charlottesville, VA (CHO) - Fayetteville, AR (XNA) Key West, FL (EYW) - Philadelphia, PA (PHL) Austin, TX (AUS) - Charlotte, NC (CLT) Austin, TX (AUS) - Tucson, AZ (TUS) San Diego, CA (SAN) - San Juan, PR (SJU) Charlottesville, VA (CHO) - Minneapolis, MN (MSP) Fresno, CA (FAT) - Tucson, AZ (TUS) Las Vegas, NV (LAS) - St. Thomas, VI (STT) Charlotte, NC (CLT) - Miami, FL (MIA) Chicago, IL (CHI) - Riverside, CA (PSP) Miami, FL (MIA) - Philadelphia, PA (PHL) San Juan, PR (SJU) - St. Louis, MO (STL) San Antonio, TX (SAT) - Tucson, AZ (TUS) Dallas, TX (DFW) - Knoxville, TN (TYS) Greensboro, NC (GSO) - San Juan, PR (SJU) Orlando, FL (MCO) - Riverside, CA (PSP) Buffalo, NY (BUF) - Fayetteville, AR (XNA) Hartford, CT (BDL) - San Juan, PR (SJU) Dallas, TX (DFW) - San Jose, CA (SJC) $33(1',; $ &,7< 3$,56 :+(5( 7+( 0(5*(5 ,6 35(68037,9(/< ,//(*$/ Appendix 2 3RVW 0HUJHU ++, ' ++, 5903 1877 7451 1855 5637 1845 5230 1844 4514 1834 5844 1831 8601 1831 5038 1815 8179 1805 6957 1801 5506 1800 4635 1799 4349 1798 5961 1791 7220 1789 5168 1780 7185 1771 6372 1759 5123 1750 4022 1739 5099 1728 5173 1713 4959 1705 5258 1702 4530 1697 5600 1693 5300 1687 4198 1678 4883 1669 7380 1667 7530 1665 7085 1645 7120 1638 5692 1619 4512 1599 4923 1597 7794 1590 4835 1574 4336 1571 4703 1555 4699 1547 9396 1546 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 45 of 56 &,7< 3$,5 Syracuse, NY (SYR) - Fayetteville, AR (XNA) Honolulu, HI (HNL) - San Antonio, TX (SAT) St. Louis, MO (STL) - St. Thomas, VI (STT) Albuquerque, NM (ABQ) - Charlotte, NC (CLT) Honolulu, HI (HNL) - Omaha, NE (OMA) Charlotte, NC (CLT) - San Antonio, TX (SAT) Virginia Beach, VA (ORF) - San Juan, PR (SJU) Miami, FL (MIA) - Reno, NV (RNO) Chattanooga, TN (CHA) - Dallas, TX (DFW) Orlando, FL (MCO) - Salinas, CA (MRY) Dallas, TX (DFW) - San Juan, PR (SJU) New York, NY (HPN) - Phoenix, AZ (PHX) Boston, MA (BOS) - San Juan, PR (SJU) Charlottesville, VA (CHO) - Dallas, TX (DFW) Richmond, VA (RIC) - St. Thomas, VI (STT) Little Rock, AR (LIT) - Syracuse, NY (SYR) Savannah, GA (SAV) - St. Croix, VI (STX) Seattle, WA (SEA) - San Juan, PR (SJU) Charleston, SC (CHS) - Dallas, TX (DFW) Cleveland, OH (CLE) - St. Croix, VI (STX) Chicago, IL (CHI) - Huntsville, AL (HSV) Cleveland, OH (CLE) - St. Thomas, VI (STT) Minneapolis, MN (MSP) - Kahului, HI (OGG) New Orleans, LA (MSY) - St. Thomas, VI (STT) Durango, CO (DRO) - Miami, FL (MIA) Minneapolis, MN (MSP) - St. Thomas, VI (STT) Dallas, TX (DFW) - Syracuse, NY (SYR) Charlottesville, VA (CHO) - Des Moines, IA (DSM) Denver, CO (DEN) - San Juan, PR (SJU) Honolulu, HI (HNL) - Tucson, AZ (TUS) Philadelphia, PA (PHL) - Fayetteville, AR (XNA) Des Moines, IA (DSM) - Honolulu, HI (HNL) Des Moines, IA (DSM) - Reno, NV (RNO) Philadelphia, PA (PHL) - St. Croix, VI (STX) Honolulu, HI (HNL) - Indianapolis, IN (IND) Boston, MA (BOS) - Fayetteville, AR (XNA) Dallas, TX (DFW) - San Diego, CA (SAN) Albuquerque, NM (ABQ) - Kahului, HI (OGG) Charlottesville, VA (CHO) - Phoenix, AZ (PHX) Charlotte, NC (CLT) - El Paso, TX (ELP) Des Moines, IA (DSM) - Fresno, CA (FAT) Dallas, TX (DFW) - Jacksonville, FL (JAX) 3RVW 0HUJHU ++, ' ++, 4609 1545 4711 1541 6580 1541 4986 1540 4545 1531 5158 1519 5474 1517 4566 1502 6622 1495 5045 1492 3842 1491 4437 1484 3631 1479 4745 1476 5002 1466 4209 1462 5215 1462 3824 1462 5315 1457 7993 1449 4974 1446 4286 1431 4426 1430 5276 1418 5283 1417 4701 1410 4010 1409 5161 1397 3816 1381 4340 1380 4537 1377 4983 1371 4282 1350 9330 1331 3926 1328 4474 1327 6896 1323 5134 1322 6867 1319 5268 1317 5037 1311 7090 1309 &,7< 3$,5 Riverside, CA (PSP) - Washington, DC (WAS) Des Moines, IA (DSM) - Tucson, AZ (TUS) Fresno, CA (FAT) - Omaha, NE (OMA) New York, NY (NYC) - Riverside, CA (PSP) St. Louis, MO (STL) - Tucson, AZ (TUS) Nashville, TN (BNA) - San Juan, PR (SJU) Austin, TX (AUS) - Honolulu, HI (HNL) Dallas, TX (DFW) - Huntsville, AL (HSV) Key West, FL (EYW) - Raleigh, NC (RDU) Charlottesville, VA (CHO) - Omaha, NE (OMA) Chattanooga, TN (CHA) - San Francisco, CA (SFO) Columbus, OH (CMH) - Honolulu, HI (HNL) Des Moines, IA (DSM) - Riverside, CA (PSP) Philadelphia, PA (PHL) - San Jose, CA (SJC) Boston, MA (BOS) - Kapaa, HI (LIH) Cincinnati, OH (CIN) - Dallas, TX (DFW) Miami, FL (MIA) - Louisville, KY (SDF) Kahului, HI (OGG) - Philadelphia, PA (PHL) St. Thomas, VI (STT) - Tallahassee, FL (TLH) Raleigh, NC (RDU) - Fayetteville, AR (XNA) Honolulu, HI (HNL) - Milwaukee, WI (MKE) Washington, DC (WAS) - Fayetteville, AR (XNA) Fresno, CA (FAT) - Kansas City, MO (MCI) Des Moines, IA (DSM) - Riverside, CA (ONT) Indianapolis, IN (IND) - St. Thomas, VI (STT) Dallas, TX (DFW) - Cape Coral, FL (RSW) Boston, MA (BOS) - Santa Barbara, CA (SBA) Cleveland, OH (CLE) - San Juan, PR (SJU) Dallas, TX (DFW) - Tallahassee, FL (TLH) Charlotte, NC (CLT) - New York, NY (NYC) New York, NY (NYC) - San Juan, PR (SJU) Columbus, OH (CMH) - St. Thomas, VI (STT) New York, NY (HPN) - Louisville, KY (SDF) Hilo, HI (KOA) - Tucson, AZ (TUS) Dallas, TX (DFW) - Honolulu, HI (HNL) Los Angeles, CA (LAX) - St. Thomas, VI (STT) Dallas, TX (DFW) - Harrisburg, PA (MDT) Chicago, IL (CHI) - Phoenix, AZ (PHX) Dallas, TX (DFW) - Lexington, KY (LEX) Tampa, FL (TPA) - Tucson, AZ (TUS) El Paso, TX (ELP) - Minneapolis, MN (MSP) Chicago, IL (CHI) - Philadelphia, PA (PHL) $33(1',; $ &,7< 3$,56 :+(5( 7+( 0(5*(5 ,6 35(68037,9(/< ,//(*$/ Appendix 3 3RVW 0HUJHU ++, ' ++, 4360 1300 4786 1292 3874 1292 4283 1278 4306 1273 4957 1262 4531 1259 8308 1249 4746 1247 5087 1237 5000 1225 3984 1225 4797 1223 3728 1215 5009 1210 6239 1205 3821 1203 5157 1199 5006 1192 4878 1190 4656 1187 4195 1185 3980 1184 4661 1179 4761 1179 7914 1179 5013 1174 3567 1156 5578 1152 5408 1150 3573 1148 4530 1146 4898 1145 4981 1138 6180 1137 7828 1136 3722 1134 3868 1133 7635 1133 3663 1128 5393 1121 3779 1116 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 46 of 56 &,7< 3$,5 Detroit, MI (DTW) - Kahului, HI (OGG) Dallas, TX (DFW) - Tucson, AZ (TUS) Dallas, TX (DFW) - Washington, DC (WAS) Orlando, FL (MCO) - Santa Barbara, CA (SBA) Pittsburgh, PA (PIT) - St. Thomas, VI (STT) Miami, FL (MIA) - Washington, DC (WAS) Boston, MA (BOS) - Reno, NV (RNO) Miami, FL (MIA) - Fayetteville, AR (XNA) Tampa, FL (TPA) - Fayetteville, AR (XNA) Chicago, IL (CHI) - Kapaa, HI (LIH) Houston, TX (HOU) - Riverside, CA (PSP) New York, NY (NYC) - Fayetteville, AR (XNA) Charlottesville, VA (CHO) - Seattle, WA (SEA) Chicago, IL (CHI) - Hilo, HI (KOA) Minneapolis, MN (MSP) - San Juan, PR (SJU) Cape Coral, FL (RSW) - Fayetteville, AR (XNA) Chicago, IL (CHI) - San Juan, PR (SJU) Orlando, FL (MCO) - Tucson, AZ (TUS) Dallas, TX (DFW) - Los Angeles, CA (SNA) Charlottesville, VA (CHO) - San Diego, CA (SAN) Cleveland, OH (CLE) - Dallas, TX (DFW) Dallas, TX (DFW) - St. Thomas, VI (STT) Virginia Beach, VA (ORF) - Fayetteville, AR (XNA) Orlando, FL (MCO) - Fayetteville, AR (XNA) Fresno, CA (FAT) - New York, NY (NYC) Santa Barbara, CA (SBA) - Salt Lake City, UT (SLC) Austin, TX (AUS) - Columbia, SC (CAE) Fresno, CA (FAT) - Washington, DC (WAS) Fresno, CA (FAT) - Houston, TX (HOU) Detroit, MI (DTW) - Tucson, AZ (TUS) Philadelphia, PA (PHL) - Los Angeles, CA (SNA) Phoenix, AZ (PHX) - Richmond, VA (RIC) Dallas, TX (DFW) - Kahului, HI (OGG) Dallas, TX (DFW) - Miami, FL (PBI) Indianapolis, IN (IND) - Tucson, AZ (TUS) Los Angeles, CA (LAX) - San Juan, PR (SJU) San Francisco, CA (SFO) - San Juan, PR (SJU) Durango, CO (DRO) - San Antonio, TX (SAT) San Juan, PR (SJU) - Fayetteville, AR (XNA) San Francisco, CA (SFO) - St. Thomas, VI (STT) Charlotte, NC (CLT) - Los Angeles, CA (LAX) Riverside, CA (ONT) - Tampa, FL (TPA) 3RVW 0HUJHU ++, ' ++, 4623 1115 8367 1113 7111 1111 4729 1110 6199 1105 3350 1099 3228 1097 5213 1089 4809 1089 4812 1089 4827 1087 4238 1074 3998 1073 4704 1072 3776 1067 4835 1066 2806 1059 3508 1059 9283 1058 3640 1055 4494 1054 6531 1050 4322 1049 4751 1047 4255 1046 4720 1043 4351 1043 4112 1038 4575 1036 3293 1027 3113 1021 3462 1018 7965 1014 8074 1013 3763 1013 4164 1012 3252 1009 5052 1007 4985 1000 4846 995 5457 993 3341 992 &,7< 3$,5 Boston, MA (BOS) - Little Rock, AR (LIT) Key West, FL (EYW) - Phoenix, AZ (PHX) Chicago, IL (CHI) - El Paso, TX (ELP) New York, NY (HPN) - San Diego, CA (SAN) New York, NY (NYC) - Tucson, AZ (TUS) Knoxville, TN (TYS) - Fayetteville, AR (XNA) Charlotte, NC (CLT) - San Diego, CA (SAN) Harrisburg, PA (MDT) - St. Louis, MO (STL) Louisville, KY (SDF) - San Juan, PR (SJU) New York, NY (NYC) - Riverside, CA (ONT) New York, NY (NYC) - St. Thomas, VI (STT) Chicago, IL (CHI) - Miami, FL (PBI) Boston, MA (BOS) - Riverside, CA (ONT) Honolulu, HI (HNL) - Philadelphia, PA (PHL) Nashville, TN (BNA) - New York, NY (NYC) Pittsburgh, PA (PIT) - Fayetteville, AR (XNA) Riverside, CA (ONT) - San Antonio, TX (SAT) Charleston, SC (CHS) - San Juan, PR (SJU) Dallas, TX (DFW) - Rochester, NY (ROC) Chicago, IL (CHI) - Fresno, CA (FAT) Honolulu, HI (HNL) - St. Louis, MO (STL) Boston, MA (BOS) - Dallas, TX (DFW) Atlanta, GA (ATL) - Grand Junction, CO (GJT) Kansas City, MO (MCI) - Tucson, AZ (TUS) St. Louis, MO (STL) - Syracuse, NY (SYR) Birmingham, AL (BHM) - St. Thomas, VI (STT) Huntsville, AL (HSV) - Phoenix, AZ (PHX) Charlottesville, VA (CHO) - Kansas City, MO (MCI) Detroit, MI (DTW) - St. Thomas, VI (STT) Grand Junction, CO (GJT) - Philadelphia, PA (PHL) Chicago, IL (CHI) - Santa Barbara, CA (SBA) Richmond, VA (RIC) - Fayetteville, AR (XNA) Honolulu, HI (HNL) - Kansas City, MO (MCI) Detroit, MI (DTW) - El Paso, TX (ELP) New York, NY (NYC) - Santa Barbara, CA (SBA) New York, NY (HPN) - Fayetteville, AR (XNA) Miami, FL (MIA) - San Juan, PR (SJU) Harrisburg, PA (MDT) - Fayetteville, AR (XNA) Columbus, OH (CMH) - Los Angeles, CA (SNA) Austin, TX (AUS) - Greensboro, NC (GSO) Montgomery, AL (MGM) - Fayetteville, AR (XNA) Montgomery, AL (MGM) - Phoenix, AZ (PHX) $33(1',; $ &,7< 3$,56 :+(5( 7+( 0(5*(5 ,6 35(68037,9(/< ,//(*$/ Appendix 4 3RVW 0HUJHU ++, ' ++, 3387 969 5114 968 5089 966 3559 965 3967 963 4759 958 5509 956 3526 954 4899 951 3084 950 3873 947 6542 929 3066 928 3978 925 3518 923 4235 917 4014 914 5048 912 3776 910 4549 908 4515 907 5624 900 3588 893 3780 890 3539 890 5001 889 3944 885 5451 883 3512 879 4499 878 4819 878 4157 873 3287 869 4561 864 4872 863 4657 863 3750 862 4567 860 3066 855 4490 852 5064 848 5152 846 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 47 of 56 &,7< 3$,5 Tucson, AZ (TUS) - Washington, DC (WAS) El Paso, TX (ELP) - Philadelphia, PA (PHL) Austin, TX (AUS) - Los Angeles, CA (SNA) Phoenix, AZ (PHX) - Knoxville, TN (TYS) New York, NY (HPN) - St. Louis, MO (STL) Miami, FL (MIA) - Riverside, CA (ONT) Little Rock, AR (LIT) - Philadelphia, PA (PHL) Dallas, TX (DFW) - Grand Junction, CO (GJT) Birmingham, AL (BHM) - St. Croix, VI (STX) Lexington, KY (LEX) - Phoenix, AZ (PHX) Los Angeles, CA (LAX) - St. Louis, MO (STL) Charlotte, NC (CLT) - Fayetteville, AR (XNA) Las Vegas, NV (LAS) - Santa Barbara, CA (SBA) Miami, FL (MIA) - Raleigh, NC (RDU) Little Rock, AR (LIT) - Miami, FL (MIA) Orlando, FL (MCO) - Riverside, CA (ONT) Cape Coral, FL (RSW) - St. Thomas, VI (STT) New Orleans, LA (MSY) - San Juan, PR (SJU) Little Rock, AR (LIT) - Rochester, NY (ROC) Kapaa, HI (LIH) - Washington, DC (WAS) Louisville, KY (SDF) - St. Thomas, VI (STT) Detroit, MI (DTW) - San Juan, PR (SJU) Columbus, OH (CMH) - Tucson, AZ (TUS) Des Moines, IA (DSM) - Phoenix, AZ (PHX) Charlottesville, VA (CHO) - Denver, CO (DEN) Boston, MA (BOS) - Gainesville, FL (GNV) Charlottesville, VA (CHO) - Los Angeles, CA (LAX) Austin, TX (AUS) - Philadelphia, PA (PHL) Austin, TX (AUS) - Richmond, VA (RIC) Pittsburgh, PA (PIT) - Tucson, AZ (TUS) Hartford, CT (BDL) - Fayetteville, AR (XNA) Dallas, TX (DFW) - Portland, OR (PDX) Charlottesville, VA (CHO) - Milwaukee, WI (MKE) Kahului, HI (OGG) - Washington, DC (WAS) Philadelphia, PA (PHL) - San Antonio, TX (SAT) Dallas, TX (DFW) - New York, NY (NYC) Greensboro, NC (GSO) - San Antonio, TX (SAT) Columbus, OH (CMH) - Los Angeles, CA (LAX) Little Rock, AR (LIT) - Harrisburg, PA (MDT) Seattle, WA (SEA) - St. Thomas, VI (STT) San Antonio, TX (SAT) - Los Angeles, CA (SNA) Denver, CO (DEN) - Kapaa, HI (LIH) 3RVW 0HUJHU ++, ' ++, 4247 845 3902 843 3439 843 3700 838 3322 838 3305 837 3482 832 7233 823 10000 821 4181 819 4812 816 5930 816 5004 814 3423 814 3847 807 2953 805 5127 801 5674 799 3500 799 4887 796 4886 795 3117 791 3397 785 5219 784 4302 784 5346 783 3900 782 2837 777 3835 776 3255 773 4199 772 4837 770 5375 764 4700 761 2842 755 5211 754 4719 751 2923 750 4050 750 4204 748 3570 748 4845 747 &,7< 3$,5 Dallas, TX (DFW) - Montgomery, AL (MGM) Omaha, NE (OMA) - Tucson, AZ (TUS) Los Angeles, CA (LAX) - Raleigh, NC (RDU) Birmingham, AL (BHM) - Miami, FL (MIA) Honolulu, HI (HNL) - Pittsburgh, PA (PIT) Little Rock, AR (LIT) - New York, NY (NYC) El Paso, TX (ELP) - Seattle, WA (SEA) Atlanta, GA (ATL) - San Juan, PR (SJU) Honolulu, HI (HNL) - Miami, FL (MIA) Honolulu, HI (HNL) - Tampa, FL (TPA) Gainesville, FL (GNV) - San Juan, PR (SJU) New York, NY (HPN) - Indianapolis, IN (IND) Des Moines, IA (DSM) - San Jose, CA (SJC) Chicago, IL (CHI) - Tucson, AZ (TUS) Chattanooga, TN (CHA) - Phoenix, AZ (PHX) Columbia, SC (CAE) - Fayetteville, AR (XNA) Detroit, MI (DTW) - Grand Junction, CO (GJT) Chattanooga, TN (CHA) - Los Angeles, CA (LAX) Buffalo, NY (BUF) - Dallas, TX (DFW) Chicago, IL (CHI) - Syracuse, NY (SYR) Charlotte, NC (CLT) - Sacramento, CA (SMF) Rochester, NY (ROC) - Fayetteville, AR (XNA) Detroit, MI (DTW) - Riverside, CA (ONT) Philadelphia, PA (PHL) - San Diego, CA (SAN) Miami, FL (MIA) - Tucson, AZ (TUS) Little Rock, AR (LIT) - Raleigh, NC (RDU) Raleigh, NC (RDU) - Washington, DC (WAS) San Jose, CA (SJC) - St. Louis, MO (STL) Pittsburgh, PA (PIT) - Los Angeles, CA (SNA) Hartford, CT (BDL) - Phoenix, AZ (PHX) Miami, FL (PBI) - San Francisco, CA (SFO) Durango, CO (DRO) - Tampa, FL (TPA) Boston, MA (BOS) - Kahului, HI (OGG) Miami, FL (MIA) - San Diego, CA (SAN) Richmond, VA (RIC) - St. Louis, MO (STL) Columbus, OH (CMH) - Dallas, TX (DFW) Nashville, TN (BNA) - St. Croix, VI (STX) Phoenix, AZ (PHX) - Cape Coral, FL (RSW) New York, NY (HPN) - Seattle, WA (SEA) Columbus, OH (CMH) - New York, NY (NYC) Reno, NV (RNO) - Tampa, FL (TPA) Savannah, GA (SAV) - Fayetteville, AR (XNA) $33(1',; $ &,7< 3$,56 :+(5( 7+( 0(5*(5 ,6 35(68037,9(/< ,//(*$/ Appendix 5 3RVW 0HUJHU ++, ' ++, 8376 746 3272 736 2808 734 3583 732 4474 729 3025 728 4387 728 4243 726 4481 726 3403 725 6576 724 3744 723 3651 718 4795 718 5224 718 5277 716 3495 714 5159 711 3590 708 4584 707 3665 706 4513 705 2905 699 4569 698 4278 696 3707 693 3411 690 3553 689 2862 687 3045 687 3238 684 5017 682 4044 682 2993 682 2976 681 7529 677 9444 671 2711 670 3511 668 3137 666 3854 663 4952 659 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 48 of 56 &,7< 3$,5 Little Rock, AR (LIT) - Pittsburgh, PA (PIT) Key West, FL (EYW) - Washington, DC (WAS) Columbia, SC (CAE) - Los Angeles, CA (LAX) New York, NY (NYC) - Reno, NV (RNO) Los Angeles, CA (SNA) - Tampa, FL (TPA) Albuquerque, NM (ABQ) - Philadelphia, PA (PHL) New York, NY (HPN) - Las Vegas, NV (LAS) San Juan, PR (SJU) - Tallahassee, FL (TLH) Cincinnati, OH (CIN) - St. Thomas, VI (STT) Dallas, TX (DFW) - Indianapolis, IN (IND) Des Moines, IA (DSM) - Philadelphia, PA (PHL) Houston, TX (HOU) - Kahului, HI (OGG) Richmond, VA (RIC) - San Francisco, CA (SFO) Boston, MA (BOS) - Salinas, CA (MRY) Chicago, IL (CHI) - Richmond, VA (RIC) Atlanta, GA (ATL) - Kahului, HI (OGG) Detroit, MI (DTW) - Key West, FL (EYW) Orlando, FL (MCO) - San Jose, CA (SJC) Gainesville, FL (GNV) - Los Angeles, CA (LAX) Chicago, IL (CHI) - San Jose, CA (SJC) Huntsville, AL (HSV) - Syracuse, NY (SYR) Columbus, OH (CMH) - San Jose, CA (SJC) Cincinnati, OH (CIN) - New York, NY (HPN) Miami, FL (PBI) - Phoenix, AZ (PHX) Boston, MA (BOS) - Lexington, KY (LEX) San Juan, PR (SJU) - Knoxville, TN (TYS) Jacksonville, FL (JAX) - Fayetteville, AR (XNA) Pensacola, FL (PNS) - Fayetteville, AR (XNA) Riverside, CA (ONT) - Philadelphia, PA (PHL) Chattanooga, TN (CHA) - Denver, CO (DEN) Kansas City, MO (MCI) - San Juan, PR (SJU) Los Angeles, CA (SNA) - St. Louis, MO (STL) Columbia, SC (CAE) - San Antonio, TX (SAT) Boston, MA (BOS) - Los Angeles, CA (SNA) Charlottesville, VA (CHO) - San Francisco, CA (SFO) Indianapolis, IN (IND) - San Juan, PR (SJU) Riverside, CA (ONT) - Washington, DC (WAS) Chicago, IL (CHI) - Harrisburg, PA (MDT) Milwaukee, WI (MKE) - Tucson, AZ (TUS) Chicago, IL (CHI) - Kahului, HI (OGG) New York, NY (HPN) - Little Rock, AR (LIT) Detroit, MI (DTW) - Los Angeles, CA (SNA) 3RVW 0HUJHU ++, ' ++, 3419 659 3829 657 3605 657 2886 656 2872 655 3204 655 2975 655 5177 651 4816 649 7180 647 3270 645 5285 645 3125 645 5303 644 4227 644 4665 643 5219 641 2754 640 5109 639 4974 639 4545 636 3066 635 4686 634 3204 633 4454 630 4579 628 5211 624 4492 622 3569 620 5343 614 3085 612 3356 609 4511 606 3047 606 4599 605 3250 605 2910 604 4921 602 2533 602 4523 602 4494 601 2798 601 &,7< 3$,5 Hartford, CT (BDL) - Little Rock, AR (LIT) Columbus, OH (CMH) - Miami, FL (MIA) New York, NY (HPN) - Minneapolis, MN (MSP) Columbus, OH (CMH) - San Juan, PR (SJU) Dallas, TX (DFW) - Tampa, FL (TPA) Chicago, IL (CHI) - Salinas, CA (MRY) Key West, FL (EYW) - San Francisco, CA (SFO) New York, NY (HPN) - Knoxville, TN (TYS) Detroit, MI (DTW) - Fayetteville, AR (XNA) Chattanooga, TN (CHA) - St. Louis, MO (STL) Philadelphia, PA (PHL) - Reno, NV (RNO) Kansas City, MO (MCI) - Knoxville, TN (TYS) Des Moines, IA (DSM) - Miami, FL (PBI) Charlotte, NC (CLT) - San Francisco, CA (SFO) Boston, MA (BOS) - Louisville, KY (SDF) Chicago, IL (CHI) - Knoxville, TN (TYS) Miami, FL (MIA) - San Jose, CA (SJC) Atlanta, GA (ATL) - San Jose, CA (SJC) Des Moines, IA (DSM) - Wilmington, NC (ILM) Lexington, KY (LEX) - Kansas City, MO (MCI) Nashville, TN (BNA) - Rochester, NY (ROC) Miami, FL (PBI) - Fayetteville, AR (XNA) Hilo, HI (KOA) - New York, NY (NYC) Nashville, TN (BNA) - New York, NY (HPN) St. Thomas, VI (STT) - Knoxville, TN (TYS) Jacksonville, FL (JAX) - Phoenix, AZ (PHX) Minneapolis, MN (MSP) - Riverside, CA (ONT) Cape Coral, FL (RSW) - San Francisco, CA (SFO) Charlotte, NC (CLT) - Phoenix, AZ (PHX) Pittsburgh, PA (PIT) - San Jose, CA (SJC) Columbus, OH (CMH) - New York, NY (HPN) Detroit, MI (DTW) - Reno, NV (RNO) Charleston, SC (CHS) - Key West, FL (EYW) San Antonio, TX (SAT) - Savannah, GA (SAV) Chattanooga, TN (CHA) - Seattle, WA (SEA) Austin, TX (AUS) - Riverside, CA (ONT) Los Angeles, CA (LAX) - Richmond, VA (RIC) Salinas, CA (MRY) - New York, NY (NYC) San Antonio, TX (SAT) - Knoxville, TN (TYS) San Antonio, TX (SAT) - San Jose, CA (SJC) Des Moines, IA (DSM) - Knoxville, TN (TYS) New York, NY (HPN) - Los Angeles, CA (LAX) $33(1',; $ &,7< 3$,56 :+(5( 7+( 0(5*(5 ,6 35(68037,9(/< ,//(*$/ Appendix 6 3RVW 0HUJHU ++, ' ++, 3258 599 3161 596 3448 596 3131 594 6997 592 5356 591 6164 591 4688 589 5095 588 5385 587 3257 586 4543 580 5020 580 6547 580 3335 577 4426 577 3313 577 3439 573 5027 570 3795 570 3840 567 5232 566 2683 565 4351 565 5261 564 3050 564 2857 563 2681 563 5970 560 2903 560 6310 560 3275 558 5545 557 4287 555 5320 555 4018 552 2905 552 5542 551 4405 551 4077 548 4300 548 3258 548 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 49 of 56 &,7< 3$,5 Charlotte, NC (CLT) - Denver, CO (DEN) Phoenix, AZ (PHX) - Syracuse, NY (SYR) Richmond, VA (RIC) - Seattle, WA (SEA) Chicago, IL (CHI) - Reno, NV (RNO) Birmingham, AL (BHM) - San Juan, PR (SJU) New York, NY (NYC) - Kahului, HI (OGG) Virginia Beach, VA (ORF) - Phoenix, AZ (PHX) Orlando, FL (MCO) - Los Angeles, CA (SNA) Baton Rouge, LA (BTR) - Lexington, KY (LEX) Austin, TX (AUS) - Reno, NV (RNO) Charlotte, NC (CLT) - Kansas City, MO (MCI) Santa Barbara, CA (SBA) - Washington, DC (WAS) Gainesville, FL (GNV) - New York, NY (NYC) Chicago, IL (CHI) - Jacksonville, FL (JAX) Montgomery, AL (MGM) - San Francisco, CA (SFO) Hilo, HI (KOA) - Washington, DC (WAS) Indianapolis, IN (IND) - Miami, FL (MIA) Raleigh, NC (RDU) - San Francisco, CA (SFO) San Diego, CA (SAN) - Tampa, FL (TPA) Chicago, IL (CHI) - St. Croix, VI (STX) Dallas, TX (DFW) - Los Angeles, CA (LAX) Charlottesville, VA (CHO) - Little Rock, AR (LIT) Denver, CO (DEN) - Lexington, KY (LEX) Kapaa, HI (LIH) - Phoenix, AZ (PHX) Nashville, TN (BNA) - Washington, DC (WAS) San Antonio, TX (SAT) - Sacramento, CA (SMF) Phoenix, AZ (PHX) - Tallahassee, FL (TLH) Key West, FL (EYW) - Greensboro, NC (GSO) Charlotte, NC (CLT) - Seattle, WA (SEA) Pittsburgh, PA (PIT) - San Juan, PR (SJU) Greensboro, NC (GSO) - Fayetteville, AR (XNA) Boston, MA (BOS) - Des Moines, IA (DSM) Columbus, OH (CMH) - Fayetteville, AR (XNA) Denver, CO (DEN) - Richmond, VA (RIC) Miami, FL (MIA) - Knoxville, TN (TYS) Kapaa, HI (LIH) - New York, NY (NYC) Phoenix, AZ (PHX) - Fort Walton Beach, FL (VPS) Denver, CO (DEN) - Hilo, HI (KOA) Charlotte, NC (CLT) - Salt Lake City, UT (SLC) Omaha, NE (OMA) - San Juan, PR (SJU) Los Angeles, CA (LAX) - Tallahassee, FL (TLH) Kansas City, MO (MCI) - Syracuse, NY (SYR) 3RVW 0HUJHU ++, ' ++, 5192 547 3298 544 3084 544 4015 544 5331 543 2993 543 3132 541 2750 537 4938 535 4193 534 5285 534 5304 533 4830 533 2940 532 5057 529 4514 529 3189 529 2582 528 2600 528 9841 528 5112 528 5886 527 3415 526 4543 526 4006 524 3274 524 5470 523 5612 523 4832 522 4171 520 4916 519 2605 518 4343 517 2855 516 4933 514 2752 514 3529 512 4782 511 4602 510 3521 508 5315 504 3349 504 &,7< 3$,5 Miami, FL (MIA) - Sacramento, CA (SMF) Cincinnati, OH (CIN) - San Juan, PR (SJU) Greenville, SC (GSP) - Fayetteville, AR (XNA) Dallas, TX (DFW) - Salt Lake City, UT (SLC) Dallas, TX (DFW) - Las Vegas, NV (LAS) Boston, MA (BOS) - Hilo, HI (KOA) Des Moines, IA (DSM) - Raleigh, NC (RDU) Dallas, TX (DFW) - Fort Walton Beach, FL (VPS) Charlottesville, VA (CHO) - Las Vegas, NV (LAS) Des Moines, IA (DSM) - Jacksonville, FL (JAX) Riverside, CA (ONT) - St. Louis, MO (STL) Omaha, NE (OMA) - Syracuse, NY (SYR) Las Vegas, NV (LAS) - Miami, FL (MIA) San Jose, CA (SJC) - Tampa, FL (TPA) Orlando, FL (MCO) - Reno, NV (RNO) Charleston, SC (CHS) - St. Croix, VI (STX) Raleigh, NC (RDU) - Seattle, WA (SEA) Greensboro, NC (GSO) - Los Angeles, CA (LAX) Kansas City, MO (MCI) - Philadelphia, PA (PHL) Denver, CO (DEN) - Montgomery, AL (MGM) Nashville, TN (BNA) - Charlottesville, VA (CHO) Columbus, OH (CMH) - Reno, NV (RNO) Kahului, HI (OGG) - Phoenix, AZ (PHX) El Paso, TX (ELP) - Milwaukee, WI (MKE) Harrisburg, PA (MDT) - Phoenix, AZ (PHX) Cincinnati, OH (CIN) - Rochester, NY (ROC) Houston, TX (HOU) - Reno, NV (RNO) Kansas City, MO (MCI) - Los Angeles, CA (SNA) Boston, MA (BOS) - Honolulu, HI (HNL) Little Rock, AR (LIT) - Richmond, VA (RIC) Richmond, VA (RIC) - San Diego, CA (SAN) Durango, CO (DRO) - Philadelphia, PA (PHL) Philadelphia, PA (PHL) - San Juan, PR (SJU) Detroit, MI (DTW) - Gulfport, MS (GPT) Wilmington, NC (ILM) - Seattle, WA (SEA) Miami, FL (MIA) - Pittsburgh, PA (PIT) Cincinnati, OH (CIN) - Little Rock, AR (LIT) Key West, FL (EYW) - St. Louis, MO (STL) Des Moines, IA (DSM) - Montgomery, AL (MGM) Los Angeles, CA (LAX) - Montgomery, AL (MGM) San Francisco, CA (SFO) - Tallahassee, FL (TLH) Los Angeles, CA (LAX) - Pittsburgh, PA (PIT) $33(1',; $ &,7< 3$,56 :+(5( 7+( 0(5*(5 ,6 35(68037,9(/< ,//(*$/ Appendix 7 3RVW 0HUJHU ++, ' ++, 2774 503 3442 502 5272 501 4506 500 6388 500 4509 498 3832 498 9022 496 5346 495 4522 495 3842 493 3346 491 3641 490 3037 490 3072 488 9341 488 2590 487 3342 484 4445 478 5661 476 6270 476 4533 476 4623 475 3620 474 3941 474 3105 473 3072 472 2507 472 4142 472 4152 471 3411 466 5257 466 3576 465 4883 465 5396 464 4094 463 4541 461 4897 460 5393 456 5000 456 5781 455 2713 455 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 50 of 56 &,7< 3$,5 Detroit, MI (DTW) - San Jose, CA (SJC) Hartford, CT (BDL) - Los Angeles, CA (LAX) Houston, TX (HOU) - Lexington, KY (LEX) Little Rock, AR (LIT) - Cape Coral, FL (RSW) El Paso, TX (ELP) - New York, NY (NYC) Chattanooga, TN (CHA) - Syracuse, NY (SYR) Charlotte, NC (CLT) - St. Louis, MO (STL) Denver, CO (DEN) - Fort Walton Beach, FL (VPS) Los Angeles, CA (LAX) - Miami, FL (PBI) Phoenix, AZ (PHX) - Tampa, FL (TPA) El Paso, TX (ELP) - Los Angeles, CA (LAX) Miami, FL (MIA) - Los Angeles, CA (SNA) Rochester, NY (ROC) - Louisville, KY (SDF) Key West, FL (EYW) - New York, NY (NYC) Nashville, TN (BNA) - Syracuse, NY (SYR) New York, NY (HPN) - Kansas City, MO (MCI) Indianapolis, IN (IND) - San Jose, CA (SJC) Omaha, NE (OMA) - Miami, FL (PBI) Anchorage, AK (ANC) - Columbus, OH (CMH) Minneapolis, MN (MSP) - Riverside, CA (PSP) Pittsburgh, PA (PIT) - San Diego, CA (SAN) El Paso, TX (ELP) - Portland, OR (PDX) Chicago, IL (CHI) - Mobile, AL (MOB) Los Angeles, CA (LAX) - Lexington, KY (LEX) Dallas, TX (DFW) - Orlando, FL (MCO) Chattanooga, TN (CHA) - Las Vegas, NV (LAS) Des Moines, IA (DSM) - Syracuse, NY (SYR) Raleigh, NC (RDU) - San Antonio, TX (SAT) San Francisco, CA (SFO) - Tampa, FL (TPA) Gainesville, FL (GNV) - Philadelphia, PA (PHL) Virginia Beach, VA (ORF) - San Francisco, CA (SFO) Raleigh, NC (RDU) - San Diego, CA (SAN) Pittsburgh, PA (PIT) - Reno, NV (RNO) Indianapolis, IN (IND) - Riverside, CA (ONT) Las Vegas, NV (LAS) - Richmond, VA (RIC) New York, NY (NYC) - Raleigh, NC (RDU) Mobile, AL (MOB) - Phoenix, AZ (PHX) Tallahassee, FL (TLH) - Fayetteville, AR (XNA) Key West, FL (EYW) - Las Vegas, NV (LAS) Mobile, AL (MOB) - St. Louis, MO (STL) Riverside, CA (ONT) - Pittsburgh, PA (PIT) Chattanooga, TN (CHA) - San Diego, CA (SAN) 3RVW 0HUJHU ++, ' ++, 2931 454 2628 453 3960 451 4582 451 4710 450 5225 450 6079 449 3761 446 3421 445 4073 443 5347 442 3141 442 3431 441 3767 441 4010 440 3029 439 3193 437 4576 436 3993 435 3129 433 2625 431 4077 431 4718 431 3480 431 6570 431 5739 431 3540 430 2819 429 2502 428 5296 428 2619 427 2545 426 3770 423 4118 421 2632 418 2619 416 3393 415 5582 415 5533 415 4683 415 3463 414 5736 413 &,7< 3$,5 Des Moines, IA (DSM) - San Diego, CA (SAN) Montgomery, AL (MGM) - Seattle, WA (SEA) Houston, TX (HOU) - Hilo, HI (KOA) Memphis, TN (MEM) - Miami, FL (MIA) Nashville, TN (BNA) - Key West, FL (EYW) Boston, MA (BOS) - Phoenix, AZ (PHX) Jacksonville, FL (JAX) - St. Thomas, VI (STT) Richmond, VA (RIC) - San Antonio, TX (SAT) Miami, FL (PBI) - St. Louis, MO (STL) Atlanta, GA (ATL) - Riverside, CA (ONT) Boston, MA (BOS) - Huntsville, AL (HSV) Charlotte, NC (CLT) - Omaha, NE (OMA) Cincinnati, OH (CIN) - Fayetteville, AR (XNA) Hartford, CT (BDL) - Baton Rouge, LA (BTR) San Jose, CA (SJC) - Washington, DC (WAS) Jackson, MS (JAN) - Phoenix, AZ (PHX) Las Vegas, NV (LAS) - Harrisburg, PA (MDT) Austin, TX (AUS) - San Juan, PR (SJU) Reno, NV (RNO) - Washington, DC (WAS) Minneapolis, MN (MSP) - Tucson, AZ (TUS) Austin, TX (AUS) - Harrisburg, PA (MDT) Salinas, CA (MRY) - Phoenix, AZ (PHX) Boston, MA (BOS) - San Antonio, TX (SAT) Phoenix, AZ (PHX) - Pensacola, FL (PNS) Columbus, OH (CMH) - Riverside, CA (ONT) Denver, CO (DEN) - Miami, FL (PBI) Baton Rouge, LA (BTR) - San Juan, PR (SJU) Austin, TX (AUS) - Durango, CO (DRO) Austin, TX (AUS) - Los Angeles, CA (LAX) Austin, TX (AUS) - Charlottesville, VA (CHO) Baton Rouge, LA (BTR) - Columbus, OH (CMH) Cleveland, OH (CLE) - Fayetteville, AR (XNA) Chattanooga, TN (CHA) - Houston, TX (HOU) Memphis, TN (MEM) - Phoenix, AZ (PHX) Charlotte, NC (CLT) - Las Vegas, NV (LAS) Chicago, IL (CHI) - Fort Walton Beach, FL (VPS) Miami, FL (MIA) - Richmond, VA (RIC) Atlanta, GA (ATL) - Reno, NV (RNO) Austin, TX (AUS) - Raleigh, NC (RDU) Lexington, KY (LEX) - Syracuse, NY (SYR) Miami, FL (MIA) - Salt Lake City, UT (SLC) Chicago, IL (CHI) - Raleigh, NC (RDU) $33(1',; $ &,7< 3$,56 :+(5( 7+( 0(5*(5 ,6 35(68037,9(/< ,//(*$/ Appendix 8 3RVW 0HUJHU ++, ' ++, 2991 413 5549 412 5437 411 4082 404 4663 404 3632 404 3969 404 3512 403 3500 403 3136 403 3855 402 4478 402 5150 402 5950 398 2594 397 2850 397 3460 396 2692 396 2700 395 4121 395 3369 394 9083 393 3126 393 3086 392 3863 390 3280 390 5023 390 3946 389 3121 388 4508 386 4922 386 3346 385 5565 384 4378 383 5633 383 5381 381 3146 381 3073 380 2774 379 4516 377 3320 375 3352 373 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 51 of 56 &,7< 3$,5 Dallas, TX (DFW) - Louisville, KY (SDF) Memphis, TN (MEM) - San Juan, PR (SJU) New York, NY (NYC) - Washington, DC (WAS) Des Moines, IA (DSM) - Los Angeles, CA (LAX) Dallas, TX (DFW) - Wilmington, NC (ILM) Jacksonville, FL (JAX) - San Juan, PR (SJU) Charlotte, NC (CLT) - Portland, OR (PDX) Baton Rouge, LA (BTR) - Richmond, VA (RIC) Des Moines, IA (DSM) - Los Angeles, CA (SNA) Kahului, HI (OGG) - Salt Lake City, UT (SLC) Cape Coral, FL (RSW) - San Juan, PR (SJU) Des Moines, IA (DSM) - Washington, DC (WAS) San Diego, CA (SAN) - St. Louis, MO (STL) Columbus, OH (CMH) - San Diego, CA (SAN) Anchorage, AK (ANC) - Tampa, FL (TPA) Buffalo, NY (BUF) - Little Rock, AR (LIT) Houston, TX (HOU) - Virginia Beach, VA (ORF) Reno, NV (RNO) - San Antonio, TX (SAT) Chattanooga, TN (CHA) - Fayetteville, AR (XNA) Cincinnati, OH (CIN) - Phoenix, AZ (PHX) Chicago, IL (CHI) - Tallahassee, FL (TLH) Austin, TX (AUS) - Sacramento, CA (SMF) Chattanooga, TN (CHA) - Kansas City, MO (MCI) Orlando, FL (MCO) - San Juan, PR (SJU) Gulfport, MS (GPT) - Minneapolis, MN (MSP) Houston, TX (HOU) - Kapaa, HI (LIH) Boston, MA (BOS) - El Paso, TX (ELP) Cincinnati, OH (CIN) - Miami, FL (MIA) Columbus, OH (CMH) - Syracuse, NY (SYR) Kansas City, MO (MCI) - Raleigh, NC (RDU) Little Rock, AR (LIT) - Miami, FL (PBI) Denver, CO (DEN) - Kahului, HI (OGG) Des Moines, IA (DSM) - Sacramento, CA (SMF) Seattle, WA (SEA) - Fort Walton Beach, FL (VPS) Austin, TX (AUS) - Huntsville, AL (HSV) Des Moines, IA (DSM) - Greenville, SC (GSP) Las Vegas, NV (LAS) - Lexington, KY (LEX) Lexington, KY (LEX) - New York, NY (NYC) Dallas, TX (DFW) - Detroit, MI (DTW) Gainesville, FL (GNV) - Louisville, KY (SDF) St. Louis, MO (STL) - Knoxville, TN (TYS) Miami, FL (MIA) - St. Louis, MO (STL) 3RVW 0HUJHU ++, ' ++, 6979 372 4175 372 3201 372 2947 372 5639 372 4120 371 3709 371 5129 371 3145 371 3497 370 4369 368 3284 368 2967 367 2702 366 3503 365 2779 365 2778 362 4524 361 6035 360 3479 360 5407 358 3323 357 5869 356 4353 355 5688 353 5668 353 5456 352 4636 352 3973 352 3046 351 5040 350 5380 350 2629 350 3723 349 3718 349 4251 348 4617 348 4458 348 4006 347 5418 346 5379 345 3736 345 &,7< 3$,5 New York, NY (NYC) - Virginia Beach, VA (ORF) Rochester, NY (ROC) - St. Louis, MO (STL) Las Vegas, NV (LAS) - Salinas, CA (MRY) Charlotte, NC (CLT) - Des Moines, IA (DSM) Harrisburg, PA (MDT) - Seattle, WA (SEA) Cape Coral, FL (RSW) - San Diego, CA (SAN) Jacksonville, FL (JAX) - San Francisco, CA (SFO) Los Angeles, CA (SNA) - Washington, DC (WAS) Little Rock, AR (LIT) - Washington, DC (WAS) Reno, NV (RNO) - St. Louis, MO (STL) Miami, FL (PBI) - Seattle, WA (SEA) Los Angeles, CA (LAX) - Cape Coral, FL (RSW) Lexington, KY (LEX) - San Francisco, CA (SFO) San Francisco, CA (SFO) - St. Louis, MO (STL) Austin, TX (AUS) - Lexington, KY (LEX) Des Moines, IA (DSM) - Mobile, AL (MOB) El Paso, TX (ELP) - Salt Lake City, UT (SLC) Dallas, TX (DFW) - Miami, FL (MIA) Austin, TX (AUS) - Savannah, GA (SAV) Baton Rouge, LA (BTR) - Cincinnati, OH (CIN) Orlando, FL (MCO) - Phoenix, AZ (PHX) Key West, FL (EYW) - Richmond, VA (RIC) San Jose, CA (SJC) - Tucson, AZ (TUS) Chicago, IL (CHI) - Rochester, NY (ROC) Kansas City, MO (MCI) - Riverside, CA (ONT) Huntsville, AL (HSV) - Kansas City, MO (MCI) Boston, MA (BOS) - Grand Junction, CO (GJT) Omaha, NE (OMA) - Los Angeles, CA (SNA) Pensacola, FL (PNS) - San Juan, PR (SJU) El Paso, TX (ELP) - San Jose, CA (SJC) Nashville, TN (BNA) - Miami, FL (MIA) Durango, CO (DRO) - Pittsburgh, PA (PIT) Nashville, TN (BNA) - Boston, MA (BOS) Cleveland, OH (CLE) - Miami, FL (MIA) Des Moines, IA (DSM) - Miami, FL (MIA) Kansas City, MO (MCI) - Mobile, AL (MOB) Des Moines, IA (DSM) - Gulfport, MS (GPT) Kansas City, MO (MCI) - Fort Walton Beach, FL (VPS) Anchorage, AK (ANC) - Charlotte, NC (CLT) Pittsburgh, PA (PIT) - San Antonio, TX (SAT) Los Angeles, CA (LAX) - Knoxville, TN (TYS) Kansas City, MO (MCI) - Harrisburg, PA (MDT) $33(1',; $ &,7< 3$,56 :+(5( 7+( 0(5*(5 ,6 35(68037,9(/< ,//(*$/ Appendix 9 3RVW 0HUJHU ++, ' ++, 3065 344 3063 343 5718 343 4459 343 3640 342 2930 342 2638 342 2798 341 3012 340 3938 340 3470 339 2683 339 3416 338 2644 338 4331 337 4564 336 4641 336 6537 335 4641 334 4797 333 4022 333 5833 332 5027 331 5006 330 3922 328 5947 328 5419 328 2541 327 4740 327 5326 327 4185 326 6192 326 2885 325 3678 325 3715 324 3917 323 4617 323 4599 321 4572 321 2599 321 3201 320 3532 319 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 52 of 56 &,7< 3$,5 Wilmington, NC (ILM) - Omaha, NE (OMA) Baton Rouge, LA (BTR) - Raleigh, NC (RDU) Baton Rouge, LA (BTR) - Washington, DC (WAS) Columbus, OH (CMH) - San Francisco, CA (SFO) Minneapolis, MN (MSP) - Knoxville, TN (TYS) Grand Junction, CO (GJT) - Tampa, FL (TPA) Jacksonville, FL (JAX) - Omaha, NE (OMA) Wilmington, NC (ILM) - San Francisco, CA (SFO) St. Louis, MO (STL) - Tallahassee, FL (TLH) Greenville, SC (GSP) - Los Angeles, CA (LAX) Greensboro, NC (GSO) - Phoenix, AZ (PHX) Hartford, CT (BDL) - New Orleans, LA (MSY) Los Angeles, CA (LAX) - Virginia Beach, VA (ORF) Chattanooga, TN (CHA) - San Antonio, TX (SAT) Jacksonville, FL (JAX) - Seattle, WA (SEA) Hartford, CT (BDL) - San Diego, CA (SAN) San Antonio, TX (SAT) - San Juan, PR (SJU) Harrisburg, PA (MDT) - San Antonio, TX (SAT) Nashville, TN (BNA) - Harrisburg, PA (MDT) San Antonio, TX (SAT) - San Francisco, CA (SFO) Los Angeles, CA (LAX) - Tampa, FL (TPA) Cleveland, OH (CLE) - New York, NY (HPN) Harrisburg, PA (MDT) - Miami, FL (MIA) Gainesville, FL (GNV) - New Orleans, LA (MSY) Boston, MA (BOS) - Fort Walton Beach, FL (VPS) San Juan, PR (SJU) - Salt Lake City, UT (SLC) Austin, TX (AUS) - Hartford, CT (BDL) Des Moines, IA (DSM) - Pittsburgh, PA (PIT) Chattanooga, TN (CHA) - Minneapolis, MN (MSP) Des Moines, IA (DSM) - Richmond, VA (RIC) Milwaukee, WI (MKE) - San Jose, CA (SJC) Omaha, NE (OMA) - Tallahassee, FL (TLH) Columbia, SC (CAE) - Kansas City, MO (MCI) San Diego, CA (SAN) - Syracuse, NY (SYR) New York, NY (HPN) - San Francisco, CA (SFO) Boston, MA (BOS) - Tallahassee, FL (TLH) Dallas, TX (DFW) - St. Croix, VI (STX) Little Rock, AR (LIT) - Orlando, FL (MCO) San Juan, PR (SJU) - Tampa, FL (TPA) Seattle, WA (SEA) - Syracuse, NY (SYR) Chicago, IL (CHI) - Key West, FL (EYW) Sacramento, CA (SMF) - St. Louis, MO (STL) 3RVW 0HUJHU ++, ' ++, 5191 319 4815 318 3776 318 2615 317 4540 317 5003 317 5067 317 6101 317 5690 316 3094 316 4397 315 2920 315 2594 314 5910 313 2844 313 2509 312 2667 311 3358 311 3909 310 3291 310 3126 310 4704 310 5288 310 6253 309 4955 309 4901 309 2809 309 3185 308 6035 307 3387 307 3322 307 6189 307 4527 306 2797 306 4195 305 5024 304 10000 303 4050 303 6112 301 2852 301 3494 300 2582 299 &,7< 3$,5 Austin, TX (AUS) - Virginia Beach, VA (ORF) Seattle, WA (SEA) - Tallahassee, FL (TLH) Minneapolis, MN (MSP) - Syracuse, NY (SYR) Phoenix, AZ (PHX) - Savannah, GA (SAV) Huntsville, AL (HSV) - Las Vegas, NV (LAS) Omaha, NE (OMA) - Raleigh, NC (RDU) Huntsville, AL (HSV) - Seattle, WA (SEA) New York, NY (HPN) - Memphis, TN (MEM) Hilo, HI (KOA) - Phoenix, AZ (PHX) Salinas, CA (MRY) - Washington, DC (WAS) Austin, TX (AUS) - Pittsburgh, PA (PIT) Gulfport, MS (GPT) - New York, NY (NYC) Boston, MA (BOS) - Baton Rouge, LA (BTR) El Paso, TX (ELP) - Pittsburgh, PA (PIT) Little Rock, AR (LIT) - Tampa, FL (TPA) Key West, FL (EYW) - Louisville, KY (SDF) Greensboro, NC (GSO) - San Diego, CA (SAN) San Francisco, CA (SFO) - Fort Walton Beach, FL (VPS) Philadelphia, PA (PHL) - Seattle, WA (SEA) Cape Coral, FL (RSW) - San Antonio, TX (SAT) Fresno, CA (FAT) - Phoenix, AZ (PHX) Phoenix, AZ (PHX) - Pittsburgh, PA (PIT) Philadelphia, PA (PHL) - St. Louis, MO (STL) Chicago, IL (CHI) - Gulfport, MS (GPT) Charleston, SC (CHS) - Los Angeles, CA (LAX) Los Angeles, CA (LAX) - Harrisburg, PA (MDT) Honolulu, HI (HNL) - Orlando, FL (MCO) Denver, CO (DEN) - Greensboro, NC (GSO) St. Louis, MO (STL) - St. Croix, VI (STX) Harrisburg, PA (MDT) - Louisville, KY (SDF) Lexington, KY (LEX) - Fayetteville, AR (XNA) Jackson, MS (JAN) - Minneapolis, MN (MSP) Hartford, CT (BDL) - Fort Walton Beach, FL (VPS) Gulfport, MS (GPT) - Phoenix, AZ (PHX) Montgomery, AL (MGM) - Minneapolis, MN (MSP) Kansas City, MO (MCI) - Cape Coral, FL (RSW) Syracuse, NY (SYR) - Knoxville, TN (TYS) Miami, FL (PBI) - San Diego, CA (SAN) Sacramento, CA (SMF) - Tampa, FL (TPA) Little Rock, AR (LIT) - Virginia Beach, VA (ORF) Omaha, NE (OMA) - Pensacola, FL (PNS) St. Louis, MO (STL) - Washington, DC (WAS) $33(1',; $ &,7< 3$,56 :+(5( 7+( 0(5*(5 ,6 35(68037,9(/< ,//(*$/ Appendix 10 3RVW 0HUJHU ++, ' ++, 2846 299 6209 298 3796 298 4230 297 3885 297 2818 297 3345 296 4067 295 4454 295 5619 295 2609 295 4484 295 4280 293 3986 293 3930 293 6170 293 4099 293 3454 293 4246 293 2676 291 9574 290 4094 290 4704 289 4618 289 3071 289 3884 288 2888 288 3382 287 9073 287 3581 287 4320 287 4719 287 5478 287 4028 286 6343 286 3056 286 4611 286 3433 286 2501 285 3660 285 4733 285 3561 284 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 53 of 56 &,7< 3$,5 Dallas, TX (DFW) - Gainesville, FL (GNV) Indianapolis, IN (IND) - Syracuse, NY (SYR) New York, NY (NYC) - Tallahassee, FL (TLH) Jackson, MS (JAN) - New York, NY (NYC) New York, NY (HPN) - Lexington, KY (LEX) Denver, CO (DEN) - Mobile, AL (MOB) Jacksonville, FL (JAX) - Little Rock, AR (LIT) Des Moines, IA (DSM) - Huntsville, AL (HSV) Key West, FL (EYW) - Pittsburgh, PA (PIT) Columbus, OH (CMH) - El Paso, TX (ELP) Houston, TX (HOU) - Tucson, AZ (TUS) Louisville, KY (SDF) - Syracuse, NY (SYR) Miami, FL (MIA) - New Orleans, LA (MSY) Greenville, SC (GSP) - Phoenix, AZ (PHX) Phoenix, AZ (PHX) - Raleigh, NC (RDU) Harrisburg, PA (MDT) - San Diego, CA (SAN) Phoenix, AZ (PHX) - Rochester, NY (ROC) Hartford, CT (BDL) - San Francisco, CA (SFO) Kansas City, MO (MCI) - Rochester, NY (ROC) Baton Rouge, LA (BTR) - Philadelphia, PA (PHL) El Paso, TX (ELP) - Indianapolis, IN (IND) Philadelphia, PA (PHL) - Phoenix, AZ (PHX) Dallas, TX (DFW) - San Francisco, CA (SFO) Columbus, OH (CMH) - Little Rock, AR (LIT) St. Thomas, VI (STT) - Tampa, FL (TPA) Kansas City, MO (MCI) - Miami, FL (PBI) Huntsville, AL (HSV) - Minneapolis, MN (MSP) El Paso, TX (ELP) - Riverside, CA (PSP) Columbus, OH (CMH) - Seattle, WA (SEA) Charlottesville, VA (CHO) - Indianapolis, IN (IND) Philadelphia, PA (PHL) - Sacramento, CA (SMF) Anchorage, AK (ANC) - Indianapolis, IN (IND) New Orleans, LA (MSY) - Philadelphia, PA (PHL) Milwaukee, WI (MKE) - Knoxville, TN (TYS) Minneapolis, MN (MSP) - Miami, FL (PBI) Gainesville, FL (GNV) - Washington, DC (WAS) Gulfport, MS (GPT) - Los Angeles, CA (LAX) Cape Coral, FL (RSW) - Seattle, WA (SEA) Charlottesville, VA (CHO) - Louisville, KY (SDF) Sacramento, CA (SMF) - Washington, DC (WAS) Austin, TX (AUS) - Cape Coral, FL (RSW) Richmond, VA (RIC) - San Juan, PR (SJU) 3RVW 0HUJHU ++, ' ++, 6248 283 3346 283 4681 282 3886 282 4864 280 3366 280 5509 278 5237 278 3483 277 4590 276 4404 276 3612 275 4056 275 2929 274 3293 273 4131 272 2756 272 2651 271 2970 271 3775 271 4014 270 5804 270 4033 270 3273 270 4436 269 3537 269 5458 268 6530 268 2515 267 4591 266 2572 266 5094 266 3952 265 4213 265 4823 264 4883 263 3661 262 2839 262 7869 261 2686 261 2913 261 2720 261 &,7< 3$,5 Mobile, AL (MOB) - San Francisco, CA (SFO) Salt Lake City, UT (SLC) - Tampa, FL (TPA) Omaha, NE (OMA) - San Diego, CA (SAN) Los Angeles, CA (LAX) - Philadelphia, PA (PHL) Columbia, SC (CAE) - Seattle, WA (SEA) Austin, TX (AUS) - Chattanooga, TN (CHA) Harrisburg, PA (MDT) - Omaha, NE (OMA) Fort Walton Beach, FL (VPS) - Fayetteville, AR (XNA) Boston, MA (BOS) - Pensacola, FL (PNS) Minneapolis, MN (MSP) - Fort Walton Beach, FL (VPS) Omaha, NE (OMA) - Richmond, VA (RIC) El Paso, TX (ELP) - Tampa, FL (TPA) Des Moines, IA (DSM) - Rochester, NY (ROC) Philadelphia, PA (PHL) - Tallahassee, FL (TLH) Austin, TX (AUS) - Cincinnati, OH (CIN) Omaha, NE (OMA) - Savannah, GA (SAV) Cleveland, OH (CLE) - Little Rock, AR (LIT) Greensboro, NC (GSO) - Omaha, NE (OMA) Huntsville, AL (HSV) - Indianapolis, IN (IND) Des Moines, IA (DSM) - El Paso, TX (ELP) Phoenix, AZ (PHX) - San Antonio, TX (SAT) Atlanta, GA (ATL) - St. Thomas, VI (STT) Raleigh, NC (RDU) - Tallahassee, FL (TLH) Boston, MA (BOS) - Mobile, AL (MOB) Grand Junction, CO (GJT) - Miami, FL (MIA) Austin, TX (AUS) - Knoxville, TN (TYS) Gainesville, FL (GNV) - Indianapolis, IN (IND) El Paso, TX (ELP) - San Francisco, CA (SFO) Jacksonville, FL (JAX) - Los Angeles, CA (LAX) Greensboro, NC (GSO) - Houston, TX (HOU) Boston, MA (BOS) - Miami, FL (MIA) Birmingham, AL (BHM) - Key West, FL (EYW) Hartford, CT (BDL) - Jackson, MS (JAN) Detroit, MI (DTW) - Jackson, MS (JAN) Indianapolis, IN (IND) - Reno, NV (RNO) Charleston, SC (CHS) - Fayetteville, AR (XNA) Wilmington, NC (ILM) - Las Vegas, NV (LAS) Columbia, SC (CAE) - San Francisco, CA (SFO) Honolulu, HI (HNL) - Washington, DC (WAS) St. Louis, MO (STL) - Fort Walton Beach, FL (VPS) Austin, TX (AUS) - Phoenix, AZ (PHX) Jacksonville, FL (JAX) - Kansas City, MO (MCI) $33(1',; $ &,7< 3$,56 :+(5( 7+( 0(5*(5 ,6 35(68037,9(/< ,//(*$/ Appendix 11 3RVW 0HUJHU ++, ' ++, 3410 261 2876 260 2766 260 4309 259 3457 259 5587 258 3604 257 4338 257 3307 257 6289 256 3508 256 3311 255 3396 255 5014 255 3879 254 5733 254 2934 254 3827 253 5972 252 5590 252 4697 251 5168 250 5133 249 4940 249 5388 249 4141 249 5173 248 5400 248 2916 248 4051 248 3887 248 4205 247 3698 247 4440 247 3892 246 5979 246 6043 246 3428 245 4913 245 5733 245 4814 244 3399 230 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 54 of 56 &,7< 3$,5 Houston, TX (HOU) - Knoxville, TN (TYS) Denver, CO (DEN) - Knoxville, TN (TYS) El Paso, TX (ELP) - Orlando, FL (MCO) Atlanta, GA (ATL) - El Paso, TX (ELP) Boston, MA (BOS) - Jackson, MS (JAN) Milwaukee, WI (MKE) - Reno, NV (RNO) Gulfport, MS (GPT) - Kansas City, MO (MCI) Huntsville, AL (HSV) - New York, NY (NYC) San Francisco, CA (SFO) - Knoxville, TN (TYS) Miami, FL (MIA) - Omaha, NE (OMA) Lexington, KY (LEX) - Rochester, NY (ROC) Montgomery, AL (MGM) - San Diego, CA (SAN) Huntsville, AL (HSV) - San Francisco, CA (SFO) Savannah, GA (SAV) - San Francisco, CA (SFO) Gainesville, FL (GNV) - Raleigh, NC (RDU) Detroit, MI (DTW) - Honolulu, HI (HNL) Los Angeles, CA (LAX) - Miami, FL (MIA) Dallas, TX (DFW) - Seattle, WA (SEA) Milwaukee, WI (MKE) - Riverside, CA (ONT) Huntsville, AL (HSV) - Los Angeles, CA (LAX) Chicago, IL (CHI) - Montgomery, AL (MGM) Des Moines, IA (DSM) - New York, NY (NYC) Birmingham, AL (BHM) - Des Moines, IA (DSM) Hartford, CT (BDL) - San Antonio, TX (SAT) Baton Rouge, LA (BTR) - Greensboro, NC (GSO) Los Angeles, CA (LAX) - Savannah, GA (SAV) Pensacola, FL (PNS) - San Diego, CA (SAN) Hartford, CT (BDL) - Seattle, WA (SEA) Pensacola, FL (PNS) - San Francisco, CA (SFO) Austin, TX (AUS) - Grand Junction, CO (GJT) Hartford, CT (BDL) - Pensacola, FL (PNS) Omaha, NE (OMA) - Cape Coral, FL (RSW) Wilmington, NC (ILM) - Los Angeles, CA (LAX) Indianapolis, IN (IND) - Knoxville, TN (TYS) Chicago, IL (CHI) - Riverside, CA (ONT) Baton Rouge, LA (BTR) - Pittsburgh, PA (PIT) Indianapolis, IN (IND) - Philadelphia, PA (PHL) Greenville, SC (GSP) - Little Rock, AR (LIT) Los Angeles, CA (LAX) - Omaha, NE (OMA) Grand Junction, CO (GJT) - Orlando, FL (MCO) Key West, FL (EYW) - Los Angeles, CA (LAX) Charlottesville, VA (CHO) - San Antonio, TX (SAT) 3RVW 0HUJHU ++, ' ++, 4044 244 4020 244 3146 244 4450 244 3999 243 3832 243 3887 242 4033 242 3400 242 2831 240 4466 240 5257 239 3449 239 3791 239 5092 239 4822 238 3355 238 4288 237 4742 237 3441 237 6507 236 3093 235 4292 235 2916 235 5054 234 4517 234 3713 234 2772 233 2909 233 4674 233 4929 233 3008 233 5337 232 3945 232 3941 232 4397 232 6662 231 4770 231 2586 231 4457 231 6973 230 4463 230 &,7< 3$,5 Key West, FL (EYW) - Virginia Beach, VA (ORF) Dallas, TX (DFW) - Durango, CO (DRO) Key West, FL (EYW) - Minneapolis, MN (MSP) St. Croix, VI (STX) - Washington, DC (WAS) Des Moines, IA (DSM) - Tallahassee, FL (TLH) Charlotte, NC (CLT) - St. Thomas, VI (STT) Boston, MA (BOS) - Knoxville, TN (TYS) Los Angeles, CA (LAX) - Syracuse, NY (SYR) Columbia, SC (CAE) - San Diego, CA (SAN) Baton Rouge, LA (BTR) - Virginia Beach, VA (ORF) Memphis, TN (MEM) - Syracuse, NY (SYR) Memphis, TN (MEM) - San Francisco, CA (SFO) Atlanta, GA (ATL) - Tucson, AZ (TUS) Indianapolis, IN (IND) - Rochester, NY (ROC) Charleston, SC (CHS) - Seattle, WA (SEA) San Diego, CA (SAN) - Knoxville, TN (TYS) Seattle, WA (SEA) - Knoxville, TN (TYS) Denver, CO (DEN) - Tallahassee, FL (TLH) Detroit, MI (DTW) - Little Rock, AR (LIT) Los Angeles, CA (LAX) - Fort Walton Beach, FL (VPS) Denver, CO (DEN) - New York, NY (HPN) Hartford, CT (BDL) - Lexington, KY (LEX) Pittsburgh, PA (PIT) - San Francisco, CA (SFO) Salinas, CA (MRY) - Salt Lake City, UT (SLC) Little Rock, AR (LIT) - San Juan, PR (SJU) San Diego, CA (SAN) - Tallahassee, FL (TLH) Key West, FL (EYW) - Memphis, TN (MEM) Des Moines, IA (DSM) - New York, NY (HPN) Baton Rouge, LA (BTR) - Phoenix, AZ (PHX) Phoenix, AZ (PHX) - Washington, DC (WAS) Baton Rouge, LA (BTR) - New York, NY (NYC) Jackson, MS (JAN) - Miami, FL (MIA) Mobile, AL (MOB) - New York, NY (NYC) Albuquerque, NM (ABQ) - Tampa, FL (TPA) Boston, MA (BOS) - Gulfport, MS (GPT) Chicago, IL (CHI) - Los Angeles, CA (SNA) Virginia Beach, VA (ORF) - Seattle, WA (SEA) Mobile, AL (MOB) - Minneapolis, MN (MSP) Charlotte, NC (CLT) - San Juan, PR (SJU) Denver, CO (DEN) - Virginia Beach, VA (ORF) Wilmington, NC (ILM) - St. Louis, MO (STL) Kansas City, MO (MCI) - Tallahassee, FL (TLH) $33(1',; $ &,7< 3$,56 :+(5( 7+( 0(5*(5 ,6 35(68037,9(/< ,//(*$/ Appendix 12 3RVW 0HUJHU ++, ' ++, 5747 230 4052 230 6277 229 8150 229 6416 229 4759 229 5003 228 2935 227 4515 227 5156 226 4421 226 3520 226 4887 226 3666 226 3380 226 3233 226 3046 225 5975 225 3907 224 3815 223 3819 223 4745 222 3060 222 6650 221 6569 220 6434 219 6557 219 3464 219 4389 219 3435 219 3718 218 4304 218 4452 218 3054 218 5213 218 3839 217 3247 217 5888 217 2594 215 2598 215 6783 215 6205 215 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 55 of 56 &,7< 3$,5 Columbia, SC (CAE) - Houston, TX (HOU) Des Moines, IA (DSM) - Harrisburg, PA (MDT) New York, NY (NYC) - San Antonio, TX (SAT) Gulfport, MS (GPT) - Washington, DC (WAS) San Francisco, CA (SFO) - Syracuse, NY (SYR) Greensboro, NC (GSO) - Orlando, FL (MCO) New York, NY (NYC) - San Jose, CA (SJC) Jackson, MS (JAN) - Milwaukee, WI (MKE) Phoenix, AZ (PHX) - St. Louis, MO (STL) Omaha, NE (OMA) - Knoxville, TN (TYS) Baton Rouge, LA (BTR) - Indianapolis, IN (IND) Charleston, WV (CRW) - Dallas, TX (DFW) Las Vegas, NV (LAS) - Knoxville, TN (TYS) Des Moines, IA (DSM) - Cape Coral, FL (RSW) Houston, TX (HOU) - Santa Barbara, CA (SBA) New York, NY (HPN) - Milwaukee, WI (MKE) Pensacola, FL (PNS) - St. Thomas, VI (STT) Fresno, CA (FAT) - Honolulu, HI (HNL) Harrisburg, PA (MDT) - Minneapolis, MN (MSP) Houston, TX (HOU) - Richmond, VA (RIC) Pittsburgh, PA (PIT) - Seattle, WA (SEA) Austin, TX (AUS) - Greenville, SC (GSP) Albuquerque, NM (ABQ) - Boston, MA (BOS) Las Vegas, NV (LAS) - Syracuse, NY (SYR) Houston, TX (HOU) - Salinas, CA (MRY) Jackson, MS (JAN) - San Juan, PR (SJU) Chattanooga, TN (CHA) - New York, NY (NYC) Miami, FL (MIA) - Pensacola, FL (PNS) Indianapolis, IN (IND) - Harrisburg, PA (MDT) Gulfport, MS (GPT) - Greenville, SC (GSP) Virginia Beach, VA (ORF) - Tallahassee, FL (TLH) New York, NY (NYC) - St. Louis, MO (STL) Cincinnati, OH (CIN) - Seattle, WA (SEA) Austin, TX (AUS) - Charleston, SC (CHS) Baton Rouge, LA (BTR) - Detroit, MI (DTW) 3RVW 0HUJHU ++, ' ++, 3633 215 3556 215 2806 214 4647 214 3547 214 4997 214 2996 214 5568 213 4598 213 3596 213 4240 212 4244 212 3919 212 3859 211 6373 211 3142 210 5346 210 4872 209 3659 208 3267 207 2610 207 2984 207 3294 207 2755 207 6287 206 6244 205 5046 205 5066 204 3462 203 4923 203 5030 203 2810 203 2858 203 3275 201 5080 201 $33(1',; $ &,7< 3$,56 :+(5( 7+( 0(5*(5 ,6 35(68037,9(/< ,//(*$/ Appendix 13 Case 1:13-cv-01236-CKK Document 1 Filed 08/13/13 Page 56 of 56 Cited Document Complaints Undated- 1) 00/00/0000 -- US Airways Analysis of American Airlines Standalone Plan [draft] - 2) 00/00/0000 US Airways Group Inc. Annual Report 3) 00/00/0000 Quality Questions From PGBC 2000 4) 7 August 2000 US Airways Network Strategy Power Point Presentation 2006 5) RANPROD0036749 - 20 November 2006 US Ain/vays Project Green I 2007? 6) ATSLOT01717400- 26 October 2007 AirTran?Conference Call Transcript 2008 7) RANPROD0474961 11 August 2008 US Airways ive~Year Strategic Plan Financing lnitiat-ives - 2009 RANPROD0080697 10 September 2009 and BOSWAS Problems 9) RANPROD0526174 ~25 July 2009 FW: AMR Raises Bag Check Fees For Domestic Flights 10) RANPROD0513470 23 July 2009 FW: Randolph [draft] FAA Petition 11) - 1 June 2009 US Airways Strategic Plan and Financing initiatives 12) - 23 February 2009 Aviation Week Daily 2010 13 September 2010 - [Scott Kirby?President] GE Presentation?4 October 2010 7 September 2010 Need To Get You Guys For 10 Minutes Airways Advantage Pricing]. 15) 7 September 2010 US Airways Needs To Get You Guys For 10 Minutes 16) 9 August 2010 FW: E-mailing?w-Delta-Courts-New York? AMR-UAL 17) 18 June 2010 US Airways; Re: Swellblog/Swellba'r on Airlines 18) 28 April 2010 US Airways Earnings conference Call On 27 April 2000/4 PM - 19) - April 2010 US Airways Power Point Presentation 20) 23 February 2010 Airways At Thomson Reuters Travel and Leisure Summit New York on 23 February 2010/5:30 PM 21-) - 28 January 2010 2009 US Airways Earnings Conference Call on 28 January 2010/5:30 PM 2011 22) 28 December 2011 US Airways Projected Presentation Power Point 23) 20 December 2011 US Airways Project Presentation [19 December 2011] 24) 16 December 2011 - US Airways Project Presentation [16 December 2011] 25) - 15 December 2011 - US Airways T4 and Res Town Hall Recap 26) 16 November 2011 US Airways - FW: Meeting Follow-ups 27) 27 September 2011 American Airlines BOSDFW '28) .- 25 July 2011 us Airways Re: Phl?pit/fhht 29) 4 20 July'_2011 Head-"U0: American TakesAggressive stepsto Address Near?Term Challenges and Position the Company to Win? 30) 28 March 2011 US'Aim/ays AVerting-a Crisis: Lari-ding On' The _Hudson 31) 24 March 2011 - Us-Airvirays Hall . 32) 22 March 2011 us Airways Group'lncfat JP MorganAviatien, Transportation Defense Conference on 22 March 2011/2:25 PM 33) 22 March 2011 US Aways?Ref'JPM 2012 34) 4 12 December 2012 ?iAmeri-can Airlinesu?New American 4 35) 7 December 2012 American?AirIines Long-Term Network Plan" --. -. 36) 20 November 2012 use Airwaysw?rst Bag Change Transit Flights? - . . 37) us-AA?ci-D?00004805 4 8' November 2012 shared - 38) 15 October 2012 - American Airlines?Revenue Q'ljality, Overview - 39) us?AA-go1371933 4' 7 October 2012 4? us'Airways Earnings conference Call or) July 2006/1200 September 2012? Us AinNayse?AMRBQisiness Power Point] - 41) 23 September 2012 Analysis OfAmeriCan Airlines Standalone Plan - - - .- - 42) Mela?00397088 19 September 2012 American Airlines?immediate Revebue Dis-Synergies [Pricing Strategy] 43) MCK00010588 18 September 2012 McKinsey Company?Business Model Alignment Adjustment 44) 18 September 2012 - American Airlines?immediate Revenue Dis?Synergies Power Point; Alignment of Business Models 45) - 17 September 2012 US V3.1 .pptx [Advantage Pricing] 46) 7 September 2012 American Airlines?Re: Wednesday; Seed Contraction Pull Down Hubs At CLT or PHX 47) 30 August 2012 US Airways MBA Program Recruiting Final PPT July 2012 US Aimaystepublic Slots At Washington Reagan National Airport . 49) US-AA-00988282 23 July 2012 -- US Airways?Re: Chicago Tribune 50) 30 May 2012 American Airlines?The Bright American A Bright Future - 29 May 2012 American Airlines??The New American A Bright Future Plan 52) 28 April 2012 US Airways?FA Slides AFA May 2012 53) - 27 March 2012 US Ain/vays CFO Talks Merits of Consolidation 54) - 29 February 2012 US Airways Bag Fee Up?Grade 55) - 25 February 2012 US Airways Tetris: Bloomberg and Den Jones on 56) - 16 February 2012 American Airlines Virasb Vahidi EE Letter/Business Plan and Growth 57) 25 January 2012 Q4 2011 US Airways Earnings Conference Call: 25 January 2012/4:30 PM 58) - 4 January 2012 US Ainrvays DP Project Tetris Kickoff Power Point. 2013 59) - 1 May 2013 - US Fees F9 Distribution Changes 23 April 2013 American Airlines - The Street Airlines Needs To Be Saved From Government [Advantage Pricing] Do Not Print 62) 14 February 2013 - American Airlines??AMR Conference Call Transcript 63) 11 February 2013 US Airways Merchandising Products Comparison Power Point 64) - 15 February 2013 American 12.NYT Service Cuts May Follow Merger of Airlines 65) 1 February 2013 AMR Corporation; 31 January 2013 66) - 23 January 2013 US Airways Merger Travel Agent FAQ 10 January 2013 American Airlinestesponse To US Airways Merger Offer 68) January 2013 American Airlines-Domestic Slot Valuation Exercise 69) 9 January 2013 US Airways Operational Integration - 70) - 11 January 2013 American Airlines?DOA Valuation Analysis of American Airlines Standalone Plan Revenue Initiatives DRAFT Con?dential Subject to Non-Disciosure Agreement US AIRWAYS CONFJDENTIAL $1.2 Billion in Revenue Initiatives Are Core to AMR Plan - Four different categories of revenue benefits highlighted Detailed models were not provided to US Airways to validate change - only the output below and a 90 minute time period for questions Revenue Impact, . . I: Category Description SM jgint Business Fully implementingJBAs with and JAL $115 in GI Agreements Codeshare Reciprocal domestic codeshare with jetBlue fi $720 3 . an es: tim' ?3 Gauge and Regional auge5315 {g Pro uctim rovements to im rovein- tex erience ?3 Product ?3 Enhancements Source: American Airlines Business Plan 7- rmeivame ?aww?tinM5W? us KWAYS US AIRWAYS CONFIDENTIAL I Initiatives Do Not Address Deficiencies only a Merger Does - A new fleet, growth, product, and code-sharing don't address loss of market relevance in the Eastern US - underlying netwerk and its deficiencies remain unchanged in new business plan Confidential Subject to Non-Disclosure Agreement 19 5 Source: American Airlines Business Plan; YE 4cm Superser Domestic Passenger Revenue AIRWAYS US CONFEDENTIAL AME Modeling Are _Re_Venue Initiatives Independent and Additive - . AMR layered on $1.26 iri increased revenue initiatives- one initiative 'at a'time If Initiatives are not independent the revenue value could be overlapping and in conflict Con?dentiai Subject t0 Non-Disciosure Agreement Source: American Airlines Business Plan 4 ms RWAYS US AERWAYS CON FIDENTEAL I #1 - Joint Business Agreements - Sill-SM - AMR is forecasting in incremental revenue value fromloint Business Agreements ?We exp-Est to realize most of this improvement in 2011? - 7/21/2010 Earnings Call I - Unclear what benefits have been achieved or will be achieved No rn-odel was provided AMR also $85 in cost savings due to the JBA Unclear from what . with other JBA's also-snowing up in a zero sum environment may beno .incrernental gains . Joint B'u'sinless Agreements are in total-expected to contribute $475imilliori AMR Incrementelto the base code?share valueelriaady achieved - .- -- - Con?dential Subject to Non-Disclosure Agreement . most of the-valuefhas been attribUted to the relationship-With BA . Coeld BA really generated $500 105600 million in velar; year Code-shareSource: US Airways estimates of LHR revenue using publicaify available data 75 {1'5 11,! US AIRWAYS #1 - Joint Business Agreements - Structural Weakness Alliances Not Resolved In Stand-Alone Plan Versus Sta r/Sky Team - Large East coast gateways building a bridge to 98 communities that "are smaller to medium in sized and notaneffective part of the network today is a win for and_Ame_rican and will enhance prd?tability' Only 10 Destinatigns from served Eifijiish Airways . . 1 . using publicain available data 6 US AIRWAYS Con?dential - Subject to Non?Disclesure Agreement frd??iPHL 'Serve'dby'B'ri'tish Airways] . #2 - jetBlue Codeshare Estimate 7-.- USEstimate $10Zto $20 million . Value will be difficult to achieve and sustain .. . . . - JFK will have longer elapsed times for connections driven by different terminal locations and non banked flight schedule value could erode over time in non-overlapping marketsas jetblue expands American would be 1 of 17 jetBlue partners access to jetBlue seats maybe limited American and jetblue as competitors will not be able to coordinate pricing, revenue, or scheduiing Planning models cannot account for the FK factor" in accessing the value of the relationship Adjusted for size, American?s forecast is 45x larger than US Airways internal estimate of. its United relationship US Airways/ UnitedAirlines . American Airlines [jetBlue Con?dential -- Subject to Non-Disclosure Agreement Est. 2003 Est. 2012 incremental Value: I I incremental Value: Flights Per Day: 3,298 Flights Per Day: 98 Source: US Airways internal estimates of United cadeshare agreement, net of displacement; American Airlines estimate ofjetBlue cadeshare value from Business Plan Model; Flights per Day from Diio peakday July schedaie, flights exclude 86 overlap markets 7 US AI ILVUAYS US AIRWAYS #3 Gauge US Airways Methddologv- Future AMR Fleet Assignments - - - With $7.20 in revenue gauge changes are the most important AMR initiatives Few medal details were provided and Airways develbped a ?best guess? on the new fleet assignments to assess overall risks of achievement - . While there are multiple patential scenaries we Ic'onCIUded results would be similar 'ac'ross many . . . . . . g) AMR Narrow-Body Fleet Fatts - I - I US Assumption on Flying Assignment #1 120 Small st were removed - - - - . 120 Large R15 replaced the flying E: #2 With 63 Large RJs unaccounted for in 1 . 63. replaced by Large RJs #3 With 48 Nib-805 unaccounted for in 2 '48 NIB-805 upgauged to 737?8005- #4 With 6-7 7385 unaCCeunted for E7 7575 dawn-gauged to 737-8005 #5 I 757$ unaccelu?nteel for in'#4 19' f575 downgauged to A3215 #6 . 17 A321isreplace B767 I I Source: American Airlines Business Plan; US estimated equivalent aircraft based on EOYcounts 8 A1 U8 CONFEDENTJAL I I #3 Gauge US=Airways Methodology Calculation of Marginal/Growth RASM - Understanding what markets and capacity will enter the system at critical to I validating the model littie'information was provided - At a macro level more capacity via new markets; frequency growth or larger planes tend to dilute RASM Ma'rgih?l'R'ASMs' ere assumed to be added at leveis below the lower tier of flying today for AA RASM of I .I I I index - #1 Top Long-Haul Markets 100% 57% I I #1Top-50% Dom?s?tic- #2 All Other Long?Haul 80% 43% #2 Middle 25% Domestic #3 Added #3 Bottom 25% Domestic 10% worse than other #4 Added Flying At Source: US Airways estimates from AA reported yield and foadfactor data filed with U5 Donor 2011 9 .US AIRWAYS CONFIDENTIAL %of Con?dential Subiect to Non~Disclosure Agreement RASM "index ASMs ?190% "50 #3 Gauge -- Structural Network Weakness May" Undermine Modeling - Network planning'niodels were "created to ailow airline management :to managerthe .- compiexity of large flight schedules specifically to analyze the cascading network implications of a single flight schedule change Models work by looking at the ?quality of service an airline offers? relative to other airline and the true origin and destination of the passengers. The models considerthe thousands of flights offered all airlines around theworld . AMR uses its internal fiFS 'net'workrnodel this model forexample was-usedtgo Measure the thousands of new connections Created by a merger Of .US Airways'and'American. This model was not used to determine the implications of upgrading regional aircraft A manual model was created to determine the value of aircraft upgrades using historic I example-?5' Given the add-?33?? 9f hundreds ?larger regimal jets its unclearif historic changes on average in anyway represent what AMR intends to implement i - Con?dential Subject to Nonwnisclosure Agreement Source: American Airlines Business Pian us AIRWAYS CONFIDENTIAL us AA 0205 'i 3474 #3 Gange 9- AMRs Positive Changes -- Low Risk - American is making adjustments to its fleet to optimize aircraft deployments and. better match demand to capacity Changes consistent with industry practice Capacity neutral =1 Low risk Geare'derou?d replacing overSi'ze mainline jets and undersized regional jets Risk-"Prefile ._Downgauge Mainline to 3- Large Ubgauge to Larger Regional lets upgeygeto Larger Widebodies Con?dential Subject ta Non?Disclosure Agreement Source:_American Airlines Business Plan 11 US AIRWAYS CON US-AA-02053475 #3 Gauge But A larger R1 to Buffalo Wont Solve Structural Network Problem - AmeriCan'RASM trails United-in'the Buffalo Chicago market - Large planes will only widen the gap - Large Bis on average will help AMR but wont solve network structural issues Con?dential -- Subject to re Agr 5 Daily Flights 26 Daily Flights 19 Daily Flights Source: Dlio Mi July 2012 Peak Day Schedule Southwest, jetaiua and others also provide competition In live marketplace 12 US US AIRWAYS CONFIDENTIAL #3 Gauge AMRs Other Changes - High Risk-Capacity Growth - pian deviates from industry practice with a high assumed growth rate attributed with a need to maintain is share at current levels for ?relevance? More capacity, 20 percent by 2017 will be RASM dilute and industry destabilizing Risk Profile impact Downga'uge to Smaller Narrowbodies Domestic Narrowbody Growth international Na rrowbody Growth Con?dential Subject to Non-Disciasure Agreement international Widebody Growth Source: American Airlines Business Plan 13 US AIRWAYS #3 - New fleet mix in tetal will-lower .RASMS by approximately 4 percent By 2017;20% of capacity will be new flying Markets or Frequencies - Plan assumes aircraft options are exercised- We estimate 126 narrow-body and 28 Wide?body planes will be used for growth versus today . :3 ASMs Distribution %lncrease_ Comments Unchanged Flying 98.8 10.0% Up-g??g?ed nymg? 38.5 - 19% 21% . 94% New capacity will dilute RASM by6 - points 2&3. . . 107% Reduced capacity Will increase . 3 -. - . 7points .N?wFteqUenCies' 40.2 80%. 20 point reduction in capacity consistent with forecast AMR/industry performancein new markets Con?dential Subiect to Non-Disclosure Agreement Total._- 204.2 . 95.9% Withwraghtirf f. - Amendmentimpact-.- i . . - - ?95.0% SOUTEEJ American Airlines Business Plan 1 4 Ari US AIRWAYS #3 Airbus A3195 are a high unit cost airplane to compete inmost markets. AMR is inducting A3193 to ?fill gaps?- in their fleet plan Most airlines have considered the economics of the and are. choosing larger. 175-seat replacements DL 737-900, UA 737?900, WN 737-800, US A321 - US Airways operates all three version of the A320 Family the A319 is the least efficient with the highest Breakeven load factor US Airways has too many A3195 in its fleet today - Breakeven for Lip?gauging to larger gauge aircraft - 4' US Airways margins reflect the more efficient i=3 a 58 3 a is much lower than marginal RASM economics of larger gauge narrowbodies . . - incremental Breakeven Aircraft Trip Cost Marginal RASM A319 - - 2 a A320 $768 23% 5 A321 $1,864 3 27% - - A319 A320 A321 15 US Al IKWAYS US AIRWAYS CONFIDENTIAL #3 -- Growth Plan Will Reverse Industry Capacity Trends . - . . . The industry has rationalized capacity-since 2005, plan will disrupt that momentum - Growth may beheaded to bulk up against competition but a merger is a lower risk alternative . Other mayreact to AMRs plans with their own enhanced growth plans destabilizing industry a LegacyASMs320 Industry mergers and capacity discipline growth plan has potential 15 a . expand margins to disrupt the new dynamic - . - Industry l- i .- -. AMR CAGR: 4.2% 2 ??653 -- I I 1:2005 2606 21337 20138 "2609' 201a 2011 22012 i 2013 2014 i I 2015 2015 2013? 16 I US IKVVAYS US AIRWAYS CONFIDENTIAL - #4 - Product Enhancements - It is not clear Which specific preduct enhancements drive the aggregate revenUe increase No model was provided for these initiatives, unclear-if revenue is achievable or sustainable as others adopt andchangeproduct attributes Product enhancements maybe needed to maintain existing revenues and be justified in that manner Main Cab-in see Example We can determine that the change will spill off $400 in annual revenue by reducing narrowbody capacity 5% percent-We take no position on the economics benefits other than to expect that they will be main Con?dential Subject to Non?Disciosu re Agreement M080 B738 8757 Total EOY 2012 Aircraft 182 __1_95 so 457 Seats Removed 5 '10 7 Revenue Spill 120M 220M 60M 400M Annual-Departures 289K 214K 85K 588K Breakeven Revenue per Departure $420 $1020 $660 Source: American Airlines Business Plan 17 US AIRWAYS DENTEAL $670 TJ-S AMR Modeling: Domestic RASM Growth Achievability . . . i - industry load factors now average 83 percent leaving littleroom for incremental passengers Legacy Outloak: Increasing size ofplanes but not overall number of planes AMR Outlook: Decreasing size of plane's and in?reasihg the overall hUmber - RASM grOWth more difficult With high-load factors that ?eklst mum; and are further pressured by smaller planes 7175 replacing small RJs 737600 em order 737-900 On order Prior Year Load Factor .. - - .. Con?dential Subject to Non-Disclosure Agreement Over 80% - A321 replacing 8737; ml er 80% Average 103% i ?w orders from . SOUTHWESTW 737-700 to 737-800 Source: American Airlines Business Plan; A4A RASM Report; US Airways FPS system, YE June 2012 performance vs. YE June 2011 18 . US AIRWAYS Recent RASM Performance - industry RASM growth has outpaced nominal GDP, driven by significant capacity reductions AMR has lagged industry in both RASM and Capacity LOH RASM (CAG R) 5.5% 5.2% 3.0% Capacity (CAG R) Con?dentiai - Subject to Ron-Disclosure Agreement Nominal industry US AA Industry US AA GDP Source: 2005 - 2011 BEA, Company Financiais and MA 19 Us US AIRWAYS US-AA-02053483 ASM Forecast - - AMR is forecasting unprecedented industry and internal capacity growth, Which will impose a strong negative impact to their RASM US is assuming a return to modest capacity growth for boith industry and US, in line with Reai GDP expectations ASM Forecast- 2012?2017 CAGR I . 4.2% 4.2% Confidential - Subject to Ncnw?isclosure Agreement Real GDP Industry AA Industry US AMR Forecast US Forecast Source: PHI. Fed, AME 8PM and'tis Business Finn 2O A ?5 {1-8 US CONFIDENTIAL RASM Forecast - However, both US and AMR are forecasting similar core RASM growth-rates Forecast 2012 4 2017, Stage?"Adjusted CAGR 2.5% 4.2% . . OJ Revenueincrease(CAGR) 5.1% 3.7% 6.2% RASMInckeagemAGR) 2.5% 2.7% Fuei?hd 2 Stage Wright Length . Stage Length $2 8 a. 21 U8 AERWAYS - . US Airways Assessment of Revenue Initiatives - - - The down-grading of mainline flights to large regional jets inherently has the highest upside to AMR replacement of small with new larger also wiil likely have value but much less than a downgrade Offsetting RJ RASM gains are growth ASMs. Grothh ASMS willcome in at a marginal RASM rate and account for 20 percent of capacity by 2017 . - AMR's growth plan appears designed to maintain its relative share of the market over the long term in the face of much larger competitors like United and Delta - - Product and JBA initiatives maybe necessary to maintain current RASMS butmay not result in RASM improvements Domestic code-share will enhance but a fraction of the AMR estimate based on US Airways experience - - - - - - - - The use of smaile'r planes (A319) on average will drive up'unit costs .- appears inconsistent with industry trends, fueis of others in hubs,.and makes RASM grewth' harder to achieve due to high loadfactors . reported rate of 1.6 percent appears conservative until str'ipning out stage length, Wright Amendment and Fuel factors in-the context of capacity growth. Real RASMs wiil need to increase by 2.7 percent per year bf a stage length increaselof 1.6 percent Con?dential Subject to Non-Disclosure Agreement Source:American Airlines Business Plan 22 U8 AIRWAYS I US AIRWAYS GROUP INC (LCC) . Annuai report pursuant to section 13 and 15(d) Fited on 02/22/2012 Fiied Peried 12/31/2011 aw:?wip? k5 a} QEUTERS CONFIDENTIAL Table at" Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K {Mark One) ?21 ANNUAL REPORT TO SECTIGN 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Far the ?scal year aided December 31, 2011 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 1581) OF THE SECURITIES EXCHANGE ACT OF 1934 Far the transition period from to US Alrways Gmup, Inc. (Exec! name of registrant as Speci?ed in charter) Commission FiIe? No, Mid-44) Delaware 544194634 (Stare or other Jurisdiction of (IR-S Employer Incorporal?ion 0r Organizafionj . - Identi?cation No.) - 111 West Rin Salado Parkway, Tempe, Arizana 85281 {Address ofprz?nczpal executive o?ices, including zip code) (48(3) 693a?80? (Registrant's telephone number, including area code) Securities registered pursuant to Sectinn 1261) of the Act: Title of Each Class Name of Egeh Engage on Which Reg?stered Common Stock, $0.01 par value New York Stock Exchange I Securities registered pursuant to Section 12(g) of the Act: None US Alrways, Inc. {Exact name ofrcg?stran! as speci?ed in its charter) (Commission Fiie No. 1?8442) Delaware (Smte or othw? Jurisdiction of Employer Incowomtiorz 0! Organization) Identi?cation No.) 111 was: Rio Salado Parkway, Tempe, Arizona 55281 (Address of principal executive o?ices, including zip code} (488) 693-0800 (Registrantiv telephone number, including area cede) Securities registered pursuant in Section 12(1)) of the Act: None Securities registered pursuant to Sectian 12(g) of the Act: None Indicate by check mark ?fths registrant is a wen?known seasoned issuar, as de?ned by Rult: 405 ofthe Securities Act. US Airways Grcup, Inc. - Yes 21 No US Airways, Inc. Yes El No 3 indicate by check mark if the registrant is not required to ?ie reports pursuant t9 Section ?13 or Section 15(d) of the Act CONFIDENTIAL US Airways Group, Inc. Yes No US Airways, Inc. Yes [3 No El indicate by check mark whether each registrant: (2) has ?led all reports required to be ?led by Section [3 or 15(d} of the Securities Exchange Act of 2934 during the preceding 12 months for such shorter period that the registrant was required to ?le such reports), and has been subject to such ?ling requirements for the past 90 days. Yes No - Indicate by check mark whether each registrant has submitted electronically and posted on its corporate website, if any. every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation (?232.495 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such ?les). Yes EZI No iridicate by check mark if disclosure of delinquent ?lers pursuant to item 405 of Regulation 5-3: is not contained herein, and will not be contained, to the zest of aegistruant's knowledge, in de?nitive proxy or infomation statements incorporated by reference in Part Ill of this Form or any amendment to this cm: 1 -K. Indicate by check marl; whether the registrant is is. large accelerdted ?ler, an accelerated ?ler, a nomaccelerated ?ler, or a smaller reporting company. See the de?nitions of "large accelerated ?ler,? "accelerated ?ler" and "smaller reporting company" in Rule le?Z of the Exchange Act. US Airways Group, inc. Large accelerated ?ler El Accelerated ?ler Non-accelerated filer E3 Smaller reporting company El US Airways, inc. Large accelerated ?ler l3 Accelerated ?ler Cl Nan-accelerated ?ler l2} Smaller reporting company E3 Indicate by check mark whether the registrant is a shell company (as de?ned in Rule {Eb?2 of the Exchange Act). US Always Group, Inc. Yes El No US Airways. lnc. Yes Cl No The aggregate market value of common stock held by nonreffiliates of US Airways Group. Inc. es of June 30. 30M was approximately $1.44 billion. Indicate by check mark whether the registrant has ?led all documents and reports required to be ?led by Section ll. 13 or l5(d) of the Securities Exchange Act of ?934 subsequent to the distribution of securities under a plan con?rmed by a court. US Airways Group, inc. Yes No El US Airways; Inc. Yes No As of February 37, 2012,1?herc were 162,136,198 shores ofUS Airways Group, inc. common stock outstanding. As efFobmazy l7, 20m, US Airways, Inc. had 1,000 shares of common stock outstanding, all of which were held by US Airways Group. Inc. DOCUMENTS INCORPORATED BY REFERENCE Portions of the proxy statement related to US Airways Group, 111ch 2612 Annual Meeting of Stockholders, which proxy statement be ?led under the Securities Exchange Act of 1934 within 120 days of the end of US Airways Group. Inc's ?scal year ended December 31, 20! l, are incorporated by reference into Part oftliis Annual Report on Form CONFIDENTIAL Isak: US Airways Group, Inc. US Airways, Inc. Form ill?K Year Ended December 31, 2011 Table of Contents Page PART 1 item Business 5 item 1A. Risk Factors I6 Item 13. Unresubzed Staff Comments - 28 Item 2. 29 [mm 3. Legal Procggdiaa, 3} Item 4. Mine Safctv Discinsums 31 mm Item 5. Market far US Airwavs Groug?s Common Eq aity, Related Stackholder Matters and Issuer Purchasws of Equitv Securities 32 Item 6. Selected Financial Data 34 38 73 74 item 3B. gg?unwlidated Finangial and Suggkementarv Data 0f US Airwavs, Eng. 109 item 9, Chang es in and Elisa?; egments with Acwumantg 9n Awgountigg and Financial Disciosurc 140 Item 2A, Emgedn?jg - 140 Item 93. 0mg? 145 . 35.131311 Ham Direcmrs? Executive Officers and .u crate Guvernance 146 item 1.1. Executive Comgensation 146 ?cm t2. Securitv Owners?? of Certain Bene?cia! Owners and Managemenj?g?g?atw Stockhal er 146 13. Certain Rela?onshi as and Reiated Transacti as. and Director bade ende?lce E46 item 14. Princiga! Accountant Fees and Services I 146 mm Item 35. Exhibits and Financial Stat meat Schaduies 147 SEGNATURES 148 Exhibit 21.1 Exhibit 23.1 Exhib 31.1 Exhib 31.2 Exhib {31.3 Exhibit 31.4 Exhibit 32.} Exhibit 32.2 DOCUMENT Eli??0! SCI-IRMA DOCUMENT EX-mt CALCULATION LINKBASE DOCUMENT [EX-ml LABELS LINKBASE 13mm PRE LINKRASE WEE-MEET DEFINITIGN UN KBASE DOCUMENT 2 CONFIDENTIAL Table of glontents This combined Annual Report on Form is ?led by US Airways Gmup, Inc. Airways Group") its wholly owned snbsidiary US Airways, Inc. Airways"). References in this Annual Report on Form to "our" and the "Company" refer to US Airways Group and its consolidated subsidiaries. Note Concerning Forward-Looking Statements Certain of the statements contained in this report should be considered "forward~iooking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identi?ed by words such as "may," "will," "expect," "intend," "anticipate," "believe," "estimate," ?plan,? "project," ?could,? ?should,? "would." "continue" and similar terms used in connection with statements regarding, among others, our outlook, expected fuel costs, the revenue and pricing environment, and our expected ?nancial performance and liquidity posmon. These statements include, but are not limited to, statements about future ?nancial and operating results, our plans, objectives, expectations and intentions and other statements that are not historical facts. These statements are based upon the current beliefs and expectations of management and are subject to Significant risks and uncertainties than could cause our actual resulis and ?nancial position to differ materially from these statements. These risks and uncertainties include, but are not limited to, those described below under Part I, Item 11%, ?Risk Factors" and the following: the impact of signi?cant operating losses in the fume: downturns in economic conditions and their impact on passenger demand, booking practices and related revenues; the impact of the price and availability of fuel and signi?cant disruptions in the supply of aircraft fuel; increased costs of ?nancing, a reduction in the availabiliry of ?nancing and fluctuations in interest rates; our high level of ?xed obligations and our ability to fund general corporate requirements, obtain additional financing and respond to compentive developments; any failure to comply with the liquidity covenants contained in our ?nancing arrangements; - provisions in our credit card processing and other commercial agreements that may affect our liquidity; 0 the impact of union disputes, employee strikes and other labor~related disruptions; our inability ?0 maintain labor costs at competitive levels: interruptions or disnmtioos in Service at one or more of our hub airpons or our focus city; 0 regulatory changes affecting the allocation of slots; our reliance on thirdwpany regional operators or third-party service providers; our reliance on and costs, rights and ?mctionality of thirdpr distribution channels, including those provided by global distribution systems, conventional travel agenis and online travel agents; - changes in government regulation; the impact of changes to our business model; - competitive practices in the industry, including the impact of industry consolidation; the loss of key personnel or our ability to attract and retain quali?ed personnel; I the impact of conflicts overseas or terrorist attacks, and the impact of ongoing security concerns; - ow ability lo operate and grow our route network; CONFIDENTIAL Table of Contents PART II Item Market for Us Airways Group's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Stock Exchange Listing Our common stock trades on the NYSE meter the symbol As of February 17, the closing price of our common stock on the NYSE was $8.90. As of February 17, ZOEZ, there were 15,656 holders of record of our common stock. Market Prices of Common Stock The following table sets forth. for the periods indicated; the high and low sale prices of our common stuck on the NYSE: Year Ended December 31 Period Hi 1: Low 8.1? 4.47 US Airways Group has not declared or paid cash or other dividends on its common stock since 1990 and currently does not intend to do so. Under the provisions of certain?debt agreements, including our secured loans, our ability to pay dividends on or repurchase our common stock is restricted. Any ?xture determination to pay cash dividends will be at the discretion of our board of directors, subject to applicable limitations under Delaware law, and will depend upon our results of operations, ?nancial condition, contractual restrictions and other feesors deemed relevant by our board of directors. Foreign Ownership Restrictions Under current federal law, non-US. citizens cannot own or comml more than 25% of the outstanding voting securities of a domestic 'air carrier. We believe that we were 111 compliance with this smote during the time period covered by this report. Stock Performance Graph The following :9ka pedomance graph and related infonnation shall not be damned "soliciting materiai? or with the Securities and Exchange Commission, nor shall such in??natz?on be incorporated by reference into arty ?gure ?lings under the Securizies Act of 1933 or the Exchange Act. eacf; as amended, except to the extent that we specgficalb: incorpomte it by reference into such??ng. The following stock perfomanee graph compares our cumulative total shareholder return on an annual bmis on our common stock with the cumulative total return on the Standard and Poor's 500 Sfock Index and the AMEX Airline index from December 31, 2006 ghrough December 31. 201 l. The comparison assumes $l90 was invested on December 31, 2905 in US Airways Group common stock and in each of the foregoing inclines and assumes reinvestment of digdends. The stock performance shown on the graph below represents historical stock performance and is not necessarily indicative of future stock price pe ormance. 32 CONFIDENTIAL Igikx Casey, Don From: Butler, Jim Sent: I Friday, October 12, 2012 7:39 PM To: Casey, Don; Jiecie, Tom Cc: Long, Scott . Subject: Quality questions from PGBC Guys, We also received questions from the PGBC taclatr or: our UCC presentation from a week ago. The folio-wing pertain to Quality, Unfartunataly, these are on the same timaframe as the deck early next weeklikely. 2. Revenue Quality (p.17 23) . a. Please walk through the underlying assumptians in the Revenue Quality analysis that was presented at the UCC meeting. Please also preside the models used in_'ths revenue quality analysis. b, On page 17, how wauld this analysis look different for a route where one of US Airways? major hubs was invalved? If this analysis is avaiiabte, please provide. . (this is iust the pricing structures. Assume lust show the structures align in a US hub with the acceptat?on of DL). cl Or: page 22, please explain the rationale 0f {38 Airways having a greater yield deficit post-merger than it currently has; Would US Airways routes not be able to maintain some of the current yield profile based on certain niche market connections? (Assume this is actually confusing leg with 0&9) d. On page 22, please explain how the increase in the yiela is calculated in the_ recapture analysis? What are beinggmads to the average yisid deficit post-merger? - - (This should be covered in the work Scott is daihg to break dawn the analysis) a. On page 23, please walk threw-git how this page samparas to the 2015 mandated synergies as presented on page 15. (Candica?s team) On page 23, what parties of the estimated $100mm syhergy for corporate travel shift is driven by the US Airways shuttle? (Dsgroot - i will assign) Jim 33m ?attsr Mahagisa mamas? alarmist} a harasrmahss ?rat: as? as? 3.1.43 has: M: as? as: @334: AmericanAiriinas? 4333 {smart {farts-s Bias) hm $92? Warts, mass (JM CONFIDENTIAL AAKSR-01795529 Casey, 0cm Pram: Casey, Don - ?x Sent: Friday, October 12, 2012 10:50 AM To: . Butier, Jim Long, Scott; Sim, Lori Cc: "fom.Jiede@aa.com; Raja, Vasu (Vasu.Raja@aa.com) Subject: Work fist items Revenue Synergy?s 1. Update AA analysis to in'ciucie: (Tab 2, pg 8) a. Higher average fare is recapture b. Share loss to other . . 2. Update analysis of bottom table Tab 2 pg 7 based .on 2812 operated schedules . 3. Update analysis for prasm (Tab 2, 1&20) 4. Assess AS cudeshare risk contractuai risks and other risks AA Business Fian review 1. Refute US claim that any be priced at the margin (Tab 7 843) a? Run {bur own regressionWeuid be great if we could demonstrate that this was not true for US. . 2. 18 benefit (Tab 7 pg 10) . - a. Break down components Ariantic, Pacific, Domestic, cost, corporate - b. identify what actions are yet t9 be'fuliy re?ected in base year -- sdrne be annuaiization 3. Change of gauge ("fab 'Demonstrate that our modei is not ?overiy simpiistic? b. Refute the 73% marginal prasm 4. Product Features (Tab 7' pg 15) a. MCE economics ?/?wsm 1. CLT assessment (Extra handout tab 4) a. We have a iist from before on (1T 2. STL Case study (Extra handaut tab 4 pg 10) ~very iow priority a? Update tabie for STL and at the time we baugm departures about 500 Don mar:- i Vim i?rrirairi?zn?i: Revenue 3 American Airiines? i 81K9613483 i CONFIDENTIAL Casey, Don From: Butier, Jim Sent: Friday, October 12: 2012 7:23 PM i To: Casey; Don; Raja, Vasu; Jiede, Tom Cc: Sim, Lori; Quayle, Patrick; Long, Scott Subject: 2012 10 12 Workpian v07.xisx Attachments: 203.2 10 12 Workplan v07.xisx Gaye Here is the latest document on the workplan. it has changed a bit as MCK is verifying the revenue in the US model to see if it was eppiied correctly and then we will dig into any revenue related differences. have split up the revenue related items across my team as foliows: Scott Quality - Lori Unit Revenue PRESM, 18 Patrick 4 NetWork, fleet, corporate reiatecl items Giver: a new UCC adviser meeting scheduled for Thursday, we need to prioritize section 2 in the attached (Quality and PRESM). Wei/teed a final deck draft by mesday COB. Scott is going to qork oi: Quality this Weekenjd a no we wili get together Monday morning. Tom, bewill reach out to you on a fewpieces but we shoeid be able to complete Monday. i am more concerned about legal buyoff. "form, it you could please own two items. - Articulate why LCC domestic growth is unattractive relative to the domestic average Update head to head nonstop fare comparison with 2012 scheduies and data. We pie-n to meet a few times on Monday as this comes together. Thanks, Jim CONFIDENTIAL CONFIDENTIAL We wamm?wirks? Oarw?dam dab an?;er Ear US pe?a?in We maxim: for imam! warm mama (Rams bah?: ramming sessions with US 1 mm on us business mac or: Hominy, 220m) (Net-alt merfmokldator Minding qualmmn ?mm a) Chet): that revenue in ?heir pian mm; gravidad assump?ans (m7, elm Chetk that presentation mtle match reve DUE in their plan lmes?gm WASM bme?: {penal?i (mm regressbn, leader regression, check if i: appnes Entema?on?iv) Ar?cuim ?$955 of mmwt?wmss? with their 1% af Emmi: Review and invaszigatz Ci?? and PHX daims Articulate why their damask is unamm reiatiw ta don-1,5513: average Show why win net you a! tndustr] PRASM without an? inveshvent Show cap ex trend \rs. peas kc suppo? about Shaw :3?;th impact of new (othaa?iamte) h} GASM drivm Qi?que muan Fleet PM Check that ?mart: plan is semis:an with Elm alan (Sneak impaet tr.? large it}; D?vu' ?amed pmdm: {warrant {re?ned to above) manned dub: and facility imam?me {related tn above-7 {Guaihme rankings and perception} 2} 91an {can 0mm! chad anus their ?an Oui? approach a! that us mum pmadgmmem 3 mar nigh-sis and {abut-up [draft by Tuesday 16 0a) Oman swam: qualitative mryino a) We synergies I mm mode! may wrist/um Re?ne synergy band-up page Ra?? our attaivsisto Include higher fin: to recapture Refine aur anatsz far share to ma. madam head-wheat! nonstap tum parlmn 26.7.2 Schwartz; and day: h?ow 1.233 in :hc future vs. :51: pan (industry waiving)? - buy-away swan; may Margin Geve'nmemvsindmm US Wa?-v Con?nenta! v: aur 19mins Exyma?on m? :2me rates by Case (03. Unit RWUR pmmium fmp?oa?ans justification {when use 33 PRASM, shew history. min as ?mdust-ry mimic) Ream? $335356: w?rth PRASM spin ou? cm: Uh Mark vauf? dc?ifu'lerwert DL or [33! link 1% ovum Shaw what AA did Show speci?c nac?m am am 5086:1059 Shamholder Mums on past memes in Labor ?ne-me summaw on what you haw: to be?ew Ear US 61 ?synergies Back up on SW Arbi?tmuv data? ti 0'19 Time Cm Chen}: ?nancial adviser fees Ensure than i; in for staack petcwtagc {avg age cf AK w?thout iF?) ?mg: 3 Wm our mud-115m (rend snowmen-(Men) than}! mfm!m handing quorum a] Wm: an mkahoideum murmur 1m rm shows from US decks 5m mkeholdem I adv-19cm b) Mating mm e} um maria aim-I oiharOl'! edit! {mnem? (I) {rm mm mm marshal "gum ants e) Rex-an mm! Emmy-184nm amak dawn remaining 115 mm campanenulAtL Pa:l Dam, Cost. Carp! idenkf?; actionsye! to In re?amd in Bass year (annamm?om ?Codeshare Shaw v3. ASM an as bu: trensv?mIRnbin) MW Shawn Candie Candis: Aguilar Aguiim Aguflw 11m Qusgiz? - Irvin 3 Marks Marti: W3 Rm 5 Ma?a: gm Me Garza: Izzth 1c {win V?gu'dar Aguilar in: Was Its! aim: Jim aim: Tun Bf?onc ?m Ba?dmmne at?rst a Jim 3 Jim [5 n/a wwma . Ra?-ah? Mat 5 Wua?mn 30mm Mex - Wahoa 5 Woman Mai? 8332M MIR - A Mars - A Alters NICK 5 Warm MEX A Aka?!? Mex - Ehanetein mx- Rded Mt! item: Md v'T Home r-fa n/a' Rethink} MLK - Hume Wuhan . whim: - 3 Wm? - medal Ried? MCK Riedel Md; - 1) Emma when A 5 Waite": Ha?de MW. MW Mex. aggregate: IS Wtiton n19 m. Enema; MEK- NW McK~AAher9 Oct Mon 150d Man 15%: Tue 16 0d Ina 16 MatMon?cct Mars 150a Mon 15062 Man 150:: Man 1306! man Mm: 150d qulSGc! Tuelsd? Man 1506Oct Mm: 150Oct M651 15 0c! M033 15 Oct 'Fw 260:! Mm! 15 Ga Wed 9d. Wed 1'7 01.12 Wed 1? Oct Wed 17 G11 Wars 27 06WMHM Wad nan Wad 130:: Wed 17 0d Wad 1? Oct Wed 17061 We& 17 Wed 17 Oct Wed 1706?: TUE 15 Tue :6 {Jet Tue 01010t: 75918061 Thu 0c: The"3163:520 13 Oct Thu 15 Ha:lraukw_ 95mm. transmiamic {18$ gap analysis? Se?l an: far M355ch PBX Mesa aimo? Nehvwk plan assumes average; new service ta markeis, beam up with demand: adjust 5m Review out unaiwis beset! on us feedback?aw Read other ?eck U5 providtd and mums-pom: i) NICE (Cade impact, value proposition} 1) Mama-rm t: law) in) Exvs peers] indus?try?kend twat: truf?e [mm-h mm"; m) mum aside it!? {Mum um ow. swArn ROU, bx in?ame. W) What?. Asses AS w?esbam risk Re?ne US Radian}: an AA Man Marginai WM argument Coda-.st vs, 0A to ms mode! summaty lime: we: we it) Jim 3 Jim Nathan 1101 n/a Jim 3 McK>SWa?ou n1; MCvaSEansieln mac-.17 01;! Mort 25 Tue 16 Get Revenue Quality Gverview US employs a "pricing program? in which it offers flow itineraries at a discount to the local (non?stop) carrier, particularly close to departure I The program results in both benefits to US as well as potential threats: - Allows US to drive a disproportionate share of high-yielding flow traffic in 0&Ds in which a legacy non?stop carrier operates - US depends on this flow traffic to fili plane-s into and out of its hubs, which are located in smaller iocai markets than typical legacy carriers - in response, legacy carriers have historically imposed the same flow pricing strategy in US nonetop markets, pulling local traffic off of US non-stops Today, only Delta uses this pricing strategy in US non-stop 08:05 I The program is net positive for US today, despite the reactionary pricing by Delta, because the value of the traffic taken off of large non?stop markets is more valuable than the traf?c lost in smaller non~stop markets I The program would have to be eliminated in a merger with American, as American?s iarge nonstop markets would now be susceptible to reactionary pricing from Delta and United (2 American nirlines Revenue Quality - Valuation I To value the impact of the pricing program on the merged carrier, we compared yields for US flow traffic in common 0&Ds, where UA and/or DL operate nonastop US flow yields in these 0&05 are actually 3% higher than local yieids - Typically, among iegacy carriers, flow yields are lower on average than the local carrier if US eliminates its program, its flow yields will fail in?line with typical legacy carrier flow yields ?This reduction inflow yield represents a value of roughly in common with Delta and United, where Di. and UA are the non~stop carrier I To measure the net impact of the program, we added back the vaiue of US non?stops no longer being impacted by Dt?s reactionary pricing practices if US abandoned it$ pricing program, 0L would no longer price as it does today in US non~stops ?{he value of the removal of Deita?s iower flow fares in US nonwstop markets is worth roughly I 1' Therefore, the net impact of program pricing is vaiued at roughly American Airlines CONFIDENTIAL Revenue Queiity that revenues wouici increase ifthe program were eiimineted is ?awed - We are only removing the revenue impact of 05?s pricing program reiative to UA and Di. wTherefore, we are not reducing 85?s revenues associated with its program pricing in AA non-step markets, as it is assumed we wouici assimilate that revenue A final important resuit of the eiimination of program pricing is the inherent impact on traf?c voiumes - As mentioned previousiy, US depends on its pricing program to drive fiow traffic: over its hubs -- We did not vaiue the resuitant impact of traffic, but it is safe to assume that traffic mix wouic? begin to iook more iike traditionei iegacy carriers, ratherthan its current mix today which is heavily weighted toward fiow traffic: II US has argued that eiiminating the pricing program might be positive for the merged carrier; with no anaiyticai basis for this argument 1 "Se, even if one accepts the AA premise, the anaiysis should show that eliminating the pregram wouiri be a net pesitive to New American? ,k?arnericem ?iriines' CONFIDENTIAL US Airways Network Strategy US CONFIDENTIAL 1 The US Domestic Industry is Mature 5 - Domestic rQVenue has been at or below 2000 levels - Legacy carriers are retrenching to profitable hubs, expanding abroad and consoiidating Domestic Revenue and ASM Trends {indexed to 2090, 2mm: Revenue? a: lnt?l Revenue and ASM Trends {lndexedto 2900.2090=100) Revenue am :1 v'z 24.39;.? [mum raw; .24 Aux mum 2 us AIRWAYS Domestic Market Share? A New Post- Consolidation Dynamic - US unique share position coiors decisions we make Domestic Market Share Domestic Market Share Post?Consolidation {oymvenue?F?/O?) {by ramnuaaFYOIJ} .i gm? .: US AIRWAYS US Airways is WeElPositioned in The East U- - - - - Maintaining East Coast relevance wilt be key i to profitability and mergers - - I Mar-ke-tSh-are Ranking by Regi??n is?! I. g: 4, US AIRWAYS CONFIDENTEAL Non-core Operations Perform Poorly FAG Operating Margin 2006 YTD 2010 a . 15? DCA 10"? 7 CLT 5% I- . System . PHL PH): Non Core Manama opamnons I '5 -. - - 5 Su?enngmore . I . 2006 206? 2008 2009 YTD 201 0 V15 wsormm?x Swim." US AERWAYS CONFIDENTIAL Core .Cities? Produce Best Financials - 98% of Q4 2010 capacity is in the four core markem - Represents cities we can defend by offering comprehensive to customers {20:11mG a 2:96 3 me ma max: at ENDS-AG Us AIRWAYS 9 Core CitieslShuttle: Stats and Outiook Capacity zuwmc Market Dniiy Growth Pro?t Share Depis? 2006-20?) Forecast 005005! Mediocre financiai #1 453 8% $43m results Stan financiai #1 617 34% 3338"] result: Mediocre financial #2 261 resuus Siren financial #1 197 3597?,? result: 4? High profile business #1 94 $1 markets ?3 - .- x-wu - 5mm .r m; AW-N i-wAERWAYS- Non Core Cities: Stats and Outlook I Capacity 2010FAC a at {h Shfare 03:11:" Outioak . Stableand 'ciqse to 35 (9mg break even 48 (100% $0.0m Reduced- a Waiting on ?nal #3 180 (26 A) $397?) Randolph decision. - Jet Blue arid Southwe'st #3 95 (35 in fight to bonirol market mm- new.? New)? Mn mgyzaX-m ?wk-th us AIRWAYS CONFIDENTEAL Performance By Region Positive YTD Share of Capacity YTD 2010 Group Growth VABSO . FAC ASMS Pro?t Pro?t Ou?ook PHX :0 Hawaii generated 2% i 16% 55(057??) $40m in nelwark I can?ribution Core leisure component 10% $304111 $2371 ofEastCoaeraf?c Recovery from 2009 8% 18% $68111 H1N1epidem5cc0mplele Conlinued good 5% $10211 islands Growth Constraine? by 15% 39% $255111 $103111 avairability of iong-hau! aircrafl! Mature market my wen-Aw am pm (in 23:4 9 - US AIRWAYS CONFIDENTIAL Recent Internatienai Growth Has Not Altered Our Structural Differences US Airways gateways will not support international ?ying at the lave! of oth_er_._carrie_rs_ . This structurai difference kmpacts our profitability, the perception of the US Airways brand, product and attractiveness as a merger partner International ASMs as 0? Total System I 1 US Airways ASMS Other Legacy Carriers - - -FY2019 .. . FY 2010 I 10 Sana-FAIRWAYS CONFIDENTIAL Network Changes Have Reduced 6.5% Over 4 Years Reailocation of capacity has aHowed US to add new markets to core cities 55,000 1 (1,753) 3.1% 2.5% a: zoos M's uunnuan am: Mat Exits New Markm schedule Re auctions Day Depm a summons El Gem-3m triernemng saga-g imam: a 11mm?: 43;. US AIRWAYS CONFIDENTIAL Transatlantic Margins Have-Rebound?df - Expansion focused on building schedule depth via CLT .- expansion in 2010 and 2011 FAG Operating Margin v-mzmo Phiiadelphia W. Philadeiphla - Sto'ckhoim 200? New S?hrice Philadeiphia - Athens P?iladelphia Brussels Philadelphia - Zurich 2068 New Service Philadeiphia Heathrow mo '7Dr'90u .. . 547397: 2009 New Service Charlotte Paris Philadelphia Osio Phiiadelphia Milan Philadetpma a Birmingham Ph?adelphia TeltAviv Cha riotte - Rome Charip?e ?_Dut_)lin Charlotte Madrid 12 12 US AIRWAYS CONFIDENTIAL Global Opportunities Sironger prom margins generated from iniernalicnai operas?rons Raine 10 767's in 28131?; and {a?iace by 6 A3305 - net [Eduction in 2 ?0556 UMKES -767?s currenny average 21 yeam old and be 24 years in 2013:?: when retired ?Two {ewer pianes would resu? in a reduction can iniema?ma? service Rekain 10 7675 until 201?, no change to ABM-2005 deiiveries vNeI gmw?h of 8 Wide~hudy planes -Ailemal;ve reduces cap ex Spendmg for mean and snows i0: grown: weed to consude: maimenanoe and interior issues given age or planes oomer options in 2014 and beyond exisi US AIRWAYS CONFIDENTEAL StarAHianceimpact Percent of Passengers Connecting Beyond the Hub . V. w, i jam. . us ?ies to a Star Alliance hubs - 50% of all 2010 ASMs ?own to Europe touch one of the above hubs US is not part of the newly formed joint venture, nor do we have anti-trust immunity Sam imam/soar Wm ?m arr-sum 7w mussels andeshare starred April 20 14 us AERWAYS CONFIDENTIAL US-DOJ-00099327 - . Bi? Southwest In Philadeiphsa and Phoenix 5? - Unciear what Southwest's overaii strategy is in Phiiadelphia going forward PHL is one of Southwest?s most unprofitable hubs Southwest FAC Oparallng Margin WN Peak Day Depanures By Hub 4009 1.5 US AIRWAYS CONFIDENTIAL increased Competition is Coming Upcoming industry capacity changes are estimated to impact US Airways by $73m in 2011 Competitive lncursion in US Airways markets in 2009 and 2010 was relatively low while 2011 will be relatively high A . nnua Acilons Revenue Jmpacr t?lue increased from 'lx daily to up to daily service jelBlue entering markelwith 7x daily $(22m) service starting in Nov Southwestenlered in June and has $(35m) sinceincreased lo 8x daily service WN adding service from PHX to 5 $(11m) cities? including and MSP - $(73m) ,?wm US AFRWAYS US Airways? ?Specialty? Aircraft - Specialty aircraft provide'unique benefits to the network stage Length Aimrah Bane?ts (WEB) Saats Low Trip cheaper ihan CRJ 185 37 50 at 200 mite stage) Jets prowde advantage ever other iegacy 438 70 - 86 carriers (28% cheaper per trip than A319 mile stage) 16% cheaper than A319 423 99 aircraft capable for Hawaii and 1 (13.141 176 -- Small European destinations 190 Only true intercontinental! aircraft 3396 204293 17 17 US AIRWAYS CONFIDENTEAL US Airways? ?Core? Aircraft - - Core airc'raft'are the batkbonet'of me airlirte, representing 76% of the combined ?eet stage Length Aircraft Bene?ts! lssuas (was) . - Seats - More expensive on a per trip basis than 1346 '50 50 seat turboprop - n9 Being replaced by A320 family aircraft 651 126?144 Low capacity resutts in high CASM: 750 3.. 1'24 11%higher than IheA320- Increaseto80~100aircraftby 2015 1,128 .150 tdeat aircraft for tong-ham 1:324 183 - transcontinental ?ying . In? 18 US AIRWAYS CONFIDENTIAL Going Forward - Opportunities Optimization of fleet types will need to drive increased pro?tability Deliveriesr retirements, RJ and Turboprop Mix US has RJ Scupe advantage versus competitors Consider new hub schedule structures for more connectivity, higher aircraft higher profits - Reduce lowesi margin ?ying in fund new opportunities Complete Randolph or another transaction to manage LGA Consider non European growth oplions -- dictates a siower more cautious approach No new intercontinental aircrait until 2013i2014 Take actions that prefect and enhance the value 0! care east coas? assets - Possible growth in smaller east coast and mid west markets from CLT. PHL and BSA 19 US AIRWAYS CONFIDENTIAL Gaing FomardI-COnc?rns .. USAirways shrinking is_a key :0 Jet Btue growth in_coining years creates a lot a! potential issues if we don't shrink Has not done wail and no! expecisd to in the near futur? Hub needed for nation wide route hemork but may not be needed_ after a meigar . i . Air Tran merger unce?ainty - inniea? what they wilt do to expand In Chario?e but their willingness to lose money in - PHL short-ham operations is truuhiing - . Unciear how United?s new management wi? Work with US in the tuture - La Guardia while better continues to lose money . Assehs have more vatuc today than we agreed to terms with DL Need a new value exchange if possible 20 20 US AIRWAYS CONFIDENTSAL ma Wm WM. mam? mem Wimmv??: AI RWAYS US AIRWAYS CONFIDENTIAL I mm we. win a" Overview Afra gmenled industry The US. aimna mdusby is. very Nu carrier mm 912mm man 23% revenue share Seventh largesl pantcipam neal?ry ha" is large a: market leader Share cm below ?rs Iona! :wenue (interna?onal encs domestic) To: US. camera. Fragmentation even more dramatic on a gioba! basis . 02 Revenue :5 a Pamenioi induslry Revenue ED 5% *5 US AIRWAYS mum :ma am- ?mum 2. Newark and Revenue Synergies US CONFIDENTIAL RANPRODOO36750 Com-bined US CONFIDENTIAL . RANPR000036751 Yellowl BIue Combined Network AYe?aw [Blue combinaiion win create the number one airline in tha 5.5; mm can compete on the same level as Amencan, United and Southwest us AIRWAYS CONFIDENTIAL RANPROD0036752 . em; Mme arm .mma Hub etwork . . AYeiiolelue combination wiil have hubs focus CHCES ihat prowlde a comprehensive service patiem but that need to be optimizedfralionaiized in a combination general?mg Signi?cant cost and revenue synergkes Hubs and Focus Gilles with Passenger Market Shares for Combined Biue and Yeliow Primary carrier US CONFIDENTIAL RANPRODGG36753 .miy Am mi- Combined Network Position in East and West Passenge: share rankitig by region Yeliow YeliowlBlue us AIRWAYS RANPROD0036754 Major Carrier Share ASMs nth; Pant-4 amt mum; Combined domestic share or approximat'eiy 20 percent pn?or Io capacity mtionaiizal?con Declines l0 approxamatery 18 percent foIIowing changes DomesticASM Share '08 Projected Share Foiiowing Capacily Changes (H: 1m 9 var US AIRWAYS CONFEDENTIAL RANPROD0038755 a: em, International Market Presence Carriers Green would be (he 1 Mine across the A?lsnlic and have a 2"?1 place position in the Caribbean and Latin America - us AIRWAYS CONFIDENTIAL RANPRODUDSBTEB Capacity Discipline Opportunities Available in Consolidation- US CONFIDENTIAL Yeilow Capacity Discipline August year-to-date capacity down as percent. 2007 outlook between 1 and 2 percent growth mm) mm. mm Dbu: i-ni: mm? mm rm 53:23 191; an 27? HM.) 45H 739 ea; 33: am 5&5: [7?33 5 ?h'k 4323 $bit: 5% 32:? 53:3 Mar (3m ?Wu 2'7. ?We . mm gm?) EH US AIRWAYS CONFEDENTIAL RANPRODOD36758 . M. am: warm: Why Did US Atrway$ I Amerlca West i3" qua-u any law? mm: was ?an A941: . . Ex} was? - ma ustry hedumionleaam,? upnvenw US AIRWAYS dual-y mm m: wnmwub. Why Airways {America West Work? The RASM outperformance achieved in the US Airways] America Wesimerger could be similarin a Delta I US Airways. merger [though our modeling assumes only an incremental 3.5% RASM improvement) Us Amy; may zrw?mkau: v.1- 3w.? 1! 11] arm US 1? ways out performancehom synergies warm 54 25M VTD 5 km am new 54:16 mm am new?. My. 12m - - ?samba-humid . a: (mew. US AIRWAYS - my: ?mm: mm? Blue Network Review including Recent Changes US AIRWAYS CONRDENTIAL RANPRODOO36761 .w 5.1mm n- Biue 2006 Capacity Changes Hue capacity has been reduced Spement In 2006, but includes sggresswe international expansion Blue Summer 2006 Capacity Summary Yaqui 9 In: ?mr. i 350 - Damian 5&5 F.6d WW ms; was ms In?) Me ems My my? '95 75'. WW H531 R333 ma . 7455 was BM 35'- r-LHx; 2M 7: 577 34AIRWAYS CONFEDENTIAL Fleet Comparison Fleel Commanls 4 . Large number a! family aim-am ma o?sel any s: ale da?ciencies. Smaiiaslnarmwbody lamiiy is the 737swhich hava the highest pmbabihty of nearmann raliremani. Widehady ?ue! Numamus rstremam apponuninesm near \0 mid-lam and possi sf; 0 mne?aing ?ber the 330 or 777 ailsmn ?aws in pursux?t of simph?cmjun. Express W0 RJs pmvida some room for snais savings Dn spares. etc Summarized Fleet Compan?son mm, m- .3 US AIRWAYS CONFIDENTIAL Blue Network Summarthomestic Blue domestic nuis impacted markets either via frequency cuts orthe use of smaiier aircraft Ciiy, Cincmnaii and Atlanta high risk Domesticscheduia changes appear rational with signi?cant capaciiy cuts and ghanges made in Salt Lake Increasing service scope from JFK is necessary Io supper? the em pan on high-CASM RJs hu?i in {OW?ylaid Fion?da mar?eis arided imemationai ?ying bul is also Witiebady ?ying within the has been reduced but is still greater than other iegacy carriers Marge amount oigomt?impoim ?ying that over-?ies Biua (and Yellow) hubs and is opemied In a large um aim-m Dairy E385 Mum-S Seats 2505 951a km. Am Chang? 200:?: mm yummg Chance Allanha 1?03! 1,010 133,779 113.929 Cincinnati 666 389 452nm? 21:51? Salt Lake 3517 3?51 31355 28?704 Ori?ndo ?22 101 12.459 (0.077 l19%) Neantk LGA 112 112 0% 12,581 12,555 New York 118 135 14% 15.847 15,204 (Hm US AIRWAYS CONFIDENTEAL RANPRODOO36764 Biue New lnternationai Fiymg Appm'ximalely 15% of Blue"; tolal capacity wi? be in new markeis - New capacity tends to be deployed in markets dom?maked by European carriers versus other US. . chac{es - Domas?ric Mdebodyje?rs being redeployed into Jniemationa! ?ying New International MarKetSm AilantnACops-nh agm Kennedy?u dupes: Angela? [min meta Auantaumssiadarf Kennedy-Du?in Man ta-Scozland Kenn airy-Kiev A?a nmAT? ?va Kenn Edy~Manche?er Manta-Ecust AtlantarDuhai Kennedy Eombay Kmnady-Sau Paqu Nianm?Seoul Kenn Edy-Bu 2h aresi Kmnedy?pisa u; New 1.0? Summui?? US AIRWAYS CON Blue Network Profitabilityw?By Hub Hub pro?tability calculaled from exlemsl data inleresllexcludes reorg, eXp, Allanla represenls primary source of pro?ls Blue Hub Pro?tability?Yellow Prolecllons from Ememal Data Runs?: :5 Hut: 115Lake Cw =3 mm- on h?murdue a, ?thwart mm a . WK. US AIRWAYS CONFIDENTIAL mt: ?Jam. Blue Network Profitabilitymay mt?? Region Asian realms appear sirongest. 01 results were mammal. Q2 results were: strong lo Europa and Caribbean resuks ware disappointan Blue Hub Profitability?Yellow Progeciions from External Dai? w: (mm: mm? ken-n u: GT 05) Pr ??nale. Irv-44AERWAYS CONFIDENTIAL RANPRODOO36757 Biue Network Profitability?2007 Outiook -- . um; ?ab; mu ?Janna Blue' is forecaster! tolmpr?ove unit revenues b1 6 percent ?rn 2013? and generate an 8 percent operating margin Blue Operating 2007 Ou?ook 1mm Emma: Da?a By Hub and By Region?Boilers in M?dlicns w: amm(Inna: HM mm mm mm tn. 3155:?? my 3.9 1.3415 rr-m? a :6 an. SIN iimhum ma mm? a. Rayon Hum mama: mu: Tarn: qr mum ?a ?war US AIRWAYS CONFIDENTIAL RANPRODODSB768 4.1mm: Proposed BEue/Yellow Network Restructuring US AERWAYS CONFIDENTIAL Network Restructuring Summary nulls-:1 Restructuring propasals are preliminary and need to be further de?ned Mih internal Blue data I lnil?lal analysis suggests a! leasl a 9 to 10 percent reduciion in systemalide capaciiy is opiimal - FleeE estimated to be reduced by 11 percenl 175 planes (?rnciudmg 100 Regional Jets) ?Lll?f Mug/l ?cil'xbi? (:la mil-wenle 4 I ?3a 4% C1. crying-3; m?xkn-?ls vn hw?uerlcy no fewerqu my? S?dth?s?): .- upd ad? lfmuawy 1.52:. Lemma - and maplma." wmAT . warm? kan 9:951 - Raumumm soumlv warm] mum's-JIM can? m. mm mm em [:91 Wm I Panmirr sin no ang bqu sweetn- Emlyn {4n 9mm maul tin: Was! a Mm-m?amvn 9mm?- nm 9 awlma u: rig-x (MW:an comm-x99 - gleam?wrumm. ?ning :u a? tar as dam Nara?! am ?an JFK a m; (JFK x5, lac-mess; um swarm WE Senna Central Fenlch -: ply-mo: a: 25's mug: Pl? 33m 5.5m: mam?: aver :vcwma pm 5331 limnadhmha: fowl ?mummy US AIRWAYS RANPRODOIOBBWOI Southeast US. Consinenng the size and scope of Yellow and Blue operations in [he Soulheasl. the region represents a large opportunity inrgalns in ef?ciencias a Combined CLT and ATL represents 42% of the unaltered Blue and Yellow Network Common markets from lhe Ewo hubs accoum for55% of capac?y and 99% o! CLT Us: 139 aircra? From CLT have an average 914.5 per day and from ATL 8.0 CLT and ATL are 22? air mlles apart Yellow caplured $20 billion in connecting revenue via Charlotte in 2006 mosl of ll in common 05908 as Atlanta Exisling ?ights lomaion?ty nfS?E, markets operale with load factors well below sysiem averages which is lneffic?senl Reducing coslsvia ?ying reductions while rscapluring a percentage ofpassengars on remaining CLT and ATL ?ights will boost RASM .wwr ml US AIRWAYS mm.? Nae. mp ouwm. Southeast U.S.?Charlotte Changes A1595. cut in overlapping 0805 1mm and 10% cul fromATL will reduce system capacity but leave the aidine mm adequala schedule coverage - contemplated Changes to Qherleile 0 Charlotte. hank structure adult! be an ham 3 la ?wavas?STKr - 39m: fruquanciescar} be reduced 25% . Immquls may be banal [aquss? on primaly gateways but no! assumad in analysis I Focus of} s?ma'ller CLT given ?mpis tummy and ATC space far '37 seal Turbo pmpsaud 50 seat Regional Jets - . Largar planes and communities car} use Wheel Atlanta resourcr?s Change likely speeds up?w invaduc?on ola large scale LCC compeiitar in BLT given ample A76 and alrpurl resautcas Sgt-:5 mummy ?5:324: Wm: Change in Dairy Depanures I if! mi . Blue Tami 'lul?ai - rjharme Bimingham.AL 7.0 :83 15.3 12.3 Asheville. NC - . 5.1 5.1 _13.2 10.7 Augusta, GA 5.7 tilt 11.3 as Jacksonville FL 7.0 9.5 56.6 13.8 US AIRWAYS CONFIDENTEAL RANPRODOO35772 a-m. :mem . Western US. Salt Lake City and Phoenix can work more ef?cienliy together lo produce revenue synergies and cost saw'ngs . . Majormarkeis could be server: via both hubs - Sma?ar markets across the Souihem can be focused on Phoenix and Northern markels via Salt Lake Example Restructuring Seams ?Ex Poniand _.Cieveland reduce servlce -- maimain or expand Tamas US AIRWAYS CONFIDENTIAL RANPROD0035773 max, Pea: um ?Inn-4' Western U?Sk?Las Vegas Night System Blue wouid gain access to Ye?avfs Las Vegas night nub foiiowing the combinalfon The Las Vegas nigh! system Mi! anew idle Bfue planes on the East Coast and Midwesl to operate pro?lably - Comedians available beyond Las Vegas I0 25 West Coast destinanons create stronger revenue pmcmial lhan Blue's existing poin?-to?potn! semce US Aways Las Vegas my One-nation Night 0'93? ation ?5'5131 Dai'iy Fung 95 56 15? Seals 12401 6,202 18,603 Desiinaticns 35 52 60 us AIRWAYS CONFEDENTIAL RANPRODDOSGTM Northeast US, New York New York City is one of the mast compeliuve markets In {he country and faces ever increasing LCC capacity Yeiiew Networks annon system: sio?s. and perimeter rules have She comprehensiveness of Blue and - the preierred business airport and combined Blue and Yeiiow will be the premier canizr - JFK might be {caused on iniemationai manuals aitowing domes?c iccai and connecting iraf?cioiravei io VJ qinei HULL Ill NUiIli?? Feemruclunng Scenario LGA Malches imv cost carriers Divesi one Shame Enhance service lo new destinations . Use Sarge! and more nffa?cs?eni planes Prime opportunity in consoiidale terminai space JFK Best casewlniernaiinnal Gateway to Europe, Africa and Middle East . Domestic service oniy feeds inieman?onai Baiance oplions wilh other Green gaieways i Stronger support from YeEIow?s NE markei position - Low cost carn?ar liker lo expand JFK operations as a result of changes, US AIRWAYS CONFIDENTIAL RANPROD0036775 . I?nziiw Mum a. Lanna?ma No?heast U.S. New York AYeliow i Blue comblnation will complete two individual and Ismail nelwozks from LaGuardis which are largew complementary I Blue and Yeiicrw New Yam LaGuarm?a Scheduies Are Blue :2 Unique Delta Markets- Red: Unique US Always Markels - Green Common Markets - Combined 57? Desiinations Are Served but Only 1G of Them in Common Common Cities Include Easier: and Washington Due to Shu?le - Excluding Shuttle. Overlap Amounts to 22% of ABM: Offered . One Shu?le Be Sold Us gum) ?m a. weer?1: Northeast US. New York Kennedy Blue has embarked upon a dramatic ewanslon ofbolh domestic and intemalional ?ying Tram JFK a I a Blue historical position at JFK has always been compromised and unpro?table Past service was - Largely to secondary Eul?ogean markets - Song semce lo Florida - Limiled domesiic feed fez?international ?ying European service may be pro?lable bu losses in roules madeihe hub unprofitable - Blue is alsz) noi the low fare leader to Florida Jel Blue has a dominant and growing market Nor has Blue cperaied lo London Key Eurupean Market Blue has decided to make numerous changes to the JFK operation Many more European Indian markets added where Blue is ihc- only us. airline operating - New service to London added albeit lo Gaivw'ck - More feed ball! from mainline and express airplanes Domestic connacllons available lhroughoul may versus international connections Yellow assumes lhal the internaiional hub componem can be pro?lable bul internal Blue dais: is needed lo: validation The number delermine future scope of JFK huh US AIRWAYS CONFIDENTEAL RANPRODOO36777 Northeast US. - Washington Washington he an importan! city for Green even wimoul one ofthe shuttles - Exctumng Shuttle operational lime redundant service exists between Blue and Yeliew 3n, Yellow ovsltapping senu?ce lo Atlanta has proved Em? unsustainable and will likely be canceled anyway Mfg? Riga; L. - mg. an: ?11. I in conjunction with Phlladelphla and New York? DCA will be better positioned Io compete with growing Low Cost Earner . as presence Combined bener able lo compete wlih Dulles incursion from United and Sommesl Airlines and Ballimme from Somm'est Airlines - Foundation forlong haul sen/Ice when perimeter min is reiuxed or eliminated - Dupllcate Shuttle service to New Yak-k will be sold to a Negative may 3 Few other Washington routes are operated by bc?rh Blue. and Yellow an us AIRWAYS CONHDENTIAL awn, cca'o am- NIH-M Northeast US. Philadeiphia Philadelphia can continue as primary Northeast connecting hub for Blue and Yellow with iew changes Biue service paiiem very minimai and other Blue hubs have overlap Opiimal geography as Mid Atlantic connecting hub Optimal geography for connections bemeen Northeast and 'Pravides Btue network signi?cam position in Mid Miami: moi otherwise achievabie and Ihird east coasi gateway to Europe I Mme mme international openaiicns from JFK to PHL depending on ovarall changes 10 JFK operation it 9331?; Flighis Desunalions - 4 109 H1 FAX Maxim Share 6% 44% 48% 93 US AIRWAYS CONFIDENTIAL Centraf US. Pittsburgh White Yeltow remains the largest airtine in Pittsburgh even after numerous cutbacks. a further r'estructbring ts anitcspaled - Proximity of CVG and PHL wilt result in signi?cant cuts to remove redundancies and inef?ciencies - Service Item PIT tomany smelt communities would and and remaking service matched to meet local Gemand - some existing connecting traf?c can be diverted via other Etue and Yettow hubs Year Enan March 2006 PIT captured $250 milticn in connecting traf?c I 1 PIT Ix t\ Move EasUWest Move Na?WSouKh and MM connecting tram: via Atlamtc connecting tra?tc vta PHI. ram?: (?ywma US AIRWAYS CONFIDENTIAL RANPRODOO36780 Cenkal U.S.?Cincinnati Yellow?s presence in small and medium nonhea? markets wilt create higher RASM and growth possibll?ias In CW3 ur-i tw Yeilow is the largesl passenger airline within the Northeast - YeIIow?s pusnion based on hisioric positlon in Pittsburgh and Northeasyt - Green has be?er potennal pos?nion for easWesl business reia?ve lo AA and DA slrength . Azimcts traffic from other nearby hubs?BTW I 0RD CLE CV Yatluw's #1 Northeast position will create new CVG revenue synergies foreasflwam traf?c USAIRWAYS Northeast Morerhan half of Eumpean iral?c originales or is destined forme- East Coast where Green wiEL be the #1 amane American Kannad Blua?eiiow Kenn edy? Fhiladetphia, Mia n1 3 Normwesl lA' Umled V?ashin gun (Bulfas) Corliiryentai Newark US NRWAYS CONFIDENTIAL I Aliiance~8ky Team versus Star Blue and Yallow offera simiiar level of service lo both Sky Team and Siar Hubs in Ewcpe - ?wo good alliance cp?icns [orGieen to choose from thte Alliancs Cit Fame: Airbus we" Lu?hansa 5 JH v? humans: glunch Swiss Copenhagen 5A8 Manna Austrian Madrid 503nm TAP Turkish Pans An France A :Amstadam KLM 0/339 cs . . .Muan Antahn ?Rume Nitaiin Prague GSA Aamflu! US AIRWAYS RANPRODOD36783 Slim 13' Mammy a'mem: Caribbean Combinec! Blue and Yellow be the second targesl carrier to the Caribbean with a 27 percenl Share Caribbean Shares?Oi 2905 From (1639367 Caribbean Shares?01 2006 Yam .55 24 fskand Destinations US AIRWAYS RANPRODOO36784 5mm Lemueth .man Network Synergies US AIRWAYS RANPRODOD35785 Synergies?Summary Annual synergies $935 mil?on are projected. Mmle mm. mm a: 1 Capacin and Resulting Passenger Load Factor lncraases and Lower Costs Slop Flying Unpro?iable Capacity Yields Instease When Load Factors Increase Run Highet Load Factors Particularly In Smaller Communities; Still Sufnment Capacity lo Serve Lanai 03.05 Presence Synergies Clealed From More Comprehensive Nelwom Includes New Conneclivity Comprehensive Nalionwide Network Enhanced No?heasl and East Cnas?t Marginal Capacity A- Discontinue Unpmmable Flying (torexample. Florida point-Io-pomi) 473 Million 229 Million 5 156 Million 3; '1?4 Million US AIRWAYS RANPRODOOBEYBS Schedule Synergy By Hub Nahum}: a. Mum $776 million per year ln synergles created by capacity changes and yield increases from load faclor increases (clues not include 01?5158 millicra on prevlous page) 0 Optimized lowom togelhs? ef?menmes that will creme large synergles no? possible alone el'in oil-?er merger scenarios my m3 w? ella?n taxman: Ln; amen: If): le?' Mluu'wz- i ll) 1, mi ugi'm a? ?ukl 4 sum was dos-jig a; MLelilE?Pr ?ap-CONFIDENTIAL Network RASM Load Factor Changes ?mm, Mm am: mum.? Unit revenues projected to increase an incr?menkal? 3 percent (on a 9 percent Capi?sclt?y cut) over what they wowd otherwise. inctese due to network rationanzalion synergies. Projaaied Load Factor and RASM Changes Ploieclad Load Factor and RASM Changes 4: 3a., {449-14 us RANPRODDO36788 . well. Dem? ml: whom Projected Yield Changes?$229 Million included in the $935 million in annual synergies are yield changes estimated at $229 million due to lnoreased load factors (not rate increases) - 67 percen: ol markels plojecte? to have no changa in yields because load laclors still below 70 perCEnl I Yields an: assumed io increase only when: load factors increase above 70% following capacily ralionalizalion 1 percent of capacily expected to have a 5 percer? yield inert-ass or greater where load factorincreases greatest Drsliibution oi Ptolected ??eld IncreaseS *i?eiel mum? 0% U'th'i 1 ?46?42% 2%??6396 3% 3% ?Wa 35%4 1% New Mamals 5'53 1% US RANPRODOOSSTESQ Mode? Methadology Using projected market steiisiics and road factors, capacity cuiswere made across the Sims and I I Yeiiow hemork-s 0 Two different recent quarters were analyzed and averaged together to determine synergies? 01 2006 to represent the winter or low season and 02 200610 represent the spring or high season - Changes in profitability were prejeciad where schedules were altered for economic, load factor or other ef?ciencies reasons Revenue: - - Demand f?r the flights cut was over the remaining capacity and in me extent room was availabie captured on the remaining ?ights (35 percent was assumed recaptured; 65 percent to other amines}. - - - Yields increased on the highest ofioad factor Costs: . - The direct operating costs for cancein ?ights were added up us AIRWAYS CONFEDENTIAL . RANPRODUO36790 1 ii .- wuth Presence Synergy Values More than $153 million per year in presence created by better relative position versus M, UA and Somhwest - Improved netwom will provide Blue and Yellow with increased revenues clue to an enhnced presence '5 urve' Positions will incnease brand across the Atlantic and via Cincinnati in particular Recenture oi 25% oi PlT?ow lre?ic we CVG accounts for?sz million in presence synergles other airlines capture remaining $168 million Closmg 25% ct yield gap on Blue and Yellow Planes to Europe $58.9 million in synergies ??eld in smaller West Coast and Midwest stations to increase to - Miliion other presence implications still being invasiigated . Greater connectlvity lhrough central allow passengers to reach most pasts nithe US via a Blue hub I: Apassenger originating in Texas can (Blue will he the sacond largest carrier in DFW Travel to Southwestern v.31 vis Phoenix Travel {0 Pacific Northwest via Salt Lake City - Travel to Southeast vla Atlanta Charlotte Travel to the Northeast via Atlanta= Philadelphia and Cincinnati US AIRWAYS m-n; m? 7 Network Departures?By Hub 13 percen? drop in dain depanures from key elites anticipat'ed Daiiy Depattures By Key City - haw-411i: Y-JHDM Mar? 23 Beam 2 Chum" 7 ?210 355 Melwm 2? 150 New '{orr teem?: 140 a La: ?mans 12 BS Mew Vnek-Lamwdiw at: ESE Phean'x 5 2:93 69 1-1; mm: mm.? striumu Emmy 46, rumbxifO?Smeo US AIRWAYS .mm) Mann-r?. - a: Network Capacity?ASMS Decline 9% System capaclty reduction Similar be?ween boll: networks System Capacity-ASH Summary System Capacity-ASM Summary Mammy: . Washuzglon Mir-I! Tum N'enrmd)? NEWV was Ln: Wyn:- 13 1' New Maw ?lplavausasla 2 1 I) 01161 nc?n 0 721? 1? Omar SJ Fhuaaemusa 34.? 34.? PM am?! 2? a ?4 US AIRWAYS RANPRODOU36793 . m, M- New Major Carrier Market Share ASMS Combined domesiic share oi approximaiely 18 perceni post capacity ralionahzalion DomesticASM Share (0162 '05 ASMs) systemASM Share ?06 ASMs) tuna val lit l5CONFJDENTIAL RANPRODOQ35794 Summary of Fieet Changes mack, Emu, up ?mam 11 parcant drop in fleet assumed; further work needed 10 better de?ne new ?eel mm between mainline wide~ D0654, OBITWS and express BlueANarrcw Bum-E ?179$ s. Mew-mtg 1 3m '{aziawusxpros 253 (4 Tom?Wm HA 1 1 'El aiat- Naniav,- Hem. 9mm mamm 3w:- Humy??lm max ?nmzami US AIRWAYS RANPRODOO3B795 2007 Thomson Financiai. Repub. . hed permission. No pari of this pubi?caiion may be reproduced OE transmiti?d in any form or by any means withouf the prim written consent of Thomsan Financiai Cam?i dent?i? a1 ATS LOT01717400 con? dentiai I CORPORATE PARTICWANTS I .- 2007' Thomson Financial. Repub hedx permisaion. No pari of ihis. pubi?cation may be repraducec? or iransmitted in any form or by any means withoui the prior censem of Thomscm Financial ATSLOT81717401 INAL TEAL SCRIPT Elise Eberwein US ?irways - SLED) Female, Cammum?cations, Culture Doug Parker Chairman, (7530 Derek Kerr (.LS?Airways (EFT) Scott Kirby Ligxh?rways 7 President CONFERENCE CALL William Greene Morgan Stanley Analmf Jamic Baker - Anal}? Robert Barry Goldman Sachs Analyst Linenberg Merrill Ray Neidl I {quanSecurities - Analy? Dania-l. Mckenzie Credit Same - Jlna?wt Bill l?v?lasa'mris Bank quew York Capn'al Analyrf izi?rank Home}: Bear ?rearm - Operator Good Clay, everyone anii?welcome to the Airways third quarter 2007 earnings coanrencc call. This call is being recurded. At this time for opening remarks and introdtwtions, i would likam turn the call. over to Ms. Elise Eberwein. Semi-?r Vice President, People? Communications, and Culture. Please go ahead, ma?am. Elise Ebexwein {Q?Si-?iim?ays Slip, People, Communications. Culture Thank: you anal good morning, everyone?. Thanks everybody for joining us today for our Third quarter 2007 eeimingi; call. Joining us on. {he call today you're. going to ?rm hear from Doug, CT-llai?zian and and than Scott Kirby President: Chief Flli?lIICliil Officer Derek Kerr will then alsu speak; also in the room today is (iur Chief?Opcmling Of?cer, 1:240:11; Janet Dillo? who is our General Counsel; and CA. l-lowlett. who is our Senior Vice President of Public- A??ixirs. As we usually do, we?ll start with D011 g. he?ll provich general comments; on our third quarter r0311 Its and an industry overview; Derek will take us through delail on the quarter inc-hulng our cost structure and our liquidity; Scott than gees through our revenue environment, performance in the quarter, and pnwides: an update on our integration walk; and ma?a?er We hear from Those warnings-Hts we'll open it up ?lo ?rst our investor community for quastious and then our media a?udienca Refers we start all then thouo? 1: let me go flu?ough the Forward-looking statement language: and today?s call will include ?nward-louking siatements and those Concern future. fuel prices, our future ?nancial performance, lat me slate that these statements represent our predictions and expectations as to ?xture- wants but numerous .risks? and uncertainties could cause actual results to cliffer materially from those projecled. 2037 Thomson Financial. Repubitahed with permission. No parl of {his publication may be reproduced or lransmilted in any form or by any means without ?the censem of Tl?Ic-msnn Financial Confidential I ATSLOT01717402 AL In?mnation about some ot?these riskn and uncertainties can he found in our earnings press rel ease which we issued this: morning, our Form ltl~Q for (planer ended September 30, 2007, and in other SEC ?lings on the Company. In addition, we?ll be discussing certain ?nancial measures this morning such as not 1055 and CASM excluding unusual items. A reconciliation of those numbers to GAAP financial measures is include in the earnings release and that can he found on our website at l.lSAirways.com and that?s under the public Investor Relations tab, l..astiy. a website of this nail is: also available on our website, USAirt-vays.oont and that's going to be archive-d for one month. and the infomnttion that wo'ro giving you on the call is as of today?s date we undertake no obligation to update. the information subsequently. At this point I'll turn it over to Doug and thanks again. for boing on the call t'oclay. Doug Parker US Aha-1mm Chairman, CEO Elise and thanks to all of you here. We released earnings this morning that showed our earnings charge-s of $185 million. that?s up 84% versus: what roported last. year, so very nice improvement. that: wo?ro obviously pleased with, particularly planned it's revenue driven Our unit rovonuc is up about 6% indicating hat there's nice demand for our product which certainly appreciate. ii?loasantly sunninch pleasantly pleased to See the operation improve. during the quarter. We are running in the month of Soptomhcr we indicated in the release ran industry average on time performance in September, the best month we've had this year by 12121., and we'ro offto a great. start in October. 0 we. fool good about where our operating in now and certainly where it?s headed and looking forward the revenue outlook is strong I want to talk a. little bit about tho integration. We had some, we had one major event happen this quarter as it relates to the operation and that in we moved to one operating oerti?caie with the FAA, and that is a Very big evenL one that customers don?t really see but it's extremely important to Our operating team, as I think most. of you know our last couple of yearn has been heavily engaged in integration in getting things like manuals and systems all unoor one platform and to all he the same. That work is largely behind us now with one: corti?cam all of our magi or systems integrations are now complete or very soon to be complete. So, we are now, we now got to more back to basics which we?re. excite-d about, focusing unreliability, cleanlinoss, convenience. ali ofthothings that we indeed did our bostto stay foousod on but aren't as easy to do when you'ro trying to get two airlines; integrated so with that operations integrated milestones now behind at;: and in place, thanks to fantastic work of a lot of people on our team, and in our operations group, we have the ability now to more tbrward, which we're excited about, We also have the: right team in place, We?ve nticlecl Robert as; our Chief fort/mu. Operating Ollioer, and lxo'n bot-3111mm now all of a running-built; oil to a. great start and we fool very good about when: we're headed in: it rolatas to the operation, We have a lot ofwork to do but thorn is a lot of upside there and fool very good about whore we're going. And then last thing want to talk about is our industry. and what looks: to me anyway to be a. pivotal event. that's happened in the ?rst lmlt?ot?this yoar and into the third quarter. Those of you that follow us know that we to 366 unit revenues decline or nation out some time in the second quintet and what we saw was every airline reduce their capacity, that's what's going forwardi and that's something I've been doing this quite awhile noun l'v? never seen that. livaryone reacted and oggressively. 1116 result is we?re seeing (inaudible) the industry now flat to even down and therefore, you're stoning unit rovoimoaiinoroiise nicely. This i s: the result is we've got: rm industry now where people are. oonocmcd about a so?oning economy. We've got oil at $85 a barrel, the kind of things that we, in the past, if we had thoso sort of it would be when we would all be: screwing around trying to .ligure out What we would do to survive this downturn, but i ndoed we?re all roporting pro?ts. That, Itliink, is a pivotal and probably momentous change in our industry. It's still to be seen as 10 if we can stay here but it certainly looks good going forward because all the comments we?re hearing from otlzor airlines are that they?re- heeping onpaoity in check, This is a big tie-a], and il?indeed everyone \i-?liorethoy say they're going to stay, I think. what?s really happened here is wo'vo dramatically reduced the cyclicality of our business which is Very very important, so we feel good about that oh viously as well. So, look, in sumnn 13* on all ofthis, we feel very good about where we are, we feel good about our results today, about our current position. We like where. we. are. We really like where we're headed and we are lumpy to see our industry acting rationally. So with all that said I'll turn it over to Dorok to give you 21 lot more detail on our numbers and Scott will talk about. ops zintlrovonuc. Derek? Derek Kerr - 55' Airways CFO .. . ms. 2 i I 202.2? Thomson Fmanmal. Repu' shed permission, No part of this publication may be reproduced or transmitted in any form or by any means without th prior written consent of Thomson Financial Confidential I ATSLOT01717403 FENAL 'l?iuot CRIN l')oug and good morning. everyone. We did ?le our lfl-Q this morning and in that Q. we reported a net pro?t of 77 million or fill .87 per diluted share for the third quarter. This compares to a net loss of $78 million or $0.88 per diluted share for the same period last year. As Doug said if you exclude the- special items our not pro?t for the third quarter was $185 million or share versus last years not pro?t of $10! million, $1.09 per diluted share and this marks our seventh consecutive pro?table quarter. During the quarter the Company did recognize $8 million of not special items. The expenses for the quarter included a $17 million in merger relatecl transition expenses and $4 million of special non?cash state tax provisioris from the utilization of our pro-acquisition NOL for the quarter and that?s in tl tax line on our press release. These expenses were offset by a $1.3 million non-cash credit for unrealized not gains associated with our ?rst hedge contracts. As a result of our third quarter ?nancial performance the Company did accrue approximately $20 million or 10% ozt'its third quarter, 2007 pro-via): income excluding special items. This brings our total as of September 30, to amn?oiziinatcly $55 million which. .l?ni happy to report. is $11 million more- _th.art what we had argued at this time last your. Total capacity Mainline express combined was at 23.3 billion ASM's down 2.9% from 2006,: our mainline capacity for the quarter was at. 19.7 billion (loo-112.7 from. a year ago. We did end the quarter with 357 aircra?, took. delivery of three E.R.l'l90's (lining the (thinner and retired two 737 300's. We still plan to end the year at 356 aircraft as we add three more and reti ?3 six 73 7?s in the third quarter. For next year. we are relit?ing sixmore 7?37 300 aircrailt in the ?rst half 01?2008 and those will be replaced by eight newl?mhraer 190's during that some period. As an aside. we did execute the de?nitive agreements; with Airbus to ?nalize the purchase ot?62 aircraft and ?rm up 30 previously ordered aircraft, This includes 60 single- aislc A320 family aircraft. Those begin delivery in 2010. There are 22 A350 which begin dciivcry in 2014 and 10 A330?s which begin delivery in. 2009. With these aircraft this will giro S. Airways one of the most modern ?ee-ts in the: industry. As for Mainline guidance as we have previously announced we have reduced our in the fourth quarter. For the quarter we're. forecasting, 18.2 billion which is about 4% less than 2006, Portia: full ycan we will be down approximatcly 15% at 75.9 billion For high. level guidance in 2008, right now we're expecting total 'l?ull year to be down approximately Mainline capacity is forecasteci to ho clown to 2% compared to 2007 While capacity Our opcrating rcvonu cs for the quartcr were 3 billion, up 2.3% from the saint: pcriod in 2006, Mainline revenues were billion, up Mainline revenue passenger miles were 16.4 billion which resulted in a record load factor for the third quarter of 83.4% ?inch is 4.3 points hier than our previous year. Mainline RASM was up 6.5% in 200'? to [30.1085] while yields incrcas?rl Consolidated RASM was up 5.6% in the third quarter on a 2.9% decline in ASM's. As o'clock into the quarter We expect demand to remain strong as the industry continu as to show capacity constraint and Scott will give you more color in his commonts. Cargo revenue down ?17% year-ovcr?ycnr, The decline- driven by lower domestic freight. and mail volume. We. do expect the-mail volume to rebound in the fourth quarter but domestic freight volumes will remain clown Airlines operating for the quarter vcre $2.8 billion, down 4% compared to a year ago. Mainline cost per ASM was dorm 2.6% year?over~year on a decrease in mainline capacity of Excluding special items, fuel and realized gains, losses on fuel hedging instruments, our cost per was an increase of 5.7% versus 2006. Express operating cost per ASM was [18.09] 1134:8911 versus 2006'. we last quarter on a yearnoveiuyear basis, the increase in cost was largely related to the implementation of our operational improvement plan. We have pulled down capacity to some of the air traf?c control issues in the Northeast United States and othcr operational challenges. Because ot?the short?term nature ot?tliis capacity reduction, we are not able to pullout all of-the corresponding ?xed costs which drove higher unit costs in the third quarter. - While. we don?t like to our unit costs increase we took the. steps necessary to improve. our operational reliability. As Doug said. to date we have seen signi?cant improvement in our operation and anticipate tho rate of increase in CASM cx?l?oel and special items to be lower as we move forward. Cost containment. continues to bc our strategic imperative for the Company and at US Airways is dcdicatcd to contributing to this ell?ort. One example is the elimination of unpro?table :llying in our Pittsburgh. huh anal the closing of our pilot and ?ight attendant crew there. - In terms of overall CASM excluding fool guidance for the fourth quarter we expect the full year 2007 to be up 4 to 6% versus 2006. This is consistent with the guidance given at the beginning ofthc month. The fourth quarter should reduction in As of CASM guidance for 2008> We are just beginning onr planning process so do not have any speci?c 2008 yet as we are still in our budgeting process. But We tainly would expect to see the rate of increase decline as our operating performance improves. 2007 Thomson Flnartcil. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means withinut'liie prior written consent of Thomson Financial Confidential ATSL0T01717404 FINAL Fuel costs continuo to climb to historical high levels and remain a minor concern for us and the industry. including the realized gains associated with our fuel hedge program. our ave-rage mail-nine fuel price for the quarter including tax was $2.16 per gallon versus $2.26 per gallon in the third quarter 2006. For the third quarter, we did have 56% of our mainline fuel consumption hedged which resulted in a realized gain of $20 million or about $0.065. par gallon. At this time we're forecasting full year 200'? fuel price to remain high ranging from $2.14 to $2.19 per gallon, the fourth quarter should he in the $2.28 to $2.33 range. And this at this level, it is about 16% higher than our actuals from a year ago. During the. third quarter did increase our hedge positions to 56% in the :lhui'th quarter into 2008. We had 41% in the ?rst quarter, 27 in the second quarter, 15 in the third, and a small 2% in the fourth dunner. 'Iheso are all heating oil costs, those collars. The jet fuel equivalent. for the - .tourlh quarter is at about $2.01 to $2.20. oftoday. we. are l?oneoasting lull year 20138 Fuel price when: the market is today to be between $2.40 and $2.45. I I i We continue to maintain a strong cash position. We linisl?ied tho quarter with billion of total cash and investments of which billion was unrestricted. Our sohodulcd principal payments on long term debt totaled $30 million in the third quarter and we?ll pay another $12 million in fourth quarter. We only have $113 million ot?soheduied repayments in 2008 und'we will continue to look at ways to re?nance or reduce our debt level. An I talked about last quarter We signed an agreement to sell our stock in Air 1110.. the trunniwlinn expected to close by the end of the month and when it does we'll. receive $25 million. in cash proceeds and record a oneutinie gain of 8 million. this point We're forecasting cash to increase by tho and ol?the year. - - One thing i want to touch on, as you will See in our 1642, our investment portfolio contains approximater $400 million at par Value in option rate securities that. failed to settle at auctions. At. the end of the quarter, we recorded an unrealiZed gain on these securities of $38 million to other comprehensive income, a subset or unrealized loss, excuse me, on these socurltien of $38 million to other comprehensive income, it subset of stockholders equity. This represents a temporary decline in fair value of thene mounting an a result of the turmoil in the credit markets. All of these invonhnentn are top tier investment grade rated and We. and our auditors believe that this is a temporary impairment which 'Why we accounted for it as a balance sheet adiustrnoin instead of having it ?ow through the 13851.. I For non?airmail. CanX we spent $43 million. in. the third quarter and are still forecasting to spend $220 million this year. We expo-ct that. number to increase to $300 million in 2008 due primarily to til-reinvestment. we are making in our product. In summary while we have. seen a marked improvement in our operations as a result oftheric investments we have made, we still have to a? have some work to do on our unit costs. Going :l'orword high lucl prices are- a big concern and with that we have inoroancd our focus on cost discipline and continue to adjust. our capacity as needed. With that I?ll turn it over to Scott. Scott Kirby U. 'Aimqps President Thanks. Doro I'd like to start by talking ahontour operations and then I?ll turn to the revenue cnriromnmt. Before turning to speci?c results, id like to welcome Robert Isoni who is here- in the room with us to the team, as our new ChiefOpmaiing Of?cer. Robert comes to us with 15 years oi.? airline operating experience and is already beginning to have an impact on our results. As; everyone knows, we had a challenging second quarter operationally following our Res. system migration in March and we talked extensively about the initiatives we were putting, in place to improve the Operation on our last. conference call in July. Since thou, we?ve continued implementing the operational improvement plan and I?d like to thank. our 36,000 employees for their fantastic elfotts throughout: the quarter which allowed us to run a significantly improved operation in the third quarter. Our on time performance improved sequentially throughout the third quarter with a 66% on time in July, 69% in August, and over 80% in September. While still not an acceptable absolute level, this; on time performance was basically industry a reragc in the third quarter as the entire airline industry is being impacted by ATC delays and it represents a signi?cant absolute and relative- improvement over the second quarter when we were recovering from this impact ofres. migration. Our operational results remain strong, going into the fouth quarter and we. feel good about the improvements that have already been achieved and tho path forward. 20o? Thomson Finanoal. Repu'o ahead w: prior written consent of Thomson Financial Confidential AT5L0T01717405 "Writing to our ravenuc results, consolidated ASM was up 5.6% in the quarter. Diamond was strong in all entities but. particularly sitting in business oriented markots. We along with the rest of the industry of course benefited from tho new indium?y capacity discipline. We also bene?ted in this quarter from overlapping last years terror scare which negatively impacted revenue in 2606. Going forward, we continue to see: a strong revenue onvi moment in the fourth quarter. oapacit; environment remains benign for tho entire industry and even more so in US Airways markets with reduced LCC capacity of our many 0i" our in many of our that began in tho fourth quarter. Fundamental demand trends in the fourth quarter appeeir to be similar to the third quarter, We lose the bene?t of easier comps due. to the terror scare in tho fourth quaitcr but our competitive capacity situation hotter throughout the quarter. GlVen all oftho changes that are occurring in the fourth quartor and the fact that Q4 is highly dependent on holiday tra?tl?iu, much of Which hasn?t booked yet, our visibility into Q4 RASM is not as good as it BOI?tl'mlly would be at. this time. But we currently expect RASM will be up in the fourth quarter similar to what. it was: up in the. third quarter. Going forward, we also pit-m to give more precise revenue guidzmco each month by giving a narrower range, results for each month opposed to our current practice of estimating RASM within 5 point hands. In conclusion, we made signi?cant operational progress in the third quarto; felt. good about our revonuc results. and remain optimistic about both the operational and revenue environment. going Doug? Derek Kerr CFO 'I'lmt?s great. Thanks Derek, thank you. Scott, and we. are now ready to lake AND ANSWER Operator 'i'liauk you, siix We?ll pause a moment to assemble our roster. We'll go first to William. (.ii'ccne at Morgan Stanley. W?illiam. Greene Stanley Analyst Yes, hi. Scott, I'm \i-?ondcring izl?you can sort of give us an update a littlo hit on the RASM, how it performed in the third quarter if you look at markets Where you compete with, let's say Southwest versus the markets where you dotft? Scott Kirby [IS/liming); Resident It's .lmrder for me to give you that speci?c breakdown. What l?d say is that what wo saw in the third quarter for a little more color is real strength in the peak. period when you can. take advantage of yield management and high load factors to drive even higher results than what the fair cmiroumcnt, loss strength in the off peak pcriods, so the hook half of Sopton'ihor for example, than we saw earlier, you saw that. i think across the industry certainly from industry results. Business demand remains particularly strong, so business oriented markets were good and leisure-2 demand is strong but not relatively as strong as business markets. So markets like Florida, Vegas, the Caribbean were not as good relatively as business oriental markets like the William Greene - Morgan Stariqu Altair-st And did you soc any impact from the start?up of Virgin even though it probably would have been very late in the quarter? Scott'- Kirby C. ?Aimwys - President Virgin strut-up isn't at the moment going to ha re much impact on us. We really have one market where we overlap with them, San Francisco, Vegas, and that startad late enough in the quarter that we don?t see any material impact. it. will impact that one market, the market effect: ?15 QQModlh 2007 Thomson Finanmal. Repub. shed wih permission, No part of this publication may be reproduced o: transmitted in any form or by any means without the prior written consent of Thomson Financial Confidential ATSLOT01717406 Confidential on us is; minimal became we're a. secondary player in those markets, so the Virgin affects for us is not m'uch, at last given the schedule that they have today. I \Villi?m. Graeme Morgan Stank)! Analyst Okay, and then if I can ask a question on headcount. i know you buiit up in the third quarter to handle some ofthe turnaround in the operations, but will we of a reduction in headcount by the. time we get to 3011? of fourth quarter and maybe. first quartnr next year? Or is this something you have to run at a hi gher level just to kind of continue the improvements? - Stott Kirby USAianw ?.Presidem I [think we will Germinly m? on the side: (if running at a higher level for tin: Future. liltile Robin?: comes in with, and we'll haw: a team that. will with automation patticuiat?ly in the airport to make our processes more e?icion?t, automate more what: do. i think we are: behind the in that regard and we got. ?irther behind {when we spent two years trying in integrate the airlines instead (3f numing?nwarci on new So maybe over time, there?s an oppuztunity to he Inuit-t. cl?cieni particularly in tin; airport, but we won't make that "ingestmeni" until, we'ii make an investmem in the systems but W6 Won?t reduce headcount until wc?m can-aim we?re able- to handle it operati?naily. Soy I would not anticipate it in the fourth or ?rst quarters! William Greene :Margan Stanlqv Analyst Thanks far your help Doug Parker - LETAirI-qus - Chairman, CEO you. . . . . Opcrato it We?ll go next to limit: Baker :11: 3PMorgun. Doug Parker USAimm's (limit-man, CEO Hey, Jim. Jamie Baker JPl-Worgarz Anal):le (500d mowing, Dung Parker - US Airways - Chairman, CEO lli. Jamie Baker JPilzt?organ - Analyst Doug, yeur network can't really run withthe likes of AMR or United and your last stab at consolidation didr? succeed. How do you keep from your network just increasingly getting nmrginaiized in the industry, particularly if some. of those larger networks succeed in cnnsolidating? Doug Parker - Chairman, CEO 2007'Thorrison Financial. Repubaished' with peimission. No part of this publication may be reproduced or transmitted in any form of by any means wilhom the prior written ccnsem of Themson Financial ATS LOTU 171740 7 FINAL Well, ?rst. we're quite happy with the network we have. You can see lion] the resuiis it works. Jamie Baker .ff?mfm?gmz - Ana?gm? Yes. Dung qu'ker US Ann-Jays Chairman, CEO And ceitainly don?t feel anything coming close to marginaiization, so we're happy with what we have. If indeed the industry consolidates which waliicl be a. ?mmstic thing, by the way, ?rst of}; if what you kind of hinted toward which is it consolidates and we don't patticipate, that?s still a good thing for us. I'm not suggesting thafs where it's headed but if it does. we actually, I think understand that ?iat's good. It?s part of what we tried to impress upnn pcoplie as we were going through our mm at. Delta. was that'tllis is while it gomi for US Airways it?s good for the entire industry. ie're going to take out 4% of the: indushy capacity as we did that. Everyenc's 2008 numbers wetlld look a of a lot better had that transactionhappcne? so if indeed other airlineg consalidate that?s good for US Airways and we're in favor ofthat. Il?indc-ed, -- having said that, I think We?ve shown that We're- wiiling to be aggressive and will be aggressive: to the ?xl??i the industry. dons ducide it?s ready to consolidate. I don?t think. we?re time yet, but. hopefully we'll get there at some point and when we- tio. I happen to behave that our attitude toward it and our willing to take- on more rig]: than others; seem to be wiiling to take on and timkly, our to go do more work than mitosis seem 13:) be willing to do will lead us in he invnl'ved but ifwe?ra. not; that's stili areail}! ponitive event for US Airways. Jamie Baker JPiivfargan - Ana?m? Just to play the devii?s advocate, I would think that if you purpnsely sat Gut consoiidation, that your relative risk would be far lower than the consolidating nctworks and you prohithiy would be. the most pro?tablc airiinc if you just $011 ofsat back and enjoyed the RASM dividends. Doug Parker - US .4iqups Chairman, CEO Yes. maybe. Jamie. Look, ljust think there?s so much value in consolidation. Jamie Halter - Inhibit-gm: - Anafyst Yes. Doug Parker - US Antique Chairman, CEO And the-ids so many synergies to had that anyway, we can sit and try and (in game theory and piuy out isccnarios. Jamie Baker JP/WOrgan ~11nalys! ND, that's; myjob. Doug Parker ELS'AirH-iqps - Chaimmn, CEO Elm-c.1134, which we?re not going to cit), but in general, what I?d say is; i. happen to think US Aitway? shareholders will be better served if we participate and sham in the synergies well the rcwmuc- buns-?ts, but if we don't, I don't disagree with you that that's a 1131in gnod thing as wcli. So Either scenario is really positive for our sharehoidai?s. it's just a question ofwhich. one is: better and that?s for us in decide. Jmnie Baker - JPB-{organ - 2037 Thommn Financial. Repu .ished _.th permission, No part of ibis publication may be tepraducec? 0! transmitted in any form or by any means withom the prior written censem of Ti?uomsrm Financiai Con? denti a? . ATSLOT01717408 Conf?i dentia?i AL So your pilot challenges! excuse me, your piiots chailenges haven't caused you to remink that theory? Doug Parker - US Airways szammz, CEO N0, ahsahitely not. Jamir: Baker JPMiIrgan Anubis: Okay. All right, thank yen very much. Appreciate it, 0pcrat0r We go next to Robs-311. Bilnd at Goidman Sachs. Robert Barry Goidmaii .S?achs - Armiys?f Hi, everyone. Doug Parker US Airways Chairman, CEO Hi, Ruben. Robert Barry - Goldman Sachs A Hairs: I wanted i0 clarify one 111mg on ?le CASM cx-fuei guidance. You said that it would 'stili increase but just a! a. lower rate; Lhat vermis the Inwer the. rah: we saw in this quarier for liaainline'? Derek Kerr US - CFO Robert Barry G?lriman Sachs - Amtb?xt And wili we stem to see that deciine in {he rats of increase in 4Q and will it then kind ofcoutinue into early 113}?! year? Derek Kerr - CFO Yes. All we're saying is next year. we beiievc the mic of increase won?t be as high as the 4 to 6 that ?a're seeing this year andthen in The fou?h quarLe-r, we beiieve we should see, I mean we?re saying it's: between the main?ne this year (31' in the Lhird quarter, 50 we expact in he in [hm range or beiow in the fourth qua?ci; but 1 ?11in next year what we?re saying haven?t done the budget yet hm our expectation wculd be as the operation gats batten the 0051:; will. come out mat we had 10 spend to run The bad operation, and that wiil be ?ower than the 4 to 6' thm? we are saying for this year. Robert Barry Goldman Sada: - Amiivst Yes. ,Qgijiagtmlis - - 200! Thomson Fmanmal. Repub had prior wri?en consent of Financial ATSLOT01717409 Doug Parker Chairman, CEO And maybe, Robert. I?ll just to mini 21 little bit. \Vc rec-ong ofcoursc that's not tho most speci?c: guidaucm but; ltopolitlly you understand and I. thitnlx~ others might. We??re in the middle- ofoui' budgeting process. Ali we?re really saying is we don?t know Where it?s going to be, but. we ceitainly don't expect that his going to -- that you would continue to see theso kind ofrates of increase like we had in the him-k half ot'this year as we go through the. full year 2008 anti 1101? should you expect that or to do that, 'I?he one thing that, the reason that. we?re: saying we don?t expect the same mic ofincreasc as opposed to saying we think. it will go down is it would be c-xtromoly hard to drive down. cost par AS in a war when: We're going to be. ?at in so anyway, we don?t know what. the number is. We'll give you better guidance once we get through our process but we are hi ghly hope?tl we. done. with that it will he a. numhertzhat?s not as great as we have soon in the hack: halt?ofthis; year. Robert. Barry - Goldman Sachs Analyst Okay, fair enough. Just a follow-up on the last too about consolidation, You mentioned you clidn?t think that. we. wars 3105:: hate, and I know there's been speculation that with Whale gol?ng close to .90 that. maybe we?re- gotting closer. {mot-m; do you think that?s trot: or do you think; the fact that airiittes are actually posting pretty good results at your $90 oil that it?s emboldcning mote to stick with the go it alone sitratcgy'? Doug Parker - (.ES?Aimmw - Chairman, CEO Again: clout know and 'l shouldn't try and speculate. Certainly on what others doing, but again. know what we've soon which is; a lot about consolidation and so far. out: has happened which was ours, only one other one has been attempted which was ours, and nothing has happened. I don?t know that. othors avert talking and that som othing isn?t going to happen soon. ljust don't I would be- surpriSe-d, and I guess I?d also add that it?it is going, to happem it probably needs to happen pretty shortly, at least our advisors tell us, ifindeed you want to get something through this administration, you need to have something announced by year-end. So at any rate that doesn't mean it: can?t approved of course if you announce it later next year. It just means by de?nition irrespective of which way the election goes you'ri: going to have a different set of people to deal with and people that make the decisions will be. leaving their jobs before they can make that decision so it makes it a long process. Robert'l'iari'y Goldman Sachs Analyst Right. Doug Parker US Ait'wqps Chairman, CEO So at any rate, if indeod that's correct and you used to get something done by yearuend, titaybc poople are working on getting something clone by yoar~enct I would just. be Surprise-d. Robert. Barry Goldman Sachs Analyst Okay, that?s helpful. Thank you. Doug Parker US Airways Chairman, CEO Sure. Operator We go next to Michael l.:inenherg with Merrill Michael Linonborg Merrill Amy's! (9 20a)? Thomson Fmanmai. Repumshed With permission. No part of this. publication may be reproduced or transmitted in any form or by any meana without the pl?lOf Written consent of Thomson inanciai Confidential - Good morning all, a couple questions. Have. you guys at all taken a. stab at potentially how much revenue you've le? on the table as 21 result of just. not. running the operation as: you would like andmaybc it's also not being able to use: Philadelphirras good as a -- as a connecting complex that youhad sort ofsot out when you put the schedule in place? Scott Kirby ?5911 4 President Wall, Mike, it's more of a cost: igsue 1 think for us on how we're running the network and we don?t 2:11on the costs are speci?cally. 193 just very very dif?cult to break out costs attributable to running a had operation and which ofthose. cost? are cootmllabie and which are kinds of issues that were going to happen no matter what you did operationally. So it's hard to break. that out. From a revenue perspective it, lthiuk. it?s hard to we? in our results an impact because we're putting up munbers, RASM increases in spite of? this that are consiszt?nt with the rest of the industry so it?s hard to see it. I do believe that there's certainly some book?way that occutred and whorl you run a good operation some ofthat comes back but I think it?g very much at the. margins and not sorhetiringl would be modeling as a material change to revenue. I?do think it will affect cost. The other point I would make is if we continue to run a bail operation for an evenlonger pariod of time it probably would have a negative. a larger and recogrxizablc negative result on rcvenuc. ltjust doesn?t happen in the near term and, as long as you get the operation back on track, revenue is going to". Michael. Linenberg - llferril?f A gulps? Good and then. just. my socorirl question and this; is; to you, Scott. When you had talked earlier about. it looked'lilce Supply inUS Aime'ays market's lookod like it was coming out at Pastor ratio than when it was in the industry. Ho do you for when you look at say a Skylius as they pull out ofsome ofthe- West Coast markets and move some: ofthoir aircraft to Gi?oensboro, or actually, i think. it?s the airport, when. you look at that is thzit -- do you comp that versus Greensboro or do you actually, when that servici: starts up January, do you look at that as; competition vomusi Charlotte since thosa. airpoits aren?t that far apart? I Scott Kirby - USAir-wqps - President ymwk: Yes. today, we have. soon almost. no impact from heir business model is so di?brent. not carrying connecting 315510111613; flying to airports that nobody liver; anywhere near, it is a business model that hasn't had much impact on us, even in the mark?zts where we compete- nominally Michael Linenherg - Merrill - Analyst Okay. Scott Kirby - And i?m sure we'll loss some of tho very highly, highly price sousilivo customers from the Carolinas who will now fly on, Skybus but I don?t expect that it will be a number that can even find in individual routes is all. Michael Linenherg - Merrill A 1131323? Okay and just lastly this is a question for Doug. Doug, ifyou can update us: on where. the Us Airways pilots, and I'm reforming to call it the East pilots. did they gel enough cards to call a vote and assuming that they succeed in having a. soparala roprcseritatiort group for them, what does do to the process that would slow it clovm? Just sort ofwhere- your head is at, your thoughts on that? Doug Parker USAim'agps Chairman, CEO Well, look: our position is our pilots should decide who they want to represent them and whatever they decide is ?ne by us anti we'll negotiate with whoever they decide to have represent them. So, and theylre going through that process now, so we. don't: have a View on how that should - 20%? ThomSon'Finoncial. Repub?lshed Wilh permission, No parl of this publicalion may be reproduced or transmitted in any form or by any meon?'w?lhoul the prior wrilien consen: of liiomsrm inancsal confi' denti al ATSLOT01717411 FINAL end up, That?s: theirs to docida, so at any rate, they wiil decide whatever they decide and as they do we'll deal with whoever they would like to represent thom. So whom: it is. I can tell you factually What I know about where it is, whioh is my understanding is they have the there has been a collection of cards, they've represented that they believe they have enough cards anti they?ro'going to ask the NNV to make a? dooision to go -- they're going to ?le those cards with the some time in the near future is my understanding but again that's something you should really ask-? Michael - Marrill Nothing has boon certified and that's where we stand, Dotig Parker US ?ow/pays; Chairman, CEO That's carve-ct. Michael - Marni! - Analyst Okay, very good,_ Nice quarter, thithks. Doug Parker - EilS'i-Itirwauizs .- Clzairmmz, CEO ?Iliaialzs. Mike. Operator S) Next to Ray Noidl at Calyon Securities. Roy Neitll - Scam-Etta? - Analyst Yes, Doug are you won'iecl at all about flight restrictions going into 1 know you?re not bigthere but would that have any effect on laGuardia or oagzm Airport where you do have a large amount o?l?opemtions? Doug Parker w' US Airways- Cimirrmm, CEO Wei}. again, all this is. then yes, you characterize it properly which is as it rclatcs to Airways, doesn?t do mud; to out? ?ying. =?e're worried about the procesrx. We have a great deal of flying up in that air space, and our concern like all of us should be about what it's going to be like next 81111111131" and we share that concern with the Port and with the 9AA. Now, What we're doing about. that is working harci to participate- in the process but what we would like to do is soc a process that includes the Port Authority. the FAA the airlines on a voluntary pmoess to first and foremost expand the ioliastmoture which is the- real rather than constraining supply and therefore. oonstraining demand and raising prices to the ?ying public, ?nding a way to actually got ?ying in and out ofthe air space, and having said we recognize. in the near term that that?s probany not, While there?s-a lot that can be done in the near and whom we think the focus; should he. thore's probably not enough to make. non Summor acceptable. So then: probably is a need for some sort ofcapacity constraints for lack of a hotter word. and we worry that just the JFK disou ssions that are underway arch?: enough. i mean. this. prohlom is not on the ground in JFK. The problem is in tho air space in the Northeast, and what wc would pie-fer to soo is some-thing that has us all working to work on that issuo and trying to ?gure out a. way if vo have to work on capacity constraints, lot's. work on constraints that a?fect all the major airports in the New York area as well as: Tetorboro, as wolf as Philadolphia and ?gure out a way that we can. all that we can get the air space constrained instead ot?just going 1.0 one aiiport which I don't think is going to have the. desired effect that peoplo aro trying to make: happon and frankly, it looks as though much of this is maybe designed actually to ?guro out a way to got congestion pri sing into the other airports which we definitely don?t think going to have the desired effect. To trying to increase the cost? congestion pricing, mmotiootemotaoom ta; .. 20o? Thomson Fmanmal. Repu [shed permiaziion, No part of this publication may be reproduced or transmitted in any forni or by any means without the prior written conaem of Thomson Financial . Confidential ATSLOT01717412 AL trying to increase the cost: ofthe. airline today to ?y in and out: ol?thoxe aimorts, we?re goin to end up for the most part, paying what it cost to ?y boonose that's when people want to fly thcro. So What really happens is our costs go up, which means fare?s go up but we?re still going to have the some capacity problem it?s not going to change the behavior oftho airlines. and so we definitely are not. fans of that idea which we?re sharing with the FAA and trying to work with them to help impress that upon them as are any other airlines. I don?t think anyone in the airline business thinks congestion pricing will work, but there soon to be some at DOT that do and we just need to that with them so that's whore we are. Does that answer your question? Ray Netti! - Cotton Secuririar .??1nalyst Yes, it does. At Pittsburgh, you're pretty much pulling out of; in the ?nal stage pretty much pulling out of there your schedule, I'm juot wondering. how does that affect your RJET operations? Are you going to shi? some oftho RIET operations to other sectors or are you going to shrink. your need for RJET usage with some 01" your contractors? I Doug Parker US Airways - Chairman, CEO Scott, before- you answer that mo tall: a little bit about Pittsburgh, and the decision to pull-down Was a really big doc-1'in on for this Company. From the original routes- ot?the Company, Pittsburgh has alwayn been a large ready operation and unth?unately, though it?s gotten to the point where it just: wasn't pro?table and we're in a business where'we can?t keep ?ying unpro?table routes. 80 We made the to downsize. We?re still tho biggest. airline there by a wide mm?gin and still will but we think it?s the right size now where we can ?y it pro?tably. it?s a tough decision for our employees and for the team, it's: the right decision to make: unfortunately one we decided we had to bite- tho bullet and go do so we have indood reduced that airport now. We?re moving the flight attendant, pilot bases out ot?there and it will have a in?nitive affect to pro?tability. We lost about $40 million on those routes over the last 12 months and this will stop that from. happening. So it's good from that perspective but it was: it tough decision for the Company and for our employees. And Scott: on the I Scott Kirby - US Air-rims: - Amide?: mom Yes. Well, I would add also on the characterization of pulling out of Pittsburgh, we are still by very wide margin the largest airline in Pittsburgh, still have 68 ?ights a day, second largest is a li?action 01? that in terms of number ol.? ?ights, SO still a large- to Pittsburgh and an important ope-ration for us. With respect to RJET, most of our reduction is actually in small markets that we're flying'with turbo props; and that are actually not even under our control. ?l?hey'ro a?ilialo centers who no: the US Airwu ye code, carriers like Colgan to fly to these markets and can docide to hoop flying or not hosed on their independent pro?tability. So the largo scorn: ol?the reduction. in. terms ofnumbor of ?ights is lifont thoso markets. With respect to regionaljets the amount of capacity that we're pulling out that we control probably represents two to three aircraft so it's not a. materirll number and those- aircra? will just be redeployed somewhere else in the system. Ray Neill} Cotton Securitko? - Analyst Okay, grout. Thank you. Doug Parker i?Air'waryS Chairman. CEO Thanks, Roy. Operator 1K ext to Daniel hick enzie with Credit Suisse. Daniel l?l-lckenrje - Credit Stirling - .4 might co 1 i i i 2007 Thomson Financial. Repootshed with permission, No pan of this publication may be reproduced or transmitted in any form or by any means without the poorwntien consent of Thomson Financial Confi dential ATSLOT01717413 Con? dentl al FINAL TEA Hi, thanks. 01': Pittsburgh, is more any lmpaci on fourth quarter oosts resulting from that pull?down? Derek Kerr - LiS?Airwqm CFO No, Ithink, Dan, we are looking at what the pull-down is going to be, what ll'S going to take and we will probably have something in the fourth - quarter for that, reduction in space and ?lings like that, but that will probably be zi special item for Closing tho bases and things like that, so il's not buill. inLo our numbers. Scott Kirby {ISAir-wqps' - President And the scheduled pull?down actually occurs in the ?rst qum?ier. Derek Kerr US Airwtqo' - CFO We'll. have an estimate on it, Daniel Mckenzie - Credit Suisse Arm?rst Okay. And know it might be early hare. but given your th? m:er term business {rave-l wands, I'm just wondering if? you can provide any perspective {aboul the outlook on business travel spending as we move into 2008?? I Scott Kirby - Frail/fen; Well: The best we can do is Tell you what we can we which is continued sirongclomand, really no signs from our corporate or anyone also, ofa slowdown, either in the: founh qua?ar 01? moving into 2008. $01 {bill know ifthat's a good predictor ofwhat will actually happen or not but we certainly don?t see any signs of slowdown there, Dzlz?el?l'viokouzie Ammo? Okay. And-then 013:: 1211:: quick question hero. 1 know you'r? still-working- ooyour ?08 budget but ?rm just wondering; ifyoo could at least provide some porspeolive on the fleet plan for 2008? I I I Derek Kerr US Airwqu - CFO Yes, the ?eo?r plan, ltalkod about, tho float is pretty flat, Thom am most ofthc ?eliverles, where we?re taking out 3011):: 737 300's and wo'ro going to luring in the Embra or 1903, but we should end the fleet pretty much ?at year-over-yaar, maybe slight g,th in the- airomft but ASMTS will be down in total like 1 to Daniel - ?edir Suf?ce - Analyst Grout. 'l?hanks a lot. Derek Kerr - - CFO Okay, Operator '3 Women Fmanmal. euoarshed with permission, No part of lh?s publication may be reproduced or transmilled in any form or by'any means w?lhoul lhe prior conaem of Thomson Financial ATSLOT01717414 TRANSCRIPT 5/ ET . . Next to Bill Mastoris at Bank of New York Capital. Bill Mastoris - Bank ofNew for}; Capital - Analyst Thank you. Doug, I'd like to follow-up on an oariior question. And that is, I just want. to make sure that I understand you correctly that you're. willing to negotiate with two separate pilot groups, one US Airways and the other one US Airways West. Did I hear that correctly? Dong Parker . Chairman, CEO Nope. Bill Mastoris - Bani: Qmev York Caphal .p?lnahrsa: Okay. Mabe you could clarify that just one group and I gather that we're Still probably a couple months awa from that? 01? front that being resolved? Doug Parker US Aim-yqu - Chairman. CEO Yes, no, Bill. The question that I was asked was about the fact that the Airways East pilots are, there is a move-moot afoot to deceitit?y ALPA and put: in place a new Union and my comment on that atl?brt was the Company doesn?t: have a position on that arid whooyor the pilots choose to represent them, we of oourxe will negotiate with, but it?s for them to decide who they want. to more-sum them. That?s wl'iat I said. As it relates; to negotiating -- now we have within the current ALVA structure, there isf the reason we call them East and West for lack of better . terms is because they?re both US Airways how but the fbrmor America. West. piloth and the Former US Airways pilots; have two separate ALPA i?oprcsontation groups and two separate contracts that we have been working on. for a couple ofyoars to try to get them on one joint contract. We . . are very intemstod thatThe prohlom has been that: clue to the stoniority integration or was: the remh ot?the AI PA process; the East: pilots don?t like that award and have not therefore participated in joint negotiations of late bcoause joitrt negotiations would not participating in joint contract negotiations would, allows them to not. to have the award put in place. So at any rate that?s where we are. a. result ofhll of this, and maybe Where the con?tsion is, the East pilots have. asked us jugt to negotiaw with them about a standalone contract. What we Raid is We?re not interested in doing that. We're only interested in talking about things that pull out team together, hot ?uther apart, which is Who-re. we tomato and We?re highly intorosted talks about. that pull the team together and ti?ankly, I?m hopeful thoy?ro working hard: I know as a grou to ii gum out to i?esdlve this amongst themselves. and I'm highly hopeful that at some point they will come to a resolution that has them back talking to us instead of talking to each other about what we can do to move forward, but. right now, it's largely an ALPA to ALPA issue, and the Company is largely uninvolved. Bill Mastoris Bank QfNew York Capital - Andy's-t Thank. you for that. clari?cation. My question. just has to do with the application of lies cash. ?ow arid whatis an adequate liquidity love-l. which you might want to do with I guess really what to a much hi gher liquidity level that anybody else. Would you use that for for instance pro-airmail (lolivorios. maybe to a higher extent than you would othor, ordinarily other Wlh? do? Or number two, might: you pay off 11h hat-?t debt or maybe eve-11 pay off some of tho other secure debt that might bf: out there in the marketplace? Doug Parker Lil?Airimys - Chairman, CEO Yes. The answer is yes, yes, and yes. i think, Bill Mastoris - Hank of?A?ew York Capifal - Audi?s? goom a 20o? Thomson Financtal. Repu ?3th Willi permission. No part of this publication may be reproduced Gt transmitted in any form or by any means without the prior written consent of Thomson Financial Confidential ATSLOT01717415 7? S: Okay. Maybe": you could give me 3 little bit more color there. Doug Parker - US Chairman, CEO But you're on the right track. I was worried you were going to say or maybe do that, dividends and sham buyback and all that Stuffbut anyway, clearly, out View is Where we are right now, the right thing to do with excess cash which is a hard thing to de?ne in this business, but we know right now we_ certainly feel goodabout the cash position, we bclicve we're going to continue to build cash, and as we. do, one-of our primatjr it making sure we have enough cvcn'body else. in that positioh today, as you note, and the right. thing, for us to do cash in excess ofthat amount that Wc is wc think the right thing to do is to reduce debt anti Derek can talk in morc ?ctaii about what (mdcr we go about tryiog to find those. Denek Kerr - CFO and the ?rst thin. Bill, is all the Embraer 190 aim-ail, we. aic going to own those. We will he the owner and We'll have some bank. lichind that. So we will have 25 airui'attl and we will-use cash for that. The second thing is W?s arc looking at all ol?our debt and sewing what is the most debt. and what we can pay down and what we can?t. So that process is going on right now and} i expect in tho foutth quarter We?ll have some movement. on those type ofthings, and using the cash in that sense. - - We: am also, as I said the capital arc going to go up by a iitilu bit. in tic-x! year in order to invast back in the product 113 Scott talked about eziriicr, Ithirtk we're are underinvested at the airportsde we need to do thing at the airports to do that. So some cash wiil be used to redo the interiors ofthc aircraft and invest in our international product and also invest at the airports on automation and things like that. Bill - Bank rngew York Capimi Anaiyst Okay, thank you very much. Operator Next to Frank. Doroc-h at Bear Stcarns. Frank Boroch BearSterIrm Attaivst Hello, everyone, Scott, I was hoping maybe you could touch on how the uttit revenue pcr?formanco broke down by ciomestic versus international in the quartcr and how some of the markets out of Philadelphia to Europe are doing? Scott. Kirby US .riirways - President The markets from Philly to Europe did quite- during the. quarter. I'm looking for my cxact notes here. Did quite well. Atlantic was up 12% or actuaily this is 0111? forecast going forward, and from the third quarter the Atlantic was up about 6% and domcstic was up about 8% but that was on a largo increase. in capacity in the Atlantic. We have a slight pun?back in capacity going into the fourth quarter so our Atiautic forecast is actuain better in the fourth quarter because. we have less ca pacity got-till}. Frank Burnett - Bear Stermw Analyst And how does Atlantic capacity pencil out for ?08, witth the iltainliuc down how should wc think about doillestic versus international? Scott Kirby - US .?iim?mgs President We can?t givc you good guidance on'that becausc we still don?t know if we're going to have gates at Philadelphia. Wc?rc in the process with "the Ahport Authority We?ve o?'ered somc suggestions that we think, that we?re certain work to create more capacity on the internal D??chl where ?2007 Thomson Fmanmal. Repuoushed Wiih permission, No part of this publication may be feprcducec? or transmitted form 'or' by any means without the prior written consent of Thomson Financial Confi dentiai ATSLOT01717416 MAL other airlines currently operate today, and we are hopeful that the Airport: Authority will pumhe tho-so which would give us the ability to maintain and start to grow our international sowico. If we loser gates in i?hiladolphia. then we?re going to actually have to pull back some of our existing intcmational sorvioe._ Frank Bomch Bear Stearns 4 Analyst Okay, and it looks like you have close. to 60 aircraft coming off lease in '08. Does that -- have you alr?ady committed to taking most ofthogo or do you have ?exibility ot?conditions warrant as we get into '08 taking down domestic capacity or more so? I Derek Kerr - ?SAimw?s - CFO Yes, Frank, this is Derek. I think we've renewed approximately hall'of thoso aircralt' so we have the. ability. There's still 3410 ho renewed off of" lease next year. So, and we do own over 58 aircraft so we have the ability to, we can do something with those, but there's still 3410 be renewed in 2003 that we could realm, I I I I Scott Kirby USAirqus President And most of our ?exibility is like We'vo done this year, which is reducing utilization. It's not onpoutod lirom a cost'pos?spootive but ill? went up further or if?thc environment we can pull the 'triggor on utilization pretty much in tho ncar'tcrm. Frank Boroch - Bear Swarm Analyst Great. Thank you Very much. Operator l: I {Chaim W6 wi?l go next to William (?irreene at Morgan Stanley. William Greens: - ilJorgmt Stanlqp - Analyst Yes. can ljust ask one follow-up here and that is with regard to your comments about 2008 CASM, did that include an assumption that you put in place new deals with labor or doe-s; it not yet include that? Doug Parker - L?S/llirwqus? - Chairman, CEO That did not contemplate that we would. Please don?t take- that to mean we don?t think we?ll have it done, but again, that would be an event that I wo would come and provide guidance based upon that. - William Greet?: Morgan Stanley A nah-st Okay, thanks for your help. Doug Parker US slimvmw ~.Chairman, CEO T0 do ?1315 Bill, by the Way though, again, there?s only one real one that. -- there?s only one that: we would believe. would have a way large, would have a large impact on CASM. Certainly from management's perspective of what we. think we would need to do in order to get the joint deal and that is the pilot out: which we've already disclosed what it would take to bring the East pilots up to the West cost and that's $122 million a your. Derek Kerr US/lirwm - CFO {39> permission. No part of this publication may be reproduced or transmitted in any form or by any means without-he 20%? Thomson Financial Repub . hed w, prior written consent of Thomson Financial confidential ATSLOT01717417 TRAN ?wt, to be clean SQ our pilo?LS don?t hear this. that actually is going beyond 111e- West contract, Dong Parker - US Aimwys? Chairman, CEO Oh, thanks. It?s 3% more. Derek Kerr - US - CFO But that's the offer we have on the tabl Dung Parker Airways - Chairman; CEO Ri gin . Operator mumng further, Mr. Greene? William Greene llJorgan Stanlev N0, l'm all thank you. Operate Thank you, sir. And we will go next to Bill M'asforis at Bank York Capital. Bill Mastoris Bank Qf'New Yer Capirrzi - Analyst Quick folle-up? Derek. What doyou View as being, in this the correct liquidh?y level? Is it 25% revenues? lmean, how do 51ml think. about That? Derek Kerr - Airways CFO I mean, our internal goal is 25% of the last 12 months revenues, but in this envlromnent, What we do is we do look at What everybociy has :mzi cur relative cash position Versus everybody else is important to us because 0?th been through in the past. So We not only just a certain percentage ofrevemies, lt'e also where we relative 10 the rest ol?the indus??y. Bill Maem?s - Bank r?me Yuri; Capimz And would 25% mill be. a good number? There?s quite a few other legacy carriers that same are even above 259-3. Derek Kerr US Airwgm CFO they aren't too much farther abave ilmh so I thin}:~ our position as you said earlier is very goed when?. we are versus everybody else so I think. have same room to invesl in the pmduct and pay dawn some of the debL Bill Mamtoris - Bank af?ict-4' York Capital Amufrs'f 2007 Thomson Financial. Repubalshed with permission. No pad of this publication may be reprcduced or lransmilied in any form or by any means without the prior cement of Thomscm Financial Con?denti al ATSLOT01717418 Confi dentiaT INAL Okay, thank you. Operator This does oonctude our Analyst portion. of our question and answer session today. DISCLAIMER Thomson Financiet reserves the right to make changes to documents. content. or other information on this web site without obligation to notify any person of such changes. in the conference calls upon which Event Transcripts are based, companies may make projections or other forward-looking statements regarding a variety of items. 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Financing Initiatives August 2008 US CON Forward-Looking Statements hum?sranarlx?s, 9:80:03: :he' be m1 mm: US AIRWAYS CONFIDENTIAL RANPRODO474962 Agenda Overview - Current macro environment I - Actions underway by US airline industry - US Airways status and initiatives I Financing initiatives Financial outiook: 5?year plan - Summary I - Appendix US CONFIDENTEAL Executive summary Macro conditions, fuel and economy, present unprecedented challengas for the global avia 4m Inriu rm With :1 that cantext, US Ailways is performing weii vis-?-vis its peers - a? total cash cn par ?thEr network carriers I 15c cos: struczu?? Drama .c impra?zemenx :n operations US irways is aggressively addressing threats to p'miitability and liquidity Raising fares - cuttine cagacity? particularly in domes?: as warez ancillary revenues :nr?cug?? new pricing medal (1.3., Eula-carts pricing} Decreasi?g aperatsonai toss {Emu-(Elna streamuning fleets and retaran obsmete aircaafz) . With these initiatives US Airways is expected to generat? a pretax profit in 2009 Howw?er, US Airways is facing a meal-term liquidity challenge due ta $3.25 billio Lime-tricked cash covenant on Citibank-led facility In US Always initiatari a three?prong? anprmanh: Raising new Liq-Jlalzy {if at least woo-cam: mlilzon - - Refina? .4503 :25 means to do: - -Adi:rressl,ig credit ?m'hg 'awer tavenant iev (NWSD million) A ?ail-?N US AIRWAYS RANPRODO474964 Agenda - Overview - Current macro environment - Actions underway by US airline industry - US Airways status and initiatives - Financing initiatives I Financial outlook: 5-year plan I Summary Appendix US AJRWAYS CONFIDENTIAL RANPRODO474965 Oil price chaiienge 2.09 5 2-3118 29W ?35 Airways is planning its business based an the forward curve despite images: Hyde, pin?gg (5m Fur ward 263% ?0535 "mm-L? US AIRWAYS CONFIDENTIAL RANPRODO474966 RASM historic precedents During periods cf high vii prices and slow emnomicgrowth, amines have ?lstle: itmimamie Ym? Chan e! . 118.0 1980?81 Recession 2005-06 Oil price 5p k3 Capa?ity reductions/wave shielded airlines during past fuel spikes and . economic downturns US AIRWAYS RANPRODG474967 Agenda - Overview I Current macro environment - Actions underway by US airiine industry - US Airways ?tatus and initiatives - Financing initiatives Fin?ncial outlo'ok': 5-year; pian - Summary - Appendix US AIRWAYS CONFIDENTIAL RANPROD0474988 US airlines' earnings As a resuit of fuel, airlines are gaeing their margins significantly eroded, wi h? L. raw urw 1uquyrud tu I YUCB 959$ - Airii?nes are manning significant capacity reszlions to combat the challengix 9 fuel environment Given its me} hedges, stiil remains relatively immune to rising cost of fueF WN 1'5 70% hedged throu 09. hedges start to 2010. and 209? 3 E. 2012 11 um .a 2013 FE. LEA US As?, CO DL A5 85 WN EH07 Margm 20?293. 1.3% US CONFIDENTIAL RANPRODD474969 Capacity reductions - f. -- Industry has already re'sponded by cutting significant Capacity, and - 93.2% 40% Totaf industry reduction Mid?yearOQ to mid~year08 (single bar) y?wwmx US CONFIDENTIAL . RANPRODU4T4970 RASM historic precedents with industry capacity down' industry RASM in 2009 is expected to be up in} ilhl? gnno I - i5 Price his?om Industly {59933 I Change,? . 3 12 i wnr?aann: Fn?ecagt ?973- 4 warm: Ram: i ml min - - spike Fuei (O7 to 09), other bars 0809 US AIRWAYS Ancillary revenue The US industry has experienced a 'sea new saies I. ,1 mankets in rolling out ancih?ary revenue initiatives in attitude toward adopting us AIRWAYS CONFIDENTIAL RANPRODO474972 Solid cash position US Airways has a solid cash position, relative to its network carrier peer groan towpa?mr {ha trancifinn to iower ranarifv {higher unit rev nue Revzn ,ua. zqos, v.19 US AERWAYS RANPRODO474973 Major liquidity initiatives by US carriers- In.a numb?rof cases, business partners have played pivotal mies in su ppartina liuuiditv initia?ves for a number of US Airwavs comps: United Airiines - .ald frsquent flier miles for $600 millicn to Morgan Chase: UA will raceive pa advance purchase of frequent fiyer miiee base is shrinking the size cf the holdback under its credit card processing agreen?eni, '88 ies? Amer-ca Sold American Beacon Advisors? 90% for ?an million AirTr an nental Airlines aised $413 million from Chase: $235 is related t0 advance purchase of fr miles and $1.78 million for csrtaln commitments related to tie cc-branding agi eement a base was prmn?ded guarantees by OEMS i ii i :ciudirg the extensian of the the end of 2016 ing up about $350 million in cash that was restricted. industry knowledge is ?at Airlines - ReceNeda letter of credit mislead by} Basing Capital Cm'poration of up to $150 mil] feta?. Received raliei on its risk of :ash leakage to credit card holdbacks via obtaining a letter of _c_re:iit amounting to $35 million ion to satisfy potential hol?back requirements with credit card processors" tars ment for equent- us AIRWAYS CONFIDENTIAL Agenda - Overview I Current macro environment I I Actions underw?y by US airiine industry- - US Airways status and initiatives - Financing initiatives I Financial outiook: 5?year ptan - Summary - Appendix US AERWAYS CONFIDENTIAL RANPRODD474975 Assessment of US Airways' position Despite the overal} turmoil in the induatry, US Airways is in a strong fundamental nnui?nn - US A'l ways has achieved a signl?cant turnaround in Its operatlons I LCC enjoys an enviable and sustalnabie cost posltlon - 62% of labor covered by new cams completed with mmlmai labor CASM impazt Pile and ?ight attendant negotiations underwav LCC expects cutceme to ieava it stiil hug 11y competitive vis-??vis peer group Upgra cling to a newar, simpleg more ef?dent fleet driving down operating costs - Aggressivelyaddressmg issues al?ing fares - Cugting rapacity, particutal'?v in domestic Us - Inc easing ancillary revenuas through new pricing mode? pricing - Deareas?mg operaticnal cost - US expects to generate pretax pro?t in 2009 US AIRWAYS CON RANPRODO474976 US Airways network . US Airways network is based on three primary hubs and serves over 200 destinafinnaworldwide Domesiic y, La A - Over 50 domestic destinations OverSO internationaldesth1atl' ns a Comprehensive coverage of the - Comprehensive COVerage of ail East cast major European dues I Secs darv hum ianm-ip nrA PIT LGA, BOS US AERWAYS RANPRODO474977 Market leadership US Airways dominates a" its primary and secondary hubs ar hubs Seat share I Nuerkret Peak .. Len-Emma302 gamed 129 118 87 KWWE US AIRWAYS RANPRODO474978 Internationai network deveiopment US Airways continues to successfuiiy impiement its international growth plan tq Eurooe and Latin America gilut' gghig gs Imaginau?giw '2 ASN.5, bn was 200?; mm 2009 .006 2007 2008 Serve; '20 European and 32 Latin American/Caribbean destinations Capa icy up 34% in 2009 versus 2006 . Strong 20% prufit margin in 2007, 8 points higher than US. domestic average 15 ne?r wide?body airtraft wili he added in 2099, 2010, and 2611 to maintain steady 9 row J1 Further divarsl?es US Airways capacity growing internationai ASMS from 18% to 22% of total 18 points iuwer ihan legacy carrier average US AIRWAYS RANPROD0474979 Operational performance US Airways has achieved dramatic turnaround in short ?me Denod - Qn-g?me agicrmance {win 14 min) "49 of its operations in a very me Worst to First Hm sre lhviankim? af?x-1M! nirli?u?s in Mirna? reliability. ?mm US AERWAYS CONFIDENTIAL RANPRODO474980 Operational performance shortt me period vigihbtiphiu almuim US Airways has? achieved dramatic turnaround in its operations in a very US Airways cleans up bag~hand3 ing mess and lwmw?ah .ii?w wde mu .emw?. .M. Nahum-wing.? One bright spot: ITS Alma 5 Group Inn. is 92mm butler this year than inst sum- mer, demonstrating :mw proh- aren?t a? wealhehrelawd. US Airways invested in new bag- equigrmem. rm- quimd more gates to reduce de- {ays, bum more buffer into its schedmeandheei?ed up manage- mem at 313 Phlladerhia hub 10 ?x problems Lhere. Inquirer August 3, 2903 - Wall Street Journal {Eastern Eafu?cn) My 5 2905 US AIRWAYS CDNFEDENTIAL RANPRODO474981 Competitive labor cost Lab?r cost is currently the lowest among the network carriers and LCC expect slamaintainih 3 H08 M15. us (r - US Airways. managed to 4?6 5 reduce its iabor cos 5 more aggressiveiy than sther . carriers I In addition; ali mat rial p'ension and retire? ant henefits liabilities 1 are ellminated . - Law rates, particutarry for top of scale wage; a likely be durable due to contract durations . US AIRWAYS CONFIDENTIAL RANPRODO474982 CASM change Cos: initiatives to counterbaiance the effect of investing in I Initiatives 2008 2009 bum Change Factor Change SeEHng exoenses 0.69 Labor . CLUE Gther 0.12 Pinata. FA furicugns . Masks. Aircraft rent contra Et 0 0'9 33 r: up w-Jm u: in wow 219531555 Other rent a (0-9 US AIRWAYS CONFIDENTIAL RANPRODO474983 Fleet Mainiine Us Airways is upgrading to a newer,? simpler, more efficient ?eet . - A ?1 drivnu? num as Emerita] 573 A3 20 Fan'u?iy *5737 fleet be hased cut' compieteiy by ?013 and be replaced th A320 Farr:in aircra?t - 33757 ?eet will ha educed substantially, and . Winglets wiil he in=tailed on the remaining aircraft to reduta fue! consumption I $45190 ?eet can be phasedAout at any time without affecting the minim! r. scope requirement? with she pilot unions .1 New? US AERWAYS CONFIDENTIAL RANPRODO474984 Fieet Express illri?i?i?ii Express ?eet re?ected in business plan incorporates more smali - - - t, . vars fluinn +k=u :2 010 2 US AIRWAYS CONFIDENTIAL PRASM increase US Airways? PRASM projection for 2009 is in ?ne with overall industry GtoyrpvaBa?m Change, 95~ Ll??14,2 14 2.7 is canfidenrin Its projection of RASM increase {or 5-year pian 0/?th US AIRWAYS US AIRWAYS CONFIDENTIAL Anciilary revenues - overview A-la?carte pricing [5 expected to generate $750 mitlion in 2009 I 2008 nitlatwes: econd checked bag fee is projected to acid 584 million in total revenues 1 Current revenues forecast checked bag fee is projected ta add $349 million in total revenues Current revenues In Sine fcrecast - choice saets - - 5 ?ight sales resulting in $47 miliion in revenues - Liguorm?i} - Nt-malcehcilc beverage - Snacks?? . . - Other Mow-pack- - 2009 nitiatives: . - nice seat program to be converted to advanced sea! in (2109, px?ogacte 2009 venues of $275 ramp up through mvre avaIlabSQ mats and purcha, points RANPRODO474987 Ancillary revenues second bag fee . - - - Second checked bag fee projected to generate $84 miilion in total raven x. 5 5 tr 4. .eoa - Actuai 4.550- 4.500 US AIRWAYS CONFIDENTIAL - RANPRODO474988 Ancillary revenues first bag fee First checked bag fee projected to generate $349 million in rota; revan qea?uJylnu ppanest'lm afresh?. (tuai dalw stimated 1 1? i i US AIRWAYS CONFIDENTIAL RANPRODO474989 Ancillary revenues_- choice seats Introduction 01? choice seat fees is expected to generate $5 as in 2008 Mavdulv 2003 results support ne?mah?a reven 30 4 tn 325 320 20- 1mm daily Actual Estimated gr -. US AIRWAYS CONFIDENTIAL RANPR000474990 Anciliary revenues - choice/ advance seats Introduction of advance seat assignment fee is expectedu?co generate $274 FY yevenue 9 . - May-0E! -_Dec-08 Apr'og Dec?09 Seats ava?an 55% 93% Sazes channe - . 59% 100% 5 . 53:55 rate . . .. . I 2am) 2009 us AIRWAYS Anciltary revenues New revenue initiatives are expectedto increase an n'ual revenues by over ?(hm-1n Idgw I I $754 243 $1.53 ag fees sag fees hie} Chain: Assignment" 1., v. ran-heard .. .2Q?ea. I US AIRWAYS I RANPRODO474992 Agenda - Overview - Current macro environment - Actions underway by US airiine industry - US Airways status and initiatives - Financing initiatives - Financial outlook: 5?year pian I Summary II Appendix US AIRWAYS RANPROD0474993 Unrestricted cash covenant Unrestricted cash covenant of 51.25 billion poses a risk in the event of increa in!) credit card hnlrihark Citib? ieci financing facility of $1.6 billion with maturity in 2014 - are: LIBOR 250 - inimum unrestricted cash covanant of $125 billion - US Always ended the ZQDB with $2.8 billion in total cash of which was 1 nrestricted - Cash burn in high-fuel environment and credit card holdbacics may pus Airw ys to fall below cash Covenantiimit A5 response, US Airways initiated a three?pronged approach to tackle cove want issue: raising new liquidlty of at least $530690 million - lowering unrestricted cash covenant CBF to million Addressing credit card hoidback risks through above actions and securing cr support from business partners liUS i i US AERWAYS CONFIDENTEAL RANPRODO474994 Credit card holdback issues- US Airways already has $293 million in totaiholdhacks from credit card . . . . . . - US Al waya in dialogue with Chase (Visa/MC merchant processing bank) regar ling business outlook and liquidity Initiatives .- Current holdback tatals $201 million, with an exposure of up to $676 million at 206% holdback (additional $475 million) - 0 specific financial tests that wuulcl trigger additional haldhacks, but underlying agreement gives Chasa certaln discretionary rights - Dialogue with Amex Is also on the way regarding business outlook Standard 7-day receivables amount to $80 I?illiaii I - Current holdbacks include an additional $12 mlliion amounting to a tutai of 5,92 million - it 100% holdback, exposure would go up ta $262 miillnn (additional $170 illicm) IUS Air? 5% increase US AIRWAYS CONFIDENTIAL - RANPRODD474995 Liquidity initiatives overview Numerousinitiatives are being pursued to address bank facility Gross Dabt Key liql. idiry initiatives: financing 'Princip' Hy raise cash: of frequent fiver miles (Barclays) . NA CEME- varicxus liquidity suppcli initiatives 200M NA - 5 Fe of 25 EMB 190 aircraft . 120M NA - - 0 her SIZHGOM NA Princip 'Iiv refinance Citibank are parts loan ongoing discussiens with an 506M Eitiple MRO and financing inatitutions IProvide credit Card hardback pesition - A range letters of credit supported by LCC business A: 100-150 N13- r: r?tners in of additional credit card holdbacks 0Futl Pq?tential Totals $0.5bn . 1.4km Net cash 200M 120M saisocm 0.9M US AIRWAYS RANPRODO474998 Unrestricted cash flow position Successful execution of this plan a 1 inn nack vailwv would with its business 9 artners means LCC haul! ?mm a -uo ?er-anon Samu- mm Alt. ima?shn?: US AIRWAYS RANPRODO474997 Sayear plan unrest. cash balances The iiquldity initiatives provide a cushion of at least $0L5bn over the unrest irl?nrl rank rnunnanf ant? up 0-15 #1 Fun, if In,? dci'l', . is suuessful ?nd 25 ?aimgbisgtancg 5} i August 3, $50 2, 001) 2, 56:30 2, {>20 1,550 43943; . 1,0041011 12 13 Ummjiiy Hui} Bahama a: m2! 5' any man!- us AERWAYS CONFEDENTIAL Agenda - Overview i Current macro ?nvironment - Actions underway by US airline industry 4 US Airways status and initiatives - Financing initiatives - Financiai outlook: 5-year pian - Summary 3 Appendix US AIRWAYS - - . 5?year plan statistics assumptions [and I.- "be; 1513 1,317 I u. u? um mun-v ms 47) as a; ax? EH: (-1) 7111! 7mm . Hum :11ngl. (weum, (um sum 51?: - am mm mm um um: mani- 1 ansIt_ 15: :51 Mum's-w cam mi 1.x nae us 225 I3: Mush :up: 19.1535 15.: Pad 0.: Wt:th 1.1.: 374 an an wad r?A 1.113.15: an 14;: 14.30 mass 13,351 ?a no ms 2125 an an 2115 rmcmu em mm ma 917: 9H m- 13.: wuu?mm; 11.5 us: In: ms nu: lemktEyih- Dynah rm [chi Ma 11/ m: 1. maxing i 5, US AIRWAYS CONFIDENTIAL 5?year plan ASMs Overs? capacity cuts of 5% in zooa?ollowed by 'm reg? and buildup "f . cum 03-09 09-13 +4 US AERWAYS CONFIDENTIAL . RANPRODO475DQ1 5-year plan Passenger RASM grOWth - PRASM expected to increase by 11% in 2009 _a:_1d remain essentialiy 5 flat in I'm yea." . M. m?ne .C08 2009 ASH Mix 83 83 54 95 Exuess PRASM i . I 2005 2069 2916 2011 2942 2021 11.4 .05! 3 0.0 ?10) mm?, US I RANPRODO475002- 5-year plan - CASM growth CASM forecasts based on assumptions of average fuel price of $1.22]be for ")an and 15Fan rant-g: tin. 4 . Halal-Una CASM a tq .1 rs ?45? Bla?dadCAE-?M ASM NIFunm: 21233 2009 mm 291.: 4 5.3 ?o.7 -2.o ~12 v1.4 We) A524 ?an 17 :7 15 Full pe?r gal US AIRWAYS 5-year pian - Fuel efficiency Fuei costs based on forward fuel curve as of August 8, 2003 with 2009 - 3551"? Fuel :9 at C1 ?5Ihk$ :par gallon nan-pru- flan? duillne ririunn {Annoy rnai- nun? nu" rind I i i i i Geno"; per saatnml (DOD) :e??mwk? US NRWAYS CON RANPRODO475004 5-year plan ?a Capex Non vessential cape): has been pared back completeiy given LCC is in a any,? a Aircraf capex (SM) :5 Non -Arrcrafr (39an (SM) 2011003 2009 2036? 23312 2013 2003 20x79 3010 2032 US AIRWAYS 5?year pEan - Financial reSults . . Under the Smyear plan assumptions, US Airways graduaily builds back i .its in 1g Revenue (5M) Pre-taxlncoma (5M) 1,235 1924 2:595 2010 11:3 2063i Margm% Gil 2.23 11,41 6.15 7.99 r" i US AIRWAYS RANPROD0475006 5-year plan Pretax EBITDAR margin Resuk is an improved and positive pretax margin starting from 2019, aibeit 4 1 I Pretax I EEITDAR margin 2209 zen: 2015 2013 20;: 2008 2009 2010 2011 28:2 2013 US AIRWAYS . RANPRODO475007 5~year plan -- Income statement - . - mm m9 mm 2m] 3512 . 2m: I. - 09mm. Rm Deva-am 8.39) an 9,591 - mm mm 11.1157 1 ring-nan lbw-n2 2,950 3,115 5,11! 3,1? 3,194 I 3,157 7 mg? . 12w . us 145 147 14(- Bus-?u! Ram-:2 74 77 75 7i Eli-9r Elan ?72 - 13.735 I)qu Til-ream. 1' 7M 2m? 2323 2.531: in}! 1: Tu 1m 4 7'11 m1 457E am End 121E: 131!) I .291! 1.250 1:52 1,137 (X: A 17v: (If 5'65 525 "Ilium-Ind LII-diagks use 564 57:! E35 mm) klhyu'n; ?m 75 inn-hu- 2m 7m 2m 2&2 MSC Flu-?g ?no. Exp-A 75 5E 71 70 1317 want 1 ,au 1,971 was new 1,114 1. 19': I Hm 23,123 ma1 um 1 55,215 ham-5 hips 241 .31 1x? 1,29; alums! Err-om 797 ?81 715 21-6 mum (Item?s) (56) (130i (151) mm ta) (ta) - l?dllHu-?prnling?ml WW 7 a. . Imam-o 1 9 a 5m Net hm? nt}. Baum-u I: Gnu-me _m US NRWAYS CONFIDENTIAL I - RANPRODO475008 WMV, 5-year pian - Balance sheet an: all: 2:2 5:5 - my magma um rig-amu- um - - um mum: nay-M In] tug-yam - um 1'qu can rum?s; um "rm . US RANPRODO475009 5-year plan - Cash flow statements MW US AIRWAYS 0 Agenda - Overview - Current macro environment - Actions underway by US airline industry II US Airways status and initiatives - Financing initiatives - Financiai outlook: 5-year plan - Summary II Appendix US AERWAYS CONFIDENTIAL 1 Summary - . i i i. I, I Us lrlihn m?incnu .that context, US Airways is performing weii Vis-?a-vis its peei's US .?irways is aggressiver addressing threats to and iiquiditv Raising fares Cutting uapacIi-y. particulariy ir- mmes'tic D5 . increasing andilary revenues 'hrcugh new pricing modei (2.55., a can pricing) Decreasing operaiionai test {inniuding fleets and retiring absoiete aircraft;- WEth these Initiatives US Airways is expected to_generate a pretax profit in 2009 .Jwar, US Airways is facing a speci?c issue: unrestrizted cash covenant We reed your support as a business paitner with us to successfui effectuate our pronged approach: ?aming nes Pa?ra dity of a: ieast 5509-600 milliom as means :0 amainlng Eower covenant ieval Addressing credit card headback risic wim cram: supncn iron-i business partners ?4.Mm\ US AERWAYS Agenda - Overview - Current macro environment I Actions underway by US airline industry - US Airways status and initiatives Financing initiatives - Financial outlook: 5?year pian Summary Appendix US AIRWAYS 3 Swyear plan assumptions Fleet Sta ks Raven ue salaries ?m .. - sv um?. him mm AH ctner Airbus 56E of ihe same medal Lease renevaaig assumed renewedfexrended (as appropriate) at the existmg rep: ra Seats are cream: by equipment and are seasonaEWed Industry RA :7 15 to grow at 2'9 Er: 2009 (driven. bya 20% reduction Ir demesiic mszt?y capa? 3% In 201 and 2% 8184- fear thereafter Animal's! Revenue contains In 2508 ramp-lug ua 537*? passengers in 2010 and grow Emress HASH is assumes: to grew at 1' 6% in 20091 i? thereafte? Nl \abor grows pay scams are Bacardan ta existing offers or estimates with contra ter- natlng at the and of 2011, 2912 and 2014. Paint anti Rig Attenaan: centric: assumed to be rati?es in Jan 2510 Bene?ts are :reatgd as a percentage of salaries 2010. and 2% every ye 3r Pram. Sham-1g ?5 base? an Jule or oelcw pre?rax margm, aw of ies are assumed to De Eeased at rates equai re awning Airnuis aircraft 8 with are reafte r' [f E. US AIRWAYS CONNDENTEAL RANPROUO475G14 5-year plan assumptions (conth Fuel No n-op Tax Financin' - Fae! prlces are based c-n futures markets and spreads. The Forwart- curve for crude; ., as EU on July 4y. .uu rorecas. ?.qu a as - 3 . no?: . A 3.. ck spread remains constant I F.1d mum is derived :?ram data by equipment type enance casts grow a;ch NEWS and Enciuue adjustments fer In?ation and rity curve for aging alrtraft - Restricted Cash changes with changes In ATL - LEBDR baaed er: 3 month fai'ward curve as of 7;;512008 - the enc? of zqcaa the NGL was 5353M anc- is . ?treasedtnecreased basea on lncoma the forecast - PDPs be m?ng In 2009 are assumed to be 60% ?nanced except for Ana's I A321 (1'53 deEEverie-E from Mann 2993 through June 2509 are assumeo to be cwne deb: of per airc'aft a garctay?s samba, mnes prevwchase assumed ac close in Sep, 2058 I DEM ioar? a sumed (a ck: Se 50-33 at 500 be is new: track an a wk. - Spare Parts .?rem sehing spare parts and parts business In the U3 ?5 assumed :5 Close De?c 2005 at 500 basis US AIRWAYS CONFIDENTIAL RANPRODO475015 SAVMEIV -: -C j} m- ?f luamaiew awoaux 15233103 300: 2008 Forecast - Cash flow statement IQI and inAIRWAYS CONFIDENTIAL 2008 Forecast Batance sheet - I mu mu 3&4. .s we .5: Ms 1-.- ipl au 153:11 my 1m mu um jUII): US AIRWAYS I 2009 Forecast Income statement u: A, In! A- 5w US RANPRODO475019 US AIRWAYS CONFIDENTIAL 2009 Forecast Cash flow statement - a- I- Ae la RANPRODO475020 2009 Forecast - Balance sheet nun (haw uu uu 1.mail (mth 2- an an 2w 1? mar-unann- am ?Ii KI- ll. um Islamic-cl ?3 1'10 u! no is! mm.anrundwa m. WMWM m, ,3 a. nuncthohzun Lac-runmimic mu 1,5! um 1,515 may 1.1: xp! nuamin-munth NS 365 991' 9? H5 In mm.? .z ., ., .., twink 903 as?mu-exu- n: n, n: u: w: 155nm1.AIRWAYS RANPRODO475021 Fare increases capacity reductions have enabled fare increases in a majority of markets LQGME Change,% 2t)= it 8 2 1275-7. ,m m, 305' Ciih C?l- (HIV ?057 (E3- LAX- FHL FEGX 9.5 U5 Dim PHL ETC h'V?i U04 PHL 514$]? .-.. Changewe) WAS gang in?mwx US AIRWAYS RANPRODO475022 From: Paui, Casey Sent: Thursday, September 10, 2009 08:28 AM o: Samp, Heather; Ham, Jon; Seitz, Kirk; Sifts, Ann CC: Lyon, Timothy Subject: RE: and BOSWAS problemos 1) Batch ID: 0855814 Carrier: US Tariff: Total Transactions: 24 Good Transactions: 24 Errors: 0 Warnings: 0 ?n~~?Original From: Samp, Heather Sent: Thursday, September 10, 2009 8:08 AM To: Ham, Jon; Paul, Casey; Seitz, Kirk; Sitte, Ann Cc: Lyon, Timothy Subject: RE: and BOSWAS probiemos Let?s try the increase again given we have some attention on the market. From: Ham, Jon Sent: Thursday, September 10, 2009 8:08 AM To: Samp, Heather; Paul, Casey; Seitz, Kirk; Sitte, Ann Cc: Lyon, Timothy Subject: RE: and BOSWAS problemos I made the changes. Left them there for 3 days and DL didn?t come along. So I reversed them back to what it is now. From; Samp, Heather Sent: Thursday, September 10, 2009 8:06 AM To: Paul, Casey; Ham, Jon; Seitz, Kirk; Sitte, Ann Cc: Lyon, Timothy Subject: RE: and BOSWAS problemos was jacked up last week prior to market review. The-change should have been to reverse back to having min stays. Who made the changes? rom: Paul, Casey Sent: Thursday, September 10, 2009 8:04 AM To: Ham, Jon; Seitz, Kirk; Sitte, Ann; Samp, Heather Cc: Lyon, Timothy Subject: and BOSWAS problemos Ham, Last week we changed around because of a market review ii think). We removed the min stays on the first couple of Zl/i?ap?s, lowered the 7ap price point and raised the Gap price point. This has angered DLNW, and they have dumped the structure into BOSWAS. Tn BOSWES this represents a pretty big discount on what is currently in there (undercutting US by on the Gap, 230rt on the flat l4ap). We carry a ton of pax in BOSWAS compared to BL, and DL carries a bunch of FAX in compared to US. we have more to lose in BOSWAS too, I think we need to bail on the changes, thoughts people. We could fight them back but I don?t think it would work, and we would lose a little of our own credibility when we hit them in markets where we control the pricing and we expect them to follow US (this is probably how they see Cp Casey Paul Team Lead Pricing US AIRWAYS 480.693.5016 casey.paul@USAirways.com US AIRWAYS CONFIDENTIAL ?mm "my" M4may~xmna~xanmmu ?a x, From: I I Parker, Douglas Rent: Saturday, July 25, 2009 12:21 AM 3: Kirby, Scott $ubject: Fw: FAMR raises bag check fees for domestic ?ights Attachments: AA Bag Fee Increase Estimate I can?t believe I?m saying this, but I think we should stand still on this for now. I recognize that increases the chances of everyone standing still. The problem is that the best alternative: "matching" AA and adding a $5 airport fee, won?t be viewed or characterized as matching. It?ll be called a raising of the fee to $25 (which in reality it is since only 20% of par use web check?in). That both sounds very high (at least to me) and also, I fear-could position us much like charging for sodas did the cheap airline. If you buy all of that (which of course is debatable) then the next best alternative is to truly "match" AA.by raising everything by $5 but eliminating the airport surcharge. The problem with that is, the aren't compelling enough for us to stick our necks out first. I do think DL or UA won't let them have an advantage, so it'll get matched I?m just not sure we should go first. If a couple weeks go by and no one's moved, we can always jump in. Anyway, those are my initial wimpy thoughts. I?m happy to be persuaded otherwise, just wanted you to know what I was thinking. Thx. From: Honey, Spencer To: Hester, Kerry; Parker, Douglas; Kirby, Scott; Eberwein, Elise; Isom, Robert; Kerr, Derek Sent: Fri Jul 24 14:41:51 2009 Subject: RE: raises bag check fees for domestic flights Based on bag counts used to derive the 6+6 forecast the incremental reVenue values during Aug? Dec 9 would be (assuming we implement in August): Matching American $20 bag (Web Airport) $30 2nd Bag (Web Airport) annualized) Increase current fees by $5 across the board with Airport/Web difference at $5 annualized) - This assumes the webmprepay check?in rate around 20%. Attached are the calculations, please let me know if you have any questionsm Thanks, Spencer From: Hester, Kerry Sent: Friday, July 24, 2009 1:31 PM To: Parker, Douglas; Kirby, Scott; Eberwein, Elise; Isom, Robert; Kerr, Derek Cc: Honey, Spencer Subject: Re: raises bag check fees for domestic flights I sent Scott and Robert some #5 last night about value of charging elites. for silvers alone. Big money. - Kerry F. Hester Vice President, Reservations and Customer Service Planning 3 Airways e80m693?5987 US AIRWAYS CONFIDENYIAL RANPROD0526174 From: Parker, Douglas To: Hester, Kerry; Kirby, Scott; Eberwein, Elise; Isom, Robert; Kerr, Derek 2? Co: Honey, Spencer Sent: Fri Jul 24 13:25:56 2009 Subject: RE: MAME raises bag check fees for domestic flights I wish they didn?t have the technology to exempt their elites. From: Hester, Kerry Sent: Friday, July 24, 2009 lzl? PM To: Parker, Douglas; Kirby, Scott; Eberwein, Elise; Isom, Robert; Kerr, Derek Cc: Honey, Spencer Subject: Re: raises bag check fees for domestic flights I'm in PHL. Haven?t turned the bb off yet. I asked Spencer to send us a note w/ estimated value. If they did a straight $5 raise, I bet they don?t have the tech for fee differentiation. Kerry F. Hester Vice President, Reservations and Customer Service Planning US Airways 480~693w5987 From: Parker, Douglas To: Kirby, Scott; Eberwein, Elise; Hester, Kerry; Isom, Robert; Kerr, Derek Sent: Fri Jul 24 13:07:28 2009 Subject: RE: raises bag check fees for domestic flights I?m quite certain that?s right. Kerry (or Robert since I think Kerry may be on her way to Europe),y how much would we estimate (very roughly) we?d gain if we matched this? Thx. From: Kirby, Scott Sent: Friday, July 24, 2009 1:05 PM To: Parker, Douglas; Eberwein, Elise; Hester, Kerry; Isom, Robert; Kerr, Derek Subject: Re: raises bag check fees for domestic flights I think they just raised everything by 5 From: Parker, Douglas To: Eberwein, EliSe; Hester, Kerry; Isom, Robert; Kirby, Scott; Kerr, Derek Sent: Fri Jul 24 13:04:39 2009 Subject: RE: raises bag check fees for domestic flights I just read AAfs release and it doesn?t say anything about saving $5 by checking in online. They do have a subtitle, though, that says AA ?remains competitive with other carriers". Are they just raising the fee to $20 and saying that?s competitive with all of us because we charge $20 at the airport? If so, this is a pretty big deal, huh? Thx. From: Eberwein, Elise Sent: Friday, July 24, 2009 1:00 PM To: Hester, Kerry; Isom, Robert; Kirby, Scott; Parker, Douglas; Kerr, Derek Subject: Fw: raises bag check fees for domestic flights US AIRWAYS From: PR Newswire Complimentary Monitoring To: Eberwein, Elise Sent: Fri Jul 24 12:58:40 2009 ~qubject: raises bag check fees for domestic flights :urtesy of PR Newswire Complimentary monitoring .ditor Notes: NONE raises bag check fees for domestic flights [24?Julye20093 AME raises bag check fees on domestic flights by $5 Increased fees apply to tickets bought on/after Aug. 14' CHICAGG, July 24 (Reuters) AME Corp parent of American Airlines, said on Friday it would raise by $5 the fee it charges to check a first or second bag on domestic flights. The new charges apply to tickets purchased on or after Aug. 14. The higher fees will extend to American's regional partner American Eagle. The fee to check a single bag will be $20, and the fee to check a second bag will be $30. U.S. airlines, struggling to bolster revenue, have begun charging fees for items and services that used to be complimentary. Earlier this week, Continental Airlines said it would raise its checked bag fee on domestic routes by effective Aug. 19, and said that other initiatives to raise revenue would follow. AME shares were up 8.16 percent at $4.64 in late trade on the New York Stock Exchange. (Reporting by Kyle Peterson; Additional reporting by Deepa Seetharaman) Company Codes: NYSE2CAL Copyright Thomson Reuters 2089. Click For Restrictions. 1/24/2009 15:56 EDT rou are receiving this Complimentary Monitoring transmission at no charge, as a benefit of your organization's membership with PR Newswire. If you would like to stop receiving Complimentary Monitoring transmissions, please reply to this email with your request. Are you interested in learning more about reporting and other aspects of your PR Newswire services? Check out our online calendar at and sign up for an upcoming interactive webinar. PR Newswire Association LLC, Distribution Services Department, 350 Hudson Street, New York, NY 10014 US AIRWAYS From: 7 Kass, Howard "lent: Thursday, July 23, 2009 07:41 AM . Johnson, Stephen L. Subject: FW: Randolph Draft FAA Petition: Privileged and Con?dential Attachments: Another example of what I raised with Ben yesterday on regulatory matters. From: Cohn, Robert E. Sent: Wednesday, July 22, 2009 6:15 PM To: Hirst, Ben; Newman, Andrea; Van der Bellen, Alexander; peter.kenney@delta.com; Yohe, Donald sally.veith@delta.com; Kass, Howard; Chapman, Tom; Morgan, Jeff; Sametta.c.Barnett@delta.com - Cc: Shane, Jeffrey Rizzi, Patrick Conn, Robert E. Subject: RE: Randolph Draft FAA.Petition: Privileged and Confidential Robert E. Conn Hogan Hartson L.L.P. 555 13th Street, N.W. Washington D.C. 20004 Direct: 202 637 4999 Mobile: 703 203 8820 ~Fax: 866 728 7784 or 202 637 5910 Amail: recohn@hhlaw.com made the following annotations. This electronic message transmission contains information from this law firm which may be confidential or privileged. The information is intended to be for the use of the individual or entity named above. If you are not the intended recipient, be aware that any disclosure, copying, distribution or use of the contents of this information is prohibited. If you have received this electronic transmission in error, please notify us by telephone (+l~202~637~5600) or by electronic mail immediately. US AIRWAYS 3470 Strategic Mara and F?nam?ng initiat?vm US AIRWAYS CONFIDENTEAL {Ex rs state ents Certain of the statements contained herein shouid be considered ?forward?looking statements? within the meaning oftbe Private Securities Litigation Reform Act of 1995. These forward looking statements may be identified by words such as ?may,? ?wiil,? ?expect,? ?intend,? ?anticipate,? ?betieve,? ?estimate,? ?plan,? "could," "should," and ?continue? and simiiarterms used in connection with statements regarding the outlook, expected fuei costs, revenue and pricing environment, and expected ?nancial performance of US Airways Group (the ?Company?). Such statements include, but are not iimited to, statements spent the bene?ts of the business combination transaction involving America West Holdings Corporation and US Airways Group, including future ?nancial and operating results, the Company?s plans, objectives, expectations and intentions, and other statements that are not historical facts. These statements are based upon the current beliefs and expectations of the Company?s management and are subject to significant risks and uncertainties that could cause the Company?s actuai results and ?nancial position to differ materiain from these statements. Such risks and uncertainties include, but are not limited to, the following: the impact of high fuel costs, signi?cant disruptions in fuel supply and further significant increases to fuel prices; the impact of future significant operating tosses; the Company's high level of fixed obtigations (inctuding compliance with ?nancial covenants related to those obligations) and the ability of the Company to obtain and maintain any necessary ?nancing for operations and other purposes; the impact of changes in the Company's business model; the ability of the Company to maintain adequate tiquidity; changes in prevailing interest rates and increased costs of financing; the impact of economic conditions; the of the Company to obtain and maintain commercially reasonable terms with vendors and service providers and reliance on those vendors and service providers; reliance on third party service providers and the impact of any failure or disruption by these providers; labor costs, relations with unionized employees generatly and the impact and outcome of the labor negotiations; reliance on automated systems and the impact of any faiiure or disruption of these systems; the impact of industry consolidation; competitive practices in the industry, inciuding significant fare restructuring activities, capacity reductions or other restructuring or consolidation activities by major airiines; the to attract and retain quali?ed personnel; the impact of global instability inciuding the potential impact of current and future terrorist attacks, infectious disease outbreaks or other global events; security?related and insurance costs; government legislation and regulation, including environmental reguiation; the Company's ability to obtain and maintain adequate and infrastructure to operate and grow the Company?s network; costs of ongoing data security compliance requirements and the impact of any data security breach; interruptions or disruptions in service at one or more of the Company?s hub airports; the impact of any accident involving the Company?s aircraft; delays in scheduled aircraft deiiven?es or other loss of anticipated fleet capacity; weather conditions; the cyciical nature of the airline industry; the impact of foreign currency exchange rate fluctuations; the ability to use pre?merger NOLs and certain othertax attributes; to integrate management, operations and labor groups; the to maintain contracts criticai to the Company?s operations; the ability of the Company to attract and retain customers; and other risks and uncertainties listed from time to time in the Company?s reports to the SEC. There may be other factors not identi?ed above of which the Company is not currently aware that may affect matters discussed in the forward-looking statements, and may also cause actual resuits to differ materially from those discussed. The Company assumes no obligation to publicly update any forward~looking statement to refith actual results, changes in assumptions or changes in other factors affecting such estimates other than as required by iaw. Additional factors that may affect the future results of the Company are set forth in the section entitled ?Risk Factors? in the Company?s Report on Form 10-Q for the quarter ended June 30, 2009 and in the Company?s filings with the SEC, which are available at US AIRWAYS CONFIDENTEAL sedative sum US Airways has performed well under difficult market circumstances, but dramatic macroeconomic changes the ?Great Recession?) have reduced liquidity US Airways 2008 Liquidity Program was iaunched in Juiy 2008 during a much different environment - Fuel had been over $140/bbi but had started a rapid decline Forecasters expected US and EU positive GDP growth for 2009 1.0% 1.5% respectively, by Eli) in June and 0.8 1.2% by in July) - Historical precedents pointed to over~11-t2% RASM growth for US domestic airline industry - As a result, the 2008 Liquidity Program was designed primarily to bridge US Airways into a profitable 2009 and beyond Refinanced debt to lower cash covenants, but shortened maturities - Structured to repay $330 million of 2008 Liquidity Program borrowings in 2009 and 2010 Maintained aggressive fleet modernization plan, assuming aircraft financing markets would be open - 2008 Liquidity Program was very successful in bridging to 2000, benefiting US Airways and its partners - Strategic partners have been paid over $2.5 in payments that would otherwise have been disrupted - Unrestricted cash ended 2009 at ?5 billion and total cash at billion - US Airways executed its pian as promised, performing better than peers operationaliy and financially - Became an industry leader in operational reliability Lowered costs, widening strategic advantage versus peers - instituted a is carte revenue programs worth over $500 miliion annuain Produced highest profit margin improvement among peer group However, the 2008 Liquidity Program did not anticipate the Great Recession which has materially impacted cash flow - US network carrier revenues declines in 1H09 were 20% versus 1H08 - Collapse of leasing I aircraft financing market will force US Airways to use $200 million of cash during 2009 forfieet renewal program Full benefit of lower fuel prices was not realized due to 2008?fuei hedges (2009 realized hedge iosses $383 million) - Near?term liquidity will drop to dangerously low ieveis by early 2010 and the short-term nature of the 2008 Liquidity Program now threatens US Airways continued operation US CONFIDENTIAL fme tearyE cent?d US Airways has moved quickly to adopt additional programs to address the difficult revenue environment and shortfall in liquidity I US Airways has responded aggressivelyto the current environment - Raised $234 million in net proceeds through an offering of common stock and convertible notes in Announced slot exchange with Delta, expected to result in $100 million annual profit improvement - Evaluating further capacity cuts of an additional by exiting 25 E190 aircraft - increased check bag fees, including a $5 increase for bag checked bags and a $50 fee for 2?d checked bags on Trans~Atlantic flights, which are projected to increase revenues by approximateiy $120 million in 2010 Cutting costs by at least $150 million annually by 2010 US Airways is seeking to refresh its Liquidity Program to reflect the softer revenue environment and the current lack of aircraft financing and improving its projected cash iiquidity position at YE11 by billion - Defer new aircraft deliveries by approximately 24-36 months on average providing ~$445 million of net liquidity versus 5-Year Plan Key stakeholders relending ~$110 miilion of payments made by US Ainivays since Fali 2008 and extending debt maturities so that principal repayments are made in years 2012-2014 witl provide cumulativer million through year end 2011 - With key stakeholders tending ~$520 million in new loans to bridge the effects of the Great Recession US Airways has developed a SuYear Ptan that demonstrates under conservative assumptions compietion of this Liquidity Program benefits US Airways and its strategic partners - Revenue environment is aiready rebounding Nevertheless, US Airways 5-Year Plan is based upon a consensus GDP forecast and a multi-year recovery of industry revenues with 2011 industry revenue well below historical levets - Under these conservative assumptions, US Airways returns to profitability in 2010, generates significant cash ?ow and easily meets commitmentsto its Liquidity Plan partners - Reaching agreement with stakeholders and closing these transaction by early 4Q09 is imperative - Avoids catastrophic effect of additionai hoidbacks on receipts by credit card processors (earnings call October 22?Ci is a key date) Preserves strong business relationships - Positions US Airways to be a strong long-term player in the US aviation industry U8 AERWAYS I Overview of 2008 Liquidity Program - Effect of recession on industry - Company recent performance - Near-term outlook - Renewing Liquidity Program I 5-Year Plan with Liquidity Program II Summary and timetable - Appendix - Detaiied 5?Year Pian financiai forecast US bidet re The 2008 Liquidity Program was driven by record fuel prices and the concern regarding covenants under the Company's Credit Facility with Citibank Crude zone industry E?orecast at the "time1 0 $U8fbbl change1\goY on Price - GDP 100 rest Gil}? outiooir at the time US WMSM buttock at the time Chan 9 cents 44.0 0.5 0.0 :05 '07 bar: 2007 2008 2009 titstoricei and industry at the time pointed to GDP and revenge growth Source: Bloombergl Economist Inteliigence Unit (EIU). US Airways research, US Airways Note: 1. Fuei price changes shown from 2007 to 2009, and forecast based on forward curve US AIRWAYS CONFIDENTIAL 2/ its? rty reg US Airways implemented a $1.05 billion liquidity financing program with the participation of all of its key stakeholders US Airways Equity offering $179 Barclays Credit card agreement $200 GECAS Spare parts: spare engines $305 Airbus Purchase agreement amendment, spare parts $250 Republic Hoidings Working capital loan $35 Air Wisconsin Working capital loan $35 GE Engines and others ~$45 - 2008 Liquidity Program allowed US Airways to: - Avoid defaulting on Citi $1.6 billion term loan Avoid catastrophic impact of holdbacks by credit card processors I US Airways used ieverage of $400 million cash pay down to obtain: - Reduction in the unrestricted cash covenant to $850 million with the ability to reduce to $750 miilion, in exchange for additional pay down - literE alt The eregrem the ettehiort in eereetrieted ceeh the eeverreet irr the Citteerik credit teeiltty errd etteettvety the rietr ot oredtt cerd US eliefits to staiteholers By securing such liquidity, key stakeholders preserved important relationships that would likely have been materially affected by a Chapter 11 filing airless Took delivery of 19 aircraft (total payments to Airbus of $639 million, net of backstop debt) Made PDP payments to Airbus of $207 million a GECAS Paid. $295 million under various lease and other financings, net of spare parts refinancing Paid $39 million of principal and $15 million in interest on 2008 spare parts Barclays - issued over 13 miles to cardholders - Paid $11 million in interest on 2008 loan GE Took delivery of $13 million in additional engines Paid $167 million in maintenance costs and deferrals Paid $11 million of principal and $6 million in interest on 2008 spare engines facility a ?epaelic - Paid $571 million underASA a Paid $519 million underASA ?$15 was peiti to the seas Liquidity Program pertisipai?its over iast i2 months US CONFIDENTIAL US-DOJ-00490305 - Overview of 2008 Liquidity Program - Effect of-reoession on industry - Company recent performance I Near-term outlook - Renewing Liquidity Program 5?Year Plan with Liquidity Program II Summary and timetable - Appendix Detailed 5?Year Plan financial forecast US AIRWAYS CONFIDENTIAL acre eewrc The actua! macro environment was entirer different than the mid~year estimates of forecasters, making it difficult to accurately forecast revenue and profit Gtceat mat Gm" gr?th U3 met @353 growth change change 08 Aug 2008 ca 4-0 Jan 2009 6 GiobalGDP mm 09 3.5 Jugzoog 310 2F?mar??e?us 1.5 - 1.0 2 - 0.5 1991 recession Iow? cint 0'0 9 @9 ~05 4.0 - 1982 recessron iow?pomt m1 5 ?2.0 1' 2.5 a ?g - ?03 ?04 '05 ?06 ?07? ?08 ?06 ?08 Eeenemtc eitaatien deterterated dramettcaty etace midweemmer 2e98, reqetring LES Airwaye ?te receithrete heth Eta egaerattene and financee Source: Economist Entetligence Unit (EIU) US AERWAYS CONFIDENTIAL ?eete {m Absolute and unit revenues have fallen even faster than GDP from the peak in July 2008 Revenue indieetere Hleterieal Emil: revenue change cents perASM 9 year average 5 Wm? Rev ?20 ASMS Jan FebMarAprMayJun Jul Jan 09A 09A 09A 09A 09A 09A09A U3 network eerrers revenuee empeec? ?626% in ?ll-me, wereue a. US Always deel?ne 13%? mm mall: revenues; declining 29% levee Source: ATA Note: 2009 unit revenue figures are seasonally adjusted US AERWAYS Cepaeity ehamee Airlines have responded to the drop in demand by reducing capacity in all major markets with an unprecedented drop in US domestic capacity relative to GDP level Demeetio Eddeetry capacity Reet at world indeetry cepaeity Billions of 12?month ending average Billions of 12~month ending average Jan-02 Jan?04 Jan-06 Jan?08 Janwio Jen?02 Jan?O4 Jan-08 Jen~08 Jen~10 dilly - lili- US demeetie eedeeity hee new been reduced te below dd?df?i?l, while mereete eerie eepeeity reddet?ede Note: Capacity represents scheduled service to/f'rom the United States only US AIRWAYS CONFIDENTIAL ., Sarrene fi ility The declining industry revenues, lower demand for aircraft and tighter credit markets have dramatically impacted the ability for airlines to finance new aircraft deliveries I Limited access to new capital Many banks are no longer actively lending Limited bank debt has closed sale/leaseback market - EETC market is just starting to recover it Onereus credit terms Lower advance rates - Decreased from >70% to around 50% More cash required to purchase aircraft - Even sa e~leaseback proceeds generate less than 100% financing proceeds - Current iease market is generating proceeds less than 100% of cost 7 Higher borrowing costs - Credit spreads at unprecedented levels LCC EETC Oct 2001 7.076% 12.0% 51% 458.0 CAL EETC June 2009 9.0 0/0 9.0% 54 389.7 UAL Spare Parts EETC June 2009 14.5% 30% 175.0 AMR EETC July 2009 10.375 9.0% 49% 520.1 US CONFIDENTEAL I Overview of 2008 Liquidity Program - Effect of recession on industry I Company recent performance I Near-term outlook - Renewing Liquidity Program I 5-Year Plan with Liquidity Program - Summary and timetable - Appendix - Detailed 5?Year Plan financial forecast US {511v gt??C? has performed extremely well in a very difficult environment I Operat?onal performance Operations for last two years have consistently been among the best of the network carriers and continue to improve - Revenue performance US Airways passenger TRASM feil tess than competitors (decline of 10.6% vs. 12.6%) lnstituted a ta carte revenue programs worth over $400 million annualiy; higher than peers - Additional revenue positive programs have been launched I Cost performance - YTD CASM decreased by 1% despite capacity reductions of 6% - Best year-over-year CASM performance in industry - US Airways CASM lowest among US network airlines and gap is widening (1.3 cents less than average) I Financial resuits - 1H 2009 earnings (excluding special items and fuel hedges) improved by nearly $600 million versus 2008 - Highest profit margin improvement versus peer group (up 9.6% vs. peer group up US AERWAYS performance i Detta Continentat United Northwest American Source: us. Department of tn operatioaat getter ance US Airways moved from worst to first in on-time performance in 2008 and is maintaining the 2009 Northwest Detta Continental United American Transportation Ora?time Performance Numbers United Northwest Continental Deita American Note: YTD 2009 numbers are through Juty 31, 2009 adjusted for US estimated August performance #1 AIRLENE 2003 AIRWAYS CONFIDENTEAL oeretionei performenee continues to Last year?s successes have continued to improve with higher ioad factors Departure on Departure on 67% 70% 3 0 0 Time 64 /o 70 /o 6 Time 79% 80% 1 Pi 3317;335:9108 72519150;! 5 2 3 1 400/ Load Factor 72.5% 73.Luggage Complaints 1.4 33% Load Factor 82.5% 82.9% 0.4 Note: YTD 2009 numbers are through August 31, 2009, except for number for Compiainis which is through July 31, 2009 Source: US. Department of Transportation U8 AIRWAYS US Airways has been a market leader in developing ancillary revenue sources, and is well on the way to earning in excess of $400 million in ancillary revenues in 2009 (over $500 million annually at steady state) Anciitary program iAnciliery initiative impact - US Airways has been a leader in creating ancillary I First bag revenue opportunities - Exceeding revenue expectationsdue to customer acceptance and improved airport collections N0 Observed markEt Shale imPaCtS - No meaningful operational impact and minimal complaints All competitors now have some form of fees, with Southwest Matched AA $20 fee level - worth the most recent to charge for advanced boarding I Second bag - Approximatelya 60% drop in second bag volume - Below original revenue expectations due to bag voiume I Larger relative impact for US versus peers due to decreases - shorter haul, more domestic oriented network I Choice seats - 17% of seats now availabie for sale - Program shifting to advanced seat sales I Onboard product sales rchase at - No significant operational issues 15Seating boarding v/ Pillows blankets Headsets I ?f entertainment Source: US Always research US CONFIDENTEAL 5 ?x fetal reyeeue er A3 White the entire industry has been hurt by the Great Recession? US Airways total revenue perASlVl (TRASIVI) has fallen less than other network carriers ?tH 2&39 TRASM change (stage length adjusted 44.4 -145 US AA CO UA DL Source: US Airways analytics US CONFIDENTIAL met anagemeat US Ainlvaye has been able to manage its cost structure better than most US network carriers and is now the lowest cost hub?and-speke airline 2397 CASM (ex feet} 1H 2mm {ex fuel) cents cents 10 10 959 9.Stage 735 641 1,066 959 1,215 1,013 1,430 1,262 1,526 Length US Airways met dieeipline laye the teundetien fer Note: Stage length adjusted. US . . "4"?in US Airways capacity by 12.8 has maintained cost discipline 6% 'ii-i 2669 CASM (ax Mai and spaciai Emma) change (stage length adjusted Source: US AinNays anaiyfics US AIRWAYS CONFJDENTSAL 8 Despite a $980 million drop in revenues, US Airways produced a fuel-adjusted operating profit of $110 million in the first half of 2009, a $662 million improvement versus 2008 Operating revenue 5,113 - 6,096 (983) Operating expenses (ex Charges) 5,885 6,374 1,039 Adjustments Realized fuel hedge gains! (losses) (332) 274 606 Adjusted operating expenses 5,003 6,648 3,645 Source: Company ?lings. US CONFIDENTIAL 9 21 US AERWAYS CONFIDENTEAL af?rvx. teeter eernin Excluding special items and the impact of fuei hedges, US Airways had the iargest 1H09 margin improvement of the network carriers and above average pretax profit margin WW change in pretax margin pretax margin points . percent 4.Source: Company fiEings US AIRWAYS CONFIDENTIAL WK- earensicaeh tlow Despite US Airways? strong performance relative to its peers, the recession has had a negative impact on earnings and cash flow versus plan Originai2009 Plan $286 Lower Operating Revenues ($2,157) Lower Fuei Prices $1,122 Other Variances $130 Current 2009 Forecast ($619) OrlginaiZOOQ Plan $1,682 Lower Net Income ($905) Equity and Convertibie Notes Raised $235 Lower Capital Expenditures/ Other $47 Current 2009 Forecast $1,059 U8 AIRWAYS CONFIDENTIAL I Overview of 2008 Liquidity Program - Effect of recession on industry - Company recent performance - Near-term outlook Renewing Liquidity Program - 5-Year Plan with Liquidity Program - Summary and timetable I Appendix Detailed 5wYear Plan financial forecast US AIRWAYS . arwte oatleelt Near-term outlook is much improved but gradual improvement anticipated I Revenues bottomed out and are improving gradually, led by a recent rebcund of business travet - Forward fuel prices have stabilized in the $75/bbi range At current levets, 2010 estimated fue: costs are similarto US Airways 2009 costs - US Airways has taken significant additional action recently that will substantially improve financial performance DCAILGA slot exchange with Deita (approximateiy $100 million annually) Raising checked bag charges (over $120 million annuatly) - Seeking disposition of the E190 ?eet (25 aircraft) that would reduce capacity by an additional 2.5% Launched an aggressive cost reduction program that has identified at ieast $150 miliion of cost reduction that management is working to have in place as soon as 4Q09 and expected to grow in future years US AIRWAYS . . . [49% ,1 Me rebound per ASW change (stage length adjusted) (221-09 .. .. 0% -1 5% 20% Contracted Cereorete Revenue change rerenee edtteetr Revenue declines bottomed out in June and corporate contract revenue showing some 2009 Note: March and Apri? not seasonally adjusted for Easter Source: US Airways anaIytics Aug Sep Q2-09 rebound rs driven by imemvine ?Imam I Meet erreiyet reperte freer JP. Merger: and Bereieye Endreere the: the revenue eevirenmenr tie ehererng eigr?ie er and are eerieipetieg eere revenue recovery {23-09 Centreeted Carperete Revenue Share YoYPts Diff 0.0 43.5 4.0 4.5 Jan Feb Mar Apr May Jun Aug Sep 2009 I US AIRWAYS CONFIDENTIAL US-DOJ-00490325 tiel costs Fuel pries have stabilized somewhat and are now forecast to remain at levels similarto US Ainrvays 2009 expense level - Each $0be change in crude oil equates to $33 in annuai fuel spend Gracie oil $US/bbl 14o - 12o 100 8O 60- 40 Historical spot Price 2O 5?Yr Plan (11.8611092006 2007 2008 2009 2010 2011 2012 2013 2014 Wt Latest company forecast is based ptimarily on prices recently observed is futures markets Source: Energy information Administration US CONFIDENTEAL CA Slot "transfer as ree ent The Delta slot transaction is expected to increase profits by million per year - On August 12, US Airways announced a slot transfer agreement with Delta - US Airways transfers up to 140 slot pairs at LGA to Delta US Airways will continue to operate Shuttle - LGA operations had been unprofitable since the time of the merger I Delta will transfer 42 siot pairs at DCA to US Airways I US Airways also receives Delta route frequencies and slots to See Peuio and Tokyo for future opportunities as US Airways grows its international presence - Expected to ciose in Q4 2009 I increased profitability driven by: - Generate more operational efficiencies and provide greater travel opportunities to an atready successful operation at DOA - Transfer unproductive assets and eliminate unprofitable small aircraft operations at LGA - improve System-wide Exiting weak performing routes that lacked sufficient seats in NY market given US overali market position . if approved and U3 Atmays believes the seeding gets an stat swap wit! immedtately preside USS Airways with benefits US AIRWAYS New baggage fe are projected to increase annual revenue by over $120 million I On August 26, US Airways raised the domestic US first bag fee from $15 to $20 and the second bag charge from $25 to $30 - Matched American?s initiative from July 2009 forward Effective for travel on or after October 7th - Based on experience, a 5% reduction in checked bags is anticipated with no impact to passenger revenues - Net benefit approximately $105 million annually I Also announced a 3550 second bag charge for international flights - Matching Delta and American, since matched by Continental and United - Effective for travel on or after October 7th - Net impactapproximately$15 million annually I US AERWAYS raer soasideratietts Eliminating E190 ?eet could provide an opportunity to significantly improve near?term profitability as well as liquidity - E1903 exempted from mainlinefleet minimums in pilot CBA - Eliminating E190 fleet would reduce US Airways system capacity by 2.5% 3- US Airways acquired the aircraft at attractive prices - Reduces debt by over $500 million - Wouid liker generate some cash relief over 2009?2011 time period of>$110 mitlion - Would also free up spare parts inventory for sale - Aircraft is in demand even in current environment I Investigating impact of eiiminating fleet type - Profitability - Network Headoount Wait US Airways is aggressivety pursuing sate epportuaities fer the E199 fleet US AIRWAYS CONFIDENTIAL ea US Airways is projecting solid profitability for 2610 - The result of an improving revenue environment and US Airways? continued steps to improve profitability is a greatly improved euttook for 2010 and beyond - Net Income projected to improve from ($619) million for FY2009 to $416 million for FY 2010 Forecast is based. upon conservative assumptions, particularly regarding revenue improvement, developed by US Airways - However, US Airways 2010 cash ievels remain too low in near term Beginning unrestricted cash balance $1,059 $986 $1,268 $1,193 $1,059 Net income I $279 $188 ($416 Other cash from ops $316 $160 ($100) $113 $288 Non aircraft capex ($150) Aircraft capex ($368) ($307) - ($255) ($1,007) Aircraft financing $62 $294 $241 I $196 $793 Debt Repayment ($163) ($443) Ali other $32 $47 $37 $30 $146 Ending unrestricted cash balance $986 $1,268 $1,193 $1,102 $1,102 The tevee at projected unrestricted sash prevtde rte operating eushtee thus prempting the need te refresh the L?quidtty Pregeam US AERWAYS CONFEDENTIAL I ?Wm I Agende I Overview of 2008 Liquidity Program I Effect of recession on industry - Company recent performance - Near?term outlook - Renewing Liquidity Program I 5-?Year Plan with Liquidity Program - Summary and timetable 1' Appendix Detailed 5?Year Plan financial} forecast US AIRWAYS CONFIDENTIAL . . [Exk? 5, zoos eestt oositieu As of 2009, US Airways? total cash and unrestricted cash positions were in iine with peers ZQW tetei sash tevei compared to I zoos uerestticted cash Eevei cempared te reveegidteD/s L?Fiiti revenues 25Total cash iiquidity exceeds average of peer group II US Airways unrestricted cash ieveis beiow industry I However, 28% of total cash (totai?ng $580 is in aVeraQe restricted accounts . we: However, the task of free aesets to seit or Wedge pieces greater risks on US Airways? Source: SEC ?lings t6 an amaut? 0f I US AERWAYS CONFIDENTIAL - Cam mgnirernents: I Unrestricted cash covenant of $850 of which $750 million must be in controi account - Current balance of 513i .168 billion I Matures in 2014 I Interest rate of plus 2.5% I Currently trading at approximately 45% discount/ 23% yieid I No fixed charge covenant 9 Ability to reduce unrestricted cash covenant to $750 miilion, in exchange for a dollar-for?dollar pay down - Can grant a silent second lien on coilateral securing term loan lean and CC banit US Airways strives to maintain a significant cash cushion above the $850 million unrestricted cash covenant level in its term loan and similar levels required by card processors First Bate (Visa MC) I Based on fixed charge coverage ratio and unrestricted cash baiances, First Data reserves right to hoidback up to 25% of the gross air traffic liability at the end of the last month of the immediately preceding quarter - Current holdback: 25% ($164 million) - Upon the occurrence of a materiai adverse change, First Data may increase the reserve percentage up to 100% of the highest level gross air traffic liability forecasted in the next 120 days American Express I AMEX holdbacks dependent on subjective analysis if the Company ?suffers material adverse changes which Amex believes in its good faith business judgment wilt materially increase its risk of loss under the processing agreement or any othertravel agreement between the parties, it may establish a further reserve out of funds omen/vise payable to the company in an amount which re?ects Amex?s financial exposure under the card agreement" - Current hoidback: ~70% ($135 million) US AIRWAYS hiehieiiy me iew fer eemieri Based on current projections, US Airways base case cash levels remains above the Citi credit facility $850 million minimum cash levels Ending unresiricteci cash heiahce millions 1,600 - 1,440 1,412 1400~ 1,372 1,268 1,273 1,274 1257 1,200 923 861 1,000 800 600 400 Baseiine 200 50% CC holdback 100% CC holdback 0 fl/ - Dec?09 Jan-?10 Feb?10 Mar-?10 2030 4010 1Q11 2011 4011 - But eheeht 3 new Liquidity Pregrerh ihere is a higher risk of additional CC hehir heicihacks which eehid drive cash ieveis herimisiy hi the $859 unrestricted cash covenant US AIRWAYS HQ 11 ity Meg rs US Airways is requesting the Liquidity Program be revisited in light of current circumstances Aircraft deferrals 1 - 201 244 445 Re?iending/extension of maturities 155 121 154 430 New loans 520 - 520 Total - Gross 675 322 398 1,395 interest Principai Repayments (9) (66) (129) (204) Total - Net 4 - 666 255 269 1,191 The Liquidity Pragram is tccused en a nesnterm beast in iiquid?ty, adjusting emsrtimtisns, and deterring saw-am aircraft dsiiveriss ts 31mm significant cost outlays Notes: 1, Represents net capex bene?ts versus baseline piani US AIRWAYS Aircraft deiive firmly ordered aircraft delivering in 2010?2011 US Airways will take delivery of 25 new Airbus aircraft in 2009 despite the recession and poor financing market Over $1 billion of aircraft investment $200 of net aircraft equity invested II US Airways would prefer to take delivery and continue to modernize fleet (all new aircraft are replacement aircraft) but cannot tolerate cash drain caused by current market financing conditions Net cash requirements of 2010?2011 aircraft threatens liquidity position $445 million of aircraft capex in 2010-2101 1, net of financing assumptions - US Airways expects to incur significant return condition costs for aircraft which will be returned in 2010 when the aircraft could otherwise be extended at favorable rates in current environment IWei Absent substantial moificatlons, US Airways is faced with heavy calls on its cash because of - US Airways currently finances $365 miliion per A321 PDP through BNP Paribas Facility has a cap of $88.05 million and inciudes 38 ofthe first 42 deiiveries (AC 1,2,3, 8 are excluded) Financed portion of the PDPs is repaid to BNP Paribas upon delivery of the aircraft in Deiivery changes of greater than three months per aircraft trigger repayment of the entire PDP facility and no further draws would be possible Total of $80.5 million on 23 aircraft is drawn under the POP as of 9/30/09 Projected to have ~$300 miilion of cash PDPs placed with Airbus by YEOQ, ~$220 million net of BNP facility A critical component: of US Amaye? Lidudity @rogran?i is a shifting of ali or substantially all of the em 0-?20?i?i Airbus new aircraft deliveries US AERWAYS CONFIDENTIAL The Liquidity millions 2,800 - 2,400 - 2,000 - 1,600 - Baseline ending unrestricted cash batteries 1200 50 million 7 $850 million covenant 800 800 Post liquidity plan 00 409 4 50% holdback 100% holdback 0 0 regrem Program provides a necessary cushion for US Airways and its partners Unrestricted cash post Liquidity Fragrant 2,800 - Baseline W- 50% holdback 2,400 190% hoidback 2,000 1 ,600 1,200 4Q11 Tits Liquidity Pregrem wit! pmvide sutticietit iiquitiity levsis tor ti$ Airways to remain a strong tong-term pieyer the US svistien industry us CONFIDENTIAL I. at: I Overview of 2008 Liquidity Program - Effect of recession on industry - Company recent performance Near?term outlook Renewing Liquidity Program I 5-Year Plan with Liquidity Program - Summary and timetable II Appendix - Detailed 5hYear Plan financial forecast US AIRWAYS CONFIDENTIAL US-DOJ-OO490338 0 a 0-year lam Revenue and Cost Assumptions - industry passenger RASM is assumed to grow at 10.7% in 2010, 5% in 2011 and 2% every year thereafter - Ali labor groups pay scaies are based on existing contracts. Piiot and Fiight Attendant contracts are assumed to be ratified in January 2011 and are based on the current Company offer - Maintenance costs are driven by the level of operations and inctude adjustments for inflation and a maturity curve for aging aircraft - Cost reduction initiatives of are included I Fuel prices are based on futures markets and were set on September 2, 2009 when the spot price was $68.05 - Based on the forward curves, the 2010 is $73.15 and the price per gaiion is $2.11 - The fleet plan assumes the elimination of the E190 ?eet and the 8767 fleet in 2010 - Capacity increases by 0.4% in 2010 and 1.1% in 2011 US AIRWAYS nw?xy EwYear Man Revenue aeeometlone Although the forecast includes significant RASM recovery, it is arguably conservative as a percent of GDP Revenue protections lndustry revenue as of nominal GDP 0.7% - .. ye?j?amgez 0- 65a 0.6% - 0.5% 0.4% 0.3% - YOY Change: 2004 2005 2006 2007 2008 2009 2010 2011 RASM 7.3% 6.2% 11.4% 3.5% 6.0% 10.7% 5.0% NominaiGDP 6.5% 6.5% 6.0% 5.7% 2.6% I 3.0% Foreeaat or domeetio US Enduerry revenue arr 134 5% reduer?err Err etze of industry revenues versus GDP dur?ng projection period Source: US Airways analytics U8 AIRWAYS CONFIDENTEAL wool-00490340 a?eer New Income Statement Tbtal Revenue 10,405 11,400 12,173 12,644 12,912 Growth 9.6% 6.8% 3.9% 2.1% Operating Expenses 9,758 9,667 10,142 10,535 10,627 EBETDAR 647 1,732 2,031 2,109 2,285 Margin 6.Aircraft Rents . 697 699 693 676 670 EBITDA (50) 1,034 1,338 1,433 1,615 Margin 9.1% 11.0% 11.3% 12.5% DepreciationlAmortization 255 273 321 383 395 EBIT (305) 760 1 ,017 1,050 1,221 Margin . 6, 7% 8.4% 8. 3% 9.5% Total Non?Operating (Income)! Expense 318 408 454 503 477 Gain/(Loss) on Sale of Assets (4) - Income Tax 0 a 38 330 Net Income (ex Transition and Special Charges) (627) 352 563 509 413 Margin (6. 3.1% 4. 6% 4.0% 3.2% Transition and Special Charges (321) - - Net Income (306) 352 563 509 413 Margin (2. 3.1% 4.6% 4.0% 3.2% US AIRWAYS CONFIDENTIAL Man it Lien Statement of Cash Fiows Cash flows from operating activities: Net Income (ex charges) 352 563 509 413 Depreciation Expense (Funds) 231 273 321 383 395 Change in Working Capital 240 (4) (57) (51) (58) Change in Prepaid fuei hedges 276 - - - Other Cash Fiow From Operating Activities (182) 21 (3) 10 318 Cash Flows From Operating Activities (62) 643 824 851 1,068 Cash flows from investing activities: Non?Aircraft Capital Expenditures (150) (150) (152) {160) (162) Aircraft Capita? Expenditures (1 ,034) (1,007) (1 ,217) (825) Change in PDPs (36) (31) 133 172 (23) Other Cash Flows From investing 67 599 111 78 Cash Flows From investing Activities: (1,153) (588) (1,126) (735) (184) Cash from financing activities: 2007 Citibank Term Loan (16) (16) (16) (16) (16) Equipment Notes 663 147 773 400 (282) Other Debt (16) (256) (301) (217) (60) Additional Paid In Capitai . 243 - Bond Discount Amortization 85 89 69 59 57 Other Cash Flows From Financing 66 (38) (43) (16) (6) 2009 Liquidity Program 675 322 341 (225) (311) Cash Ftows From Financing Activities 1,701 249 823 (15) (619) Unrestricted Cash at Beginning 1,240 1,726 2,029 2,550 2,651 Change in Unrestricted Cash 486 303 521 101 265 Unrestricted Cash at End 1,726 2,029 2,550 2,651 2,916 US AIRWAYS CONFIDENTIAL - Overview of 2008 Liquidity Program I- Effect of recession on industry I Company recent performance - Near?term outlook - Renewing Liquidity Program - 5?Year Plan with Liquidity Program I Summary and timetable - Appendix Detailed 5?Year Plan financial forecast US AIRWAYS CONFIDENTIAL MK Sn . .. mary I Environment has changed dramatically since US Airways 2008 Liquidity Financing Program was launched in July 2008 - US network carrier revenues deciines in 1H09 were 20% versus Coilapse of leasing aircraft financing market wilt force US Airways to use $200 million of cash during 2009 for fieet renewal program I 2008 Liquidity Program produced the detectives set for the program - Strategic partners have been paid billion in payments that would otherwise have been disrupted US Airways has performed betterthan peers operationally and financially in 1H09 - Company is aggressively pursuing all opportunities to further enhance unit revenues and wili continueto push down unit costs with new initiatives - US Airways is better positioned than its peer group to reap recovery of US economy, with less exposure to international markets where industry capacity has reduced far iess - However, near?term liquidity is expected to drop to dangerously low leveis by early 2010 - Short-term nature of the 2008 Liquidity Program now threatens US Airways continued operation I Outlook is brightening for 2010 and beyond US Airways planning is passed upon a modest rebound in GDP and industry revenues - Given position of its network, US Airways is uniqueiy situated among network carriers to recover fasterthan others US Airways is seeking to bolster its liquidity by .4 through a three?prong program - Negotiate to defer new aircraft deliveries in 2010 and 2011 providing ~$445 miliion of net liquidity versus 5?Year Plan Key stakehotders re?lending or deferring ~$1tO million of payments made by US Airways since Fali 2008 and extending debt maturities so that principal repayments are made in years 20122014 wilt provide cumulatively ~$430 million through year end 2011 - With key stakeholders lending ~$520 miltion in new teens to bridge the effects of the Great Recession I Reaching agreement with stakehoiders by early 4009 and closing these transaction shortly thereafter is imperative - Providing this liquidity support preserves strong business relationships and positions US Airways to be a strong player in the US aviation tndustry US CONFIDENTEAL US-DOJ-00490344 . 3 iimeiine In order to reach a timely and successful closing on critically need cash funding, we propose an intensive due diligence period in September with commitments due by mid October Sep '15 3 Pentati to Re stakehoiders Sep 28 Proposed target date for initial commitments Oct 2 Compiete due diligence on pian Oct 5 Final form of commitments due Oct 16 Completion of documenting deals Oct 19 Closing Date Event September 7 Labor Day October 22 3rd Quarter Earnings Call US AIRWAYS . - Overview of 2008 Liquidity Program - Effect of recession on industry -- Company recent performance - Near-term outlook - Renewing Liquidity Program - 5-Year Plan with Liquidity Program Summary and timetable - Appendix Detailed 5-Year Plan financial forecast CONFIDENTIAL millions 9,973 Mm wow 10,397 10,978 9,216 2.416 2,597 2,676 GS A?rway's sygtem pasaenger revenue 11,408 2,797 2009 2010 2011 2012 2013 W07 mgoo?gw VWMMEQ Compound annual growth of 5.5% is reasonable over forecast period Passen erRevenue US millions ML 6,800.9 7,376.1 7,721.3 Exp 2, 415.6 2,595.6 2,675.8 9,216.4 9,972.7 10,397.1 YeargYear Change Ml. 8. 5% 4.7% Exp 7.5% 3.0% 8.2% 4.3% PassengerRASM (cents) M1. 9.54 10.38 Exp 1683 18.29 10.86 11.69 mm ML (11.3% 7.6% Exp 8.7% 7.7% (millionsl ML 70,5135 71,094.53 Exp 14,3516 14,198.53 84,865.1 85,293.6 Year Year Chan 9. Ml. 0.8% Exp (140% (4.70% 0.5% 10.70 18.96 12.05 3.2% 3.7% 3.1% 72,140.9 14,114.8 86,255.7' 1.5% 1.1% drives a small portion of revenue growth 3,275.7 2,702.2 10,977.9 7.2% 1.0% 5.6% 11.05 19.38 12.74,888.? 13, 945.0 88,834.7 3.8% 3.0% US Airways system capasity and PRASM $0.19 29.1.; 20?12. 212.13 8,611.5 2,796.6 11,408.1 4.1% 3.5% 3.9% 11.59 20.16 12.94 4.9% 4.0% 4.7% 74,318.1 13,873.7 88,1918 and camo?ty-ohangeg drive the majority of mvanuo growth, fuel recaoture CAG 6.1% 3.7% 5.(0.83% 1.0% US CONFIDENTIAL 0wyesr seselihe else etere 2 . 0 Lieei?ity We 1 Operating Assumptions and Fuel Breakdown Operating Assumptions Mainline Passenger RASM Growth 6.6% 4. 7% 1.0% 3.0% Express Passenger RASM Growth 8.8% 4.0% 0.4% 2.0% in?ation Growth 22% 2.2% 2.3% 2.3% 2.4% Mainline ASM Growth 0.7% 1.4% 4.0% Express ASM Growth Fuel Breakdown WTI - 60.32 73.15 76.09 78.00 79.87 W'li 1.44 1.74 1.81 1.80 1.90 Crack egg 0.19 0.21 0.29 0.34 0.32 Price per Gallon 1.62 1.95 2.11 2.20 2.22 Transportation/Other 0.03 0.08 0.12 0.12 0.12 Tax 006 0.07 0.07 0.07 0.07 Hedge 0.35 - - Total Mainline Price per Gallon including Tax 2.07 2.10 2.30 2.39 2.41 Express Spread over ML Fuel excl hedqes 0.11 0.10 0.10 0.10 0.10 Total Express Price per Gallon 1.76 2.20 2.39 2.49 2.51 US AIRWAYS Operating Revenues Actual emyeer men efere 211% mm; Income Statement Forecast We re I, cent?e Mainline Passenger Revenue 8,183 6.774 7,274 7,?23 8,109 8,294 . Express Passenger Revenue 2,879 2,423 2,636 2,766 2,776 2.830 Cargo 144 95 128 166 185 194 Other Revenue (Less M80) 912 1.113 1,362 1,519 1,575 1,594 Totai Revenue 12,118 10,405 11,400 12,173 12,644 12,912 Growth (141%) 96% 6.8% 319% 2.7% Operating Expenses Fuel Tax 3,478 2,238 2,252 2,486 2,682 2,685 Express FueI 1,137 599 710 770 794 W35 Maintenance, Materia?e Repairs 783 740 694 683 693 696 Salaries Bene?ts 2,231 2.198 2,097 2,217 2,291 2,322 Express Expenses 1,912 1,911 1,913 1,932 1,936 1,950 Other Rents and Landing Fees 562 588 566 579 600 615 Other 1,683 1 .509 1 .436 1 .475 1 ,539 1 .563 Total Operating Expense 11,785 9,758 9,667 10,142 10,535 10,627 EBITDAR 833 647 1 ,732 2, 031 2,109 2,285 96 Margin 2.7% 6.2% 152% 16.7% 15. 7% 17.7% Aircraft Rents 724 697 699 893 876 670 EBITDA (391) (50) 1,034 1,338 1.433 1,615 Margin 9.1% 11.0% 11.3% 12.5% Depreciation/Amortization 215 255 273 321 383 395 (608) (805) 760 1,017 1,050 1.221 Margin 6.7% 814% 8.3% 9.5% Interest Expense 253 325 360 388 446 466 Interest (Income) (83) (24) (18) (24) (41) Other Non?Operating (Income) Expense 27 8 (O) (O) (O) (0) Total Non?Operating (Income);I Expense 196 309 344 364 405 399 Gain/(Loss) on Seie of Assets - (4) - - EBT (502) (618) 416 653 644 822 Income Tax 0 0 - 38 330 Netincome excl. Transition Charges (392) (618) 416 653 606 491 Transition Expense and SpeciaI'Charges 1,407 (321) - Net Income (2,210) (293) 416 653 606 491 US AIRWAYS CONFIDENTIAL It V. .: 7 I 5 6-year tan etere 2 68 ?enmity We re eent Statement of Cash Flows Actual Forecast Cash flows from operating activities: Net income (802) (618) 416 653 606 491 Depreciation Expense (Funds) 197 231 273 321 383 395 Change in Air Traf?c Liability (134) 15 34 26 19 13 Change in 136 (23) (27) (7) 1 (3) Change in Accrued Taxes (9) 33 1 (4) (4) (5) Change in Restricted Cash (259) 215 (11) (73) (66) (62) Change in Prepaid Fuel Hedges (276) 276 - Other Cash Flow From Operating Activities (219) (183) 18 (2) 10 318 Cash Flows From Operating Activities (1,368) (54) 704 914 949 1,146 Cash ?ows from investing activities: NonwAircrait Capital Expenditures Subtotal (263) (150) (150) (152) (160) (162) Subtotal Aircraft Capital Expenditures (66-4) (1,034) (1,007) (1,217) (825) (0) Change in PDPS (139) (36) (31) 133 172 (23) Other Cash Flows From investing 30 67 593 111 78 - Cash Flows From investing Section (1,036) (1,153) (588) (1,126) (735) (184) Cash flows from financing activities: 2007 Citibank Term Loan (416) (16) (16) (16) (16) (16) Equipment Notes 481 663 147 773 400 (282) Other Debt 797 (16) (256) (301) (217) (60) Additional Paid in Capital 268 243 - Bond Discount Amortization 11 85 89 69 59 57 Other Cash Fiows From Financing (25) 66 (38) (43) (16) (6) Cash Flows From Financing Section 1,117 1,026 (73) 482 209 (308) Unrestricted Cash at Beginning 2. 527 1,240 1,053 1,102 1,372 1,795 Change in Unrestricted Cash (1,287) (181) 43 270 424 654 Unrestricted Cash at End 1,240 1,059 1,102 1.372 1,795 2,449 Restricted Cash 727 511 623 696 662 724 Total Cash 1,967 1,570 1,624 1,967 2,458 3,173 US AERWAYS CONFIDENTIAL US-DOJ-00490350 6wyeer? etere 2009 item Balance Sheet Actual Forecast ASSETS Unrestricted Cash 6 Cash Equivalents 1,240 1,059 1,102 1,372 1,795 2,449 Net Accounts Receivable 293 267 278 296 305 311 Prepaid Expenses 684 430 414 397 380 364 Other Current Assets 201 235 235 235 235 235 Total Current Assets 2,419 1,990 2,028 2,299 2,716 3,359 Restn?cted Cash 727 511 523 596 662 724 Net Property and Equipment 3,019 3,905 4,189 5,127 5,651 5,417 Fire?delivery Deposits 267 303 334 201 29 52 Other Non?Current Assets 783 751 743 735 727 719 Total: Long-Term Assets 4,795 5,470 5,788 6,659 7,069 6,913 Total Assets 7,214 7,461 7,816 8,958 9,785 10,272 Accounts Payable 797 372 356 368 378 361 Air Traf?c Liability 698 713 747 773 792 804 Accrued Compensation 158 186 225 256 262 279 Current Portion of Long~Term Debt 362 471 449 469 350 1,616 Other Cunent Liabilities 1,030 1,023 992 997 997 990 Current Liabilities 3,045 2,765 2,770 2,862 2,778 4,070 Long-Term Portion of Long?Term Debt 3,861 4,601 4,426 4,854 5,147 3,534 Deferred income Taxes 21 21 21 21 59 389 Other Long Term Liabilities 793 661 1,473 1.440 1,415 1,401 Total Liabilities 7,719 8,049 8,689 9,178 9,399 9,395 EQUIW Paid in Capital 1,802 2,045 2,119 2,119 2,119 2,119 Retained Earnings (2,307) (2,633) (2,992) (2,339) (1,733) (1,241) Total Equity (505) (588) (873) (220) 386 878 Total Liabilities and Stockholders Equity 7,214 7,461 7,816 8,958 9,785 10,272 AERWAYS CONFIDENTIAL 5myeer sseiine Key Financiais Measures Ratios 09 Liquidity Were i, seem Revenues 10,405 11,400 12,173 12,644 12,912 EBITDAR 647 1,732 2,031 2,109 2,285 Margin 4 6.2% 15.interest Expense Aircraft Rent 1,022 1,059 1,082 1,122 1,136 Unrestricted Cash I 1,059 1,102 1,372 1,795 2,449 Debt 5, 072 4,875 5,323 5,496 5,150 Capitatized Operating Leases 4,880 4,891 4,852 4,734 4,690 Lease-Adjusted Debt 9,951 9,766 10,175 10,230 9,840 Total Capitalization 9,363 8,893 9,955 10,616 10,717 Credit Statistics Unrestricted Cash/Revenues 10.2% 9.7% 11.3% 14.2% 19.0% Expense Aircratt Rent) 0.6x 1.6x 1.9x 1.9x 2.0x Lease~Adjusted 15.4 5.6 5.0 4.8 4.3 Net Lease?Adjusted 13.7 5.0 4.3 4.0 3.2 Lease~AdJUSted Debthapitaiization 106.3% 109.8% 102.2% 96.4% 91.8% US AIRWAYS CONFIDENTIAL Woo? The current new aircraft order stream would result in the youngest ?eet among network carriers Exiatfng main?me ?eet p?an, Pro-?format revs/$393 main?ine ?eei piar; 360 354 350 354 351 351 322 325% 3:321 327 323 322 322 B737 B737 Awommw Aaommw B757 8767\ 2007 2008 2009 2010 2011 2012 2013 2007' 2008 2009 2010 2011 2012 2013 However ?s?aanc?ai require the Company to adopt a revised p?an that defars deliveries by 24 36 momma US AIRWAYS US-DOJ-OO490353 splitsi Intelligenge j- The Allied Pilots Association increasingly believes that lack of progress 5 in contract talks with American will iead to labor action, according to the Union?s newsletter: ?While we hope for a negotiatnig breakthrough, it new i - appears management will foree?us to utilize the ?nal stages of the [Railway Labor Act] to reach a contract resolution,? APA tells its members. The i union is holding nationwide meetings to update members on its strategies should it be releaSed from mediation - - A fonr~word phrase couid'surn tip to theAlaska Airiine?s riseqnest for a newUS. rl?ransportation Dept. pub? lic. investigation into the onmership Feb. 11). . - . - The phrase: yourown business. in calling for theuinvestigation, Alaska Airlines questioner] whether the airline is andwill remain under US. ownership and control, as re? quired. by US. law for U.S.?hased carriers. it cited the possible pull- out of U.S.?ha.sed investors Black New Joint Stmetnre, which have the option in their investment deais to sell back their investment to the Virgin Group. Alaska also raised questions about Virgin America?s sources of new cash in 2008, which the airline has never publicly disciosed. But in the Feb. 20 response ?led with the DOT, Virgin America re- iterated What executives of Virgin USA-and Virgin Management toid The in a face?to-face meet? ing Feb. 18: There is no threat that the airline will lose the US. own? ership and control it is required to maintain under U. S. law, and that it has been privateiy keeping the DOT CONFIDENTIAL Virgin America?s of?cial response. and 'contr'ol of the airline (SAILY, Canyon Air Partners and Cyrus Virgin America Calls ownerShip A Private Issue WithThe DOT . np-to?date on its?nanoing. In part, that?shecause the investors? origi? nal deal with the airline essentially forbids them from cashingin their stakes until the Virgin Group finds [IS?based replacement investors, they said (BASE, Feb. 19). . In its Feb. 20 ?ling, Virgin Ameri- ca noted it already went through an IS?month?long pnblieprocess to get its initialnapproval as a and [IS-controlled carrier. ?The department, not other air? line competitors, is vested with the obligation to review citizenship, and it is the department, not other air? line competitors, that needs notice of new funding or legitimate ownen ship issues,? Virgin America said, a sentiment it repeated numerous times in the filing. ?It is also the department?s obligation to verify Virgin America?s ongOing fitness compliance, and it does not require public participation to do so, and has considerable experience and expertise in doing so.? . Virgin America said it ?ied a detailed one?year progress report with the DOT on Sept. 22., and. that on Oct. 29 that DOT con?rmed that Virgin America remained Will? ing and able to provide interstate Continued on page 2 Virgin i . . air tranSportation.-?Virgin America will also continue to. comply with all department noti?cation requirements and to en? sure its compliance with all ownership and control requirements',? it added.- _?Th_ank_fully for consumers, none of these noti?cations are required t'o'be blessed by any of Virgin America?s competitors.? it also accused Alaska of trying to get involved now after having voiced no opposition during that 18?month process because of Virgin America?s ?ro- Tuesday, February 24, 2009 bust and effective competition? to Alaska on the Seat? tlewLos Angeles and Seattle-San Francisco routes. Alaska did get support for its petition for a DOT investigation, however, from two unions: the Air Line Pilots Association and Aircraft Me? chanics Fraternal Association. Many unions op? posed Virgin America?s original application and have voiced concerns about foreign ownership as a threat to jobs. Andrew Compact, andrewgcompart??a Via tianweek?om US AirWays Cites Bad Publicity For soft DrinkFee Reversal . US Airways on March twill step charging for non? - alcoholic beverages, nine months after employing the policy, citing competitive disadvantages by being the Only US. airline to end complimentary drinkservice. In a Feb. 22. Eternal memorandum, Chairman and CEO Doug Parker said adding a; la "carte pricing to all in?ight drinks service has been successful in'generating anoillary revenues and unexpectedly improiied the ?ight experience by redubing? cart usage and lavatory use.- The $2 charge was implemented Adg. l, the. same time al~ celiol prices increased $2 to $7 (DAILY, June 12, 2008). Retrieval; these bene?ts are'outweighed by the coin?7 .. petitions decision not to match this charged-?We know customers don?t buy an airline ticket based on whether or not they will get a free seda onbo ard, but with US Airm ways being the oniy'large network carrier to charge for drinks, we are at a disadvantage,? noted Parker. ?More importantly, this difference in our service has become a focal point that detracts from all of the outstanding? improvements in on-time performance and baggage handling that all of us have Worked so hard to achieve over the past yearf? - Parker still expects to generate between $400 mil- lion and $500 million this year from the carrier?s oth- er ancillary revenue streams, which include checked baggage fees, preferred seating and its latest offering, a pillow and blanket package. ?We are not making this decision because the air? line industry is now healthy,? said Parker. ?To the con? trary, While oil prices have drooped, a global reces~ sion is having a material negative impact on industry revenues and our industry still needs business model changes as much as ever.? He added, ?Moving to an a la carte model has helped us build an airline that can Withstand theuncontrol- lable factors that in?uence our industry and we need to keep trying new. programs, like a la 'carte pricing. Frankly it would have been a bigger risk for us not to have tried charging for drinks because innovation and a new business model are desperately needed.? ?ar? ren Shannon, darren_ sham: 011 @a We tfon weekcom CONFIDENTIAL and other ticket sales. . U.S. Mainland CarrierProvides Financial Boost For Mokulele Hawaiian inter-island Carrier Mokulele, which has been struggling to pay its bills, has received a ?nancial boost from a US. mainland carrier that purchased a bunch ofseats in advance at the carrier?s higher fares, Mokulele CEO Bill Boyer said Feb. 23. Boyer said that, by agreement, he cannot identify the carrienBut he said it is" a ?potential? marketing partner and purchased a ?bunch? of tickets ranging from $199 to $299 On Feb; 19. ?They Want us to sur? vive,? Boyer said. ?They know it?s very important for their hit in Hawaii to make us be here." . - - Boyer also said Mokulele still is in discussions with several potential new investors. - The influx of cash from the mainland carrier helped Mokulele pay off the $300900 it owed Republic Air~ Ways lay-Feb. 18 and meet its payabll on Feb. 20, he said. Boyer said the airline ?should? be able to pay Re- public it owes the regional. carrier Feb. 7, thanks to the cash in?ux, Molollele?s cash reserves Mokulele' has to make" pa; times a month under the airline services agreement with'Re? public, which provides jets and crew for Molnilele?s interisland routes. Boyer said. lead. factors on the ser- vice have been rising, but addedthat ?it?s really hard to build a cash ?ow? in the early months of an opera? tion. Mokulele began its interisland service Nov. 20. Regarding ways to boost its revenue, Boyer said Canadian low-cost carrier WestJet, which already sells Moloilele ?ights for Westj et Vacations, will begin promoting Mokulele on its Web site Within a few days. The airline is still working on interline e?ticketing with Alaska Airlines. Over the longer term, Boyer said hlokulele has a ?green ligh trim: the courts to pursue the antitrust lawsuit- it ?led against Mesa Air Group in November. Mesa, however, also is pursuing a lawsuit against Mokulele alleging it has not paid Mesa mere than $200,000 for fuel it purchased on Mokulele?s behalf when the carriers were code Sharing; "Andrew Com- part, andrewmcompart??h V173 tionweekcom Copyrig ht 2009 McGraw-Hlil Companies, Inc USTDA Reports Progrss in Latin American Grants -. .?l?wo of projects funded by the US. Trade and Devel- Opment Agency in Mexico have awarded contracts, and headway is being made in studies in Chile and Brazil. fall awarded a grant for $248,011) for a feasibility study to expand the runways and taxiways at Mexico?s San Luis Potosi Airport (DAILY, Sept. 10, 2008). This grant has been awarded to engineer? ing consultancy said Keith Eischeid, USTDA country manager for Mexico, Central America and the Dominican Republicrllhe $245,000g1ant to study the expansion of the cargo facilities and the passenger terminal at Puebla Interna?. tional Airport was awarded to Jacobs Consultancy, Eisc? . held said. This project is to form a part of the airport?s $74 million'propOSed expansion plan (DAILY, Sept. 10, 2008.). . A ?variety of engineering ?rms and specialized aviation consulting ?rms? have expressed interest in the $573,000 grant to study the expansion of Brazil?s ?l?ancredo Neves international.Airport, saidGabrielle Mandel, country manager for Brazil and the Southern Cone. USTDA announced'the grant earlier this month and expects the project to run over the course of the next year, Mandel said. The oontra'c't for an air navigation technology grant of $980,000 was awarded to 181, andthis project is under way, said Patricia Arriagada, USTDA ecuntr manager for the Andean Countries andthe Caribbe? an. USTDA announced the grant to study thefposs'iw bility of the first deployment of automatic dependent surveillance-broadcast in Chile last fall (DAILY, Oct. 23, 2008). -Mad1m Unnikrishnan, madhumtwuikrislr na_n@aviation weenicom Honeywell Braces For Reduction In Flying By Airline Customers Honeywell expects air transport ?ight hours to be down 2% globally this year, with a steeper decline in the US. of era?5% year?on?year. Business and general aviation is expected to be hit harder, with flight hours forecast to drop 15% in 2009. These projections were included in a presentation by Aerospace Division President and CEO Rob Gillette at the company?s annual investor conference yesterday in New York. While conunercial airliner manufacturers still have large orderbooks, Honeywell cautions there is ?some new aircraft backlog risk? in the second half of 2009, with ?signi?cant churn? expected in 2010._ - The company has trirrnned its aerOSpace revenue guid? ance for 2009 to billion-12.5 billion, down from $12.7 billion last year. Segment profit is forecast to be $2.2 bil? lion?2.4. billion, compared with billion a year earlier. Original equipment deliveries could increase by up to 5% this year in the air transport and regional market, but will be offset by a 5%400/0 reduction in de? CONFIDENTIAL Tuesday,February 24,2009 - - . .3 liveries in business and general aviation, Honeywell projects. Aftermarket sales in both sectors will be hit {by the expected reductions in flight hours. In response, Honeywell is moving to cut its costs with a hiring freeze, reduced overtime, unpaid time off, zero merit increases for managers, controls on travel and reduced capital expenditures, according to Gillette?s presentation. The company is also cycle times, so that it can react quickly to changes in demand, the presentation says. This includes buymg and holding key long?lead parts. ?Gm? ha'm Warwick graham?, wmrickfg?aria?onacelccom Eu_r0pean Low-Fa re Aesociation Lamb'a'stes Airport Charge Rule New European Union rules on airport charges are raising the ire of the Eumpean Low Fares Airline Asso? ciation (ELFAA), which said the dir'eCtive from Brussels willnot end airport monopolies. The rule requires airports with annualpassenger traf?cof more than 5 million to consult with airlines before raiSing fees, among other requirements. The .ASSOciatiQn of European Airlines complained last week I that the directive will not influence airports? ?monopolistic tendencies? Feb. ELFAA added its voice to the chorus by saying the - directive creates an ?additional regulatory burdenfor airlines and airports, at .a-tirne of unprecedented in? dustry crisis and a global economic recession.? The directive _?does not offer any protectionirom abusive airline monOpolies,? while it ?imposes costs and unnecessary administratiyeburdens? on smaller airports, said. . . ?In?ated charges are being passed onto passengers all over Europe as a. result of over?speci?ed incest? merits in unnecessary airport infrastructure and inef? ?cient operation of collating facilities,? ELFAA Secre? tary General John Hanlon said. Airports Council last week hailed the new directive, praising the EU for using guidelines in drafting the legislation ?Mad1m Unnikrish- nan, ma via ?ionweekrorn Germany To Support Airbus Export Financing Germany will broaden export ?nancing support for Airbus, according to the federal Trade Ministry. An of?cial said however that the ministry has so far not received any Airbus applications. The manufacturer is concerned that its customers might not be'able to_'get - suf?cient ?nancing to take delivery of the planned 2009 production as banks continue to refuse handing out fresh loans to airlines. Director General Giovanni Bisigneni warned in an interview that Airbus and Boe- ing n?ght end up not being able to deliver about half of their 2009 production. Copyrig 2009 by The McGruwrl-lill Companies, inc DALMAARWAYHOO 104668 Staff Ed itoriai 1200 Street NW. Suite 900, Washington, DC. 20005 - Tel - Fax 202-383-2438 E-rnall AWNord?i?cdsful?limentLonx Circulation Aviation Daily, HO. Box 5725, Harlan. 1A 5 I 593 Tel 86?5-857-0148? Fax Intl. E-mail sful?iirnenmom US. Editorial Staff Jim Mathews Ed itor-in?Cnief Alfhilul Winder Managing Editor Jennifer L.Micheis Deputy Managing Editor Jim 01:: Deputy Managing EditoriAirports Adrian Scho?eld Senior Aerransport Editor Andnew Cdmpart senior Editor . DarrenSl-iran'nen Senior Editor I Madhu Unnilrrishnan BusinessEditor . inyrid Lee Production Manager International Correspondents Europe: Jens Fie?au. Europe Bureau Chief, tel 49~89~6330u833 3,mobl IE 49'] 7?7-413-9837. .fax49?89~6530~8514 jenstil?ottaucom Martial'lardy, Charts 8: Data . Olieryrnan, AaroriTaylor. tel 531?745-6875, - allron.tayloreilpliverwymanmm - Business Of?ce CliffJohnson, Director, Electronic Sales, tel 202-383-2338, cliffjohnson?iaviationtveckcom Mike Triuan Blrectomdvertising Sales, tel 212n904-4697, Elizabeth Meyer Classi?ed advertising,tei 312-904-3675. fax 212-904-3334, Subscription Pricing - $1,985 Prim Print persingle electronic subscription. Discounted rates begin with the seaond user at the game postal or electronic address. Special rates and services available forenterp'rlse licensesIo order. call 8663510148; outside the U5. 515-237-3682mniina at: Web Access To Aviation Daily Subscribers to the electronic version of Aviatien Daily Can access the current isxue and archive at AWN subscribers go :9 Available Electronically Fol electronic delivery, please call in the U.S., Dr 515-237-3682 internatinnally E-mail emir- Reprints Fm reprints of Aviation Daily, contact Marshall Boemerat 1-800-360-5549 ext.123 uyer.com Published daily except Saturdays, Sundays. and holidays by WEEK, rs unit or? the Business information Group.Thu McGrawuHifi Cnmpanies, inc? 2 Penn Plaza, New ?i?ork, NM 10121. EISSN No. 0193-4597}, Tom Henricks,?resident, WEEK, tom_henricks@aviationweechom: Anthuny L. Velocci, 3.2, AW Editorial Director. Mark. it FlinnAi'P? Sales, mark_flinnl??aviationweekxom. Of?cers of The Hill Companies, Inc; Harold W. McGraw, ill, Chairman, President and Chief Executive Of?cer; Kenneth M. Vittor, Executive Vice President and General Counsel;Rohert J. Bahash. Executive Vice President and Chief Financial Of?cer?ohn Welsenseel, Senior Vice President. Treasury Operations. COPYREGHT 2009 by The MCGraw-Hill Companies, inc. All rights reserved. None of the content of this publication may be reproduced, stored in a (electronic, mechanical, photocopying, recording or ptherwise) withoutthc prim written pcrmissicn (lithe publisher. Available in print, World Wide Web and Email editions, Vol. 375 issue 35 CONFIDENTIAL N'orwegian?s costs to NOKO.57 from 0.58. But if the airline says that the 2009 forecast is for a return to the 0.53 level, in part because relam tively? few fuel hedges will allow the carrier to take advantage of spot prices for oil. Fuel and cur? rency casts develepment will dic- - tate the final outcome. retrieval system, or transmitted in any form hr by any means . Tuesday, February 24, 2009 Urena?Raso To HeadAirbus?s Domingo . Urena~Raso will be named as the new head of Airbus .Militaiw, industry snurces told The DAILY yesterday. .- Urenwl?laso will replace Carlos Suarez at the helm of the division" that is in charge ofthe A400M mil itary airlifter program, as well as the Ell?45 tanker, among others. The former EADS Military Transport Aircraft divisien? rem "eently was integrated into Airbus, with Suarez reporting to Airbus ii CEO Thomas Endera i-Bul: cum: panyeourees say that Suarez has . 2 been trying to block any structural changee to the struggling program Help Airbus. Gain Logistics Ef?ciencies Airbus is :wnrking with and Kuehne Nagel to improve its trans? port and logistics op?rationg. . The. streamlining of Airbus?s f; logistics Operationg is part 'of the .f Power 8 program the: aircraft malt? 2 e1? announced to imprva its button: line. The goal is to thrive to Six Ware- N'erwegiau Air Shuttle expects if unit cents this year to return to .3 2007 levels after a 7.5% increase in 2008, which led the carrier to i; report a million million) loss for the full year, down i; from a OK84.6 million pro?t the prior year: High fuel costs largely drove increase in unit Airline CEO Bjorn Kjos reaf? firmed that passenger numbers :Struggling Military Program t0 such an extent that Binders decided to replace Suarez - appears to have counted on the strong political influence in the group that has so far pi?ete?ted the old structures and executives. The is currently de- layed?b'y about fouryears and could end up being even later: French daily La Tribune reported that the French Air Force now expects a ?ve'nyeat' delay, which EADS denies. Urena?Raeo has been heading Airbus" Power 8 restructuring pru? gram, reporting to Chief Operat? Qf?cez? Fabrice Br?gler. _-Jens 11.80121 houses, "from 60, bulged ih' Toulotxh?, Hamburg, Broughteon, UK, and . We leeatinne in Spain, Madrid and -Puerto_ Airbus Says it expects the reforms to generate ef?ciencies totaling during the new: We . years; ijw?@apfation- weekcom Norwegian Sees improving Unit Revenues In 2009 . i . .for the airline have been holding up, with advanced booking ?sat? iSfaetory? for the first quarter. Nevertheless, K303 notes that the market is expected to soften as ma?a?economic: conditions deteriorate. Norwegian is continuing with its fleet overhaul, with plans to take ?ve leased Boeing in the ?rst half and six in the sec- ond half. Two of those aircraft are owned. Moreover, N'omeglan will :redeliver four MDSOS in the third quarter and, by yeareud, will have grown ltS'738?800 fleet to 7 aha craft. The total-fleet will comprise 44 airliners, up from 37 at the end of 2008. The 7374300 ?eet is to reach 58 units in 2014-. 'Jlobert Wall, Copyright 2009 by The McGraw Hill Companies, inc 104669 Royal Jordanian Offer OnAir?s Internet Service On One A319 Royal Jordanian is o?eringin?ight_1nobile telephone, text and Internet services on one of its Airbus A319s. The system is provided by QnAit?, the communica- tions company that has also been chosen to provide similar Services for British Airways. Royal Jordanian?s Oneworld alliance partner plans to offer phone and in- teract at?ess on its proposed A318 business?only ser? vites from London City Airport to New York. Royal Jordanian launched the OnAir service Feb. 23, and according to an 011fo spokesman will take delivery of another broadband enabled A319 in mid- March; The airline eventually plans to retro?t its entire Airbus narrowbody fleet, which inclixdes two more A319s and eight ASEUS. - - - OnAir?s service, Which is supperted by lnmarsat satellites, allows passengers to use mobile devices such cellular phones and PDAs, as well as laptops enabled with GSM data cards; - . -- - Royal Jordanian will "operate the Airbus on routes to Europe, India, the Middle East and North Africa, OnAir said in a release. . . - Airline President and CEO Samer Majali in the release noted, ?Royal Jordanian has always been a leader in e?travel from providing passengers with the ability to book onlinc to issuing e~tickets, making enline seat reservations and using self check?in kiosks at the airport. . - - . . ?We are very pleased to partner with industry lead? er OnAir to offer the latest passenger communications technology onboard our aircraft, and we expect these new capabilities to further enhance the high-quality customer service that our passengers have ceine to expect from Royal Jordanian.? - - . - OnAir CEO Benoit Debains added, ?Royal Jorda- nian Operates in a highly competitive and demand? ing market, in which service excellence is critical. They were the ?rst airline in the Middle East to announce a partnership with us back in December 2007, and we are pleased to offer the highest avail? able standard 'of connectivity to their passengers, while at. the same thus helping them generate addiw tional revenues.? ?Darren Shannon, Hart's-Ashan- non@aviationweek.com BMI Sets Summer Schedule Changes With Capacity Adjustments BMI British Midland has gone ahead with capac~ ity adjustments, including a decision to shift close its London Heathrow service to Leeds Bradford and Dur- ham Tees valley. . - The suspension of those two routes after 40 years of operationis set for March 28. BM: says the decision became necessary because of falling demand, coupled CONFIDENTIAL Tuesdayfebruary 24,2009 -l . with increasing costs through UK. government levies and airport charges. Other network adjustments will see the carrier switch all. Heathrow service to Aberdeen and Brus? sels to Embraer regional jets, rather than using Air bus narrowbodies, The airline also is cutting daily connections between Heathrow and Amsterdam, well as Dublin. - - Starting in late May, Heathrow to Beirut and Amu man services will see "higher frequencies. ?Robert Wall, na11@avia tioniv'eelmom Icelandair-Group Suffers Big Losses,?Makes Cuts . Although its home market is suffering financial pa? ralysis, lcelandair GrOup still sees some potential positive development this year after being driven to a 7.5 billion Iceland kronur million) loss in 2008. i - I The October 2008 collapse of Iceland?s ?nancial sector has affected the entire grotto Given these events, group President and CEO Bjorgolfur chariots; son says the operating result was aetually ?relatively But the environment in 2009 Will remain dif?cult. large drop in private consumption in leeland is projected, in addition to'a signi?cant reduction in pas~ seiiger transport and air freight on a global basis,? Jo? hannsson warns". The group hopes some foreign travel will help offset the domestic activity, which represents about 20% cf group turnover. Management says future prospects are ?decent,? with earnings margins actually improving this year over 2008 levels. That notwithstanding, 'lcelandair Group is projecting a?rst?quarter loss. Icelandair Group has already put in place several streamlining efforts and, Johannsson says ?shorts to find ways of cutting costs will continue.? Capacity cuts are being made at lcelandair and Air Iceland. Mover/er, the cargo business in particular is being subject to cost?cutting measures. On the upside, management points out that wet? leasing unit Loftleidlr icelandic has 83% of its capac- ity contracted for the year. The group remains in talks with banks to restruc? ture its ?nancial obligations and bring payment levels in line with what the company can actually deliver. Johannsson says work with the ?nancial institutions should be completed ?in the coming months.? Robert Wall, wa11@avia tionweekcom Kuwaiti carrier Wotaniya Airways is due to receive its second Airbus A320 on Feb. 26, With a plan to launch service to Beirut March 1. So far, Wataniya ?ies between Kuwait City and Dubai, and will add Cairo and Bahrain ?ights after Beirut. The airline plans to grow to seven aircraft this year. Copyrig ht? 2009 by The Companies, in: US Airways To Debut Fiber Optich System A powerful yet lightweight ?ber optiobased in? flight entertainment system with the capability of de? livering gigabit per second data to each passenger poised for FAA certi?cation and service entry within days with launch customer US Airways. - - Supplemental type certi?cation of the Fiber?To? The?Seat (FTTS) system developed by Costa Mesa, Calif.~based startup Lumexis Corp. follows completion of FAA flight tests on an Airbus A820 on Feb.8 (DAILY, Feb. Unlike previous ir?hl systems, the FTTS con? nects each seat back display" directly with a head?end server via individual ?ber optic cables providing-high bandwidth signal delivery capability. . - .Lumexis says the system will have-up to a 30% weight savings. compared with existing installations because it eliminates many of the parts and COnneC? tions normally needed for relaying data, such serene boxes to distribute signals,_copper_ and co?aidal Wires, connectors and _indi\ddual seat boxes. Installation and flight trials, however, were delayed fromiast September because of funding issues and the problems caused by last year?s spiraling fuel costs andlailing revenues. Although the [installation is currently limited to a single aircraft, Lumexis CEO Douglas Cline believes the ef?ciency of thcimproired IFE systemwili bring it eventual market success. ?We have gotten a huge amount of interest from the maj or airlines of the world and both GEMS, so I expect we really will see this product begin to take a substantial market share within the yeah? At present, thethl world is dominated by industry lead- ers Panasonic and Thales, which between them hold around 60% and 40% of the market, respectively. Due the system?s lighterweight, Lumexis is upti? mistic about penetrating newer areas of the market that are particularlysensitive to weight, such as re? gionaljets. Orin longenhaul markets where the FTTS would save around one third of the weight of a typical installation for a Boeing 74?, equal to a saving of ?around 1,250 pounds,? says Cline. For the potential regional market, Lumexis is pro? viding detailed speci?cations to Bombardier for the CSeries. The initial FT?l?S?equipped A320 is expected to be used from late February onward on routes connectn mg Phoenix with Orange County, Calif., and Charlotte. ?GuyNoH'is, g1: tiouweekcom India?s Airlinescut Capacity, Deliveries To Stay A?oat While India has billions of dollars to spend on corn~ bat aircraft, several of the country?s airlines are strug? gling to keep their heads above water. Estimated collective iosses of $2 billion in 2008 are CONFIDENTIAL Tuesday, February 24, 2009 being accompanied by cuts in services and delays and cancellations of aircraft orders. . . . Airlines are reducing? frequencies-20% on average andcutting capacity 10%-20% through deferments, cancellations andleasabacks. - With domestic traf?c down by about 9% from April to October last year from the previous year, airlines have also canceled and delayed aircraft deliveries to reduce capacity. . . . According to a Boeing presentation given during Aero India 2609, capacitywas down 8.2% in weekly seats for Jet Airways in February 2009 from 2008, Air India, 5.8% and Kingfisher Airlines 17%. ?Airbus has seen the majority of delivery delays in India,? claims Dinesh Keskar, the recently appointed Boeing indie president. . . . - . claims Boeing is in a more solid condition than Airbus in India with ?zero cancellations? and, barring two Boeing 777s, no request for deferrals. Be? sides, he contends, the potential Airbus2A380 market is increasingly undermined by fragmentation as direct flights now?y passengers from numerous cities that once used Delhi and Mumbai as hubs. - -. .. - Boeing, fortunately for the company, planned deliv cries strategically partly due to unavailability'of air~ craft and by default as a result of the '58? delay. ?We would never have taken an order from an unknown company for 100 airplanes,? .reterring to the .100 air- craft order by indigo for the .AiiZO-family Both manufacturers are looking at protecting their customers through dif?cult times. Boeing?s major customers Air india and SpiceJet we have ?nancing in place because of Exim Bank and leaseback options they have followed, says Keskar." - - - ?We know for sure some companies "will face dif? ficulty in ?nancing their fleets which the government is Wiilhig to negotiate. King?sher is our customer and we. have to try to support them,? says Christian Duhain, Head EADS International Development, Asia/Paci?c and Latin America. mNeelam Mathews, matheta/aneelamcj?gmailcom Good rith To Provide MRO For Taiwa n?s TransAsia Airways Goodrich will provide maintenance, repair and overhaul (MRO) services for Taipci~based TransAsia Airways? fleet of Seven Airbus narrOWbodics. The flight hour-based support agreement, which in- cludes Goodrich sensors, actuation, engine control and electrical power products, is initially for three years. Goodrich will conduct most of the maintenance work at its bases in Singapore; Sydney; and Xiamen, China. Taipei-based TransAsia operates a ?eet of Airbus A320s and A321s and several turbopmps on domestic and regional flights in East Asia. -Darren Shannon, darrenjlzannon @aic'a tionweelocom Copyrights; 2009 by The McGrawHill Companies, In: Tuesday,February 24,2009 . -7 December 2008 RPM Chg. ASKs Chg. Lead Pts.Chg. {mil} Factor Domestic 5,024 1.8% 8,580 5.2% 00.0% (2.60) Latin America 3,347 10.5% 4,942 10.3% - 87.7% (3.50) Totai Latin America 9,270 4.5% 13,527 9.0% 68.5% (3.00) Africa 0 0.0% 0 0.0% 0.0% - Asia Paci?c 277 0.3% 304 5.7% 76.0% (0.70) Charter 182 86.1% 235 86.7% 77.7% -- . 0.70 North America 3,189 0.6% '3 4,330 1.3% 73.7% Europe 1,815 0.4% 2,430 08% 74.4% 4.80 Totai International 5,462 7,357 74.1% 0.40 Total Systemwide 14,733 1.7% 20,895 4.4% 70.5% (1.80) 12 Months 2008 F1sz Chg. ASKS Chg. Load Pts.Chg. Factor Domestic 06,008 - 5.6% 08,440 7.3% 67.4% (1.10) LamiAnm?ca 30085 15300 54A52 15000 718%. 030 Totat Latin America 105,393 9.0% 152,892 9.9% 68.9% (0.50) Africa 0 0.0% 0 0.0% 0.0% Asia Pacific 3,296 10. 4,187 14.0% 78.7% (3.10) Charter 2,851 11.3% 3,567 6.7% 70.0% 3.30 North America 34,176 3.1% 46,121 04% 74.1% 2.50 Europe 23,004 195% 30,218 17.3% 76.1 1.40 Total international 63,327 9.3% 84,093 6.4% 75.3% 2.00 Total Systemwide 168,721 9.1% 236,985 8.6% 71.2% 0.30 i?tematiorral Total inciudes non-domestic g. .4 71,3 3 LalinAmerican02111112.A11 chartertra?ic gag :9 inciuded in internationai ?0131. Copyr1ght?EOGD by The CONFIDENTIAL Domestic Atlantic Latin Pacific ?/oChg. %Chg. 050119. %Chg. Yield Yield Yr/Yr Yield Yr/Yr Yield Yr/Yr JanUary. 2005 14.? 5.1 15.0 10.5 14.5 5.5 12.5 10.5 February 15.0 5.7 15.1 5.5 13.5 2.7 11.5 12.5 March 15.5 7.4 12.4 4.5 14.5 5.1 12.0 . 5.5 April 15.5 5.5 - 12.9 11.5 14.0 5.1 12.5 9.2 May 15.4 5.5 13.2 7.0 14.5 5.5 12.5 5.5 June 15.2 5.3 14.5 5.0 15.4 12.5 15.0 5.1 JuEy 15.7 7.5 14.5 5.4 15.5 13.7 15.4 10.9 550051 -- 15.5 5.4 14.2 11.7 15.5 15.5 14.9 15.1 September 15.1 12.5 14.1 9.1 15.1 23.2 13.7 7.0 October 15.5 7.4 15.5 9.5 15.5 19.4 12.5 - 5.0 November 154 1.2 15.5 5.0 15.5 11.4 12.5 5.0 December 14.5 -O.4 11.7 ?3.7 15.6 4.0 12.1 -O.5 The Year2005 15.5 5.4 13.5 7.2 15.0 9.5 12.5 5.1" January 2009 14.1 43.9 12.2 5.0 15.1. 12.5 0.5 U.S. Major Carriers Average Yield By Region 17.0 16.0 15.0 14.0 9. 13.0 12.0 Cents Per RPM 11.0, 10.0 6 a q; 13 a Pi? ?19 3?36 33? 0?3? ?36 ?9 4506 1030 :05? 11$ 0 {(50 The ATA report relies on data from seven US. airlines* and their regional WW M. Qm a?iliates. The results are not adjusted for inflaticn ortrip iength. (N015: Previously. mi E343 if this 150011 did not Include regional a??llate operations.) Copyright 2009 by The McGraerili Campanics, lm? CONFIDENTIAL - @?noN WEEK Stable Ratings underpin -.0t Canadian Airports Through 2009 Canada?s economy has slipped into recession along with the rest of the werid, but its airports face-the unknowns of 2009 with some'of the top credit ratings ayaiiabie. Stilt, large questions looming'are: How long the recession last and_.yyhat impact wiil there be on programs and credit quality? I - - Thesequestions are posed ina Standard Er Poor?s report titled, ?Canadian Airport Authorities Face More Turbuience in 2009.? "We expectthat the oy'eraii credit environment wiil deteriorate further in the ?rst half of 2009 and visibility remains iimited'for the latter part of the principal author, Mario Angastiniotis, director, Public Finance Ratings with 8189?s Toronto office. . - the outiooks for ?ve airports as A+Z8tabie and gave GreaterToronto-Airports Authority an A+lPositive "Thiscouid change it passenger traffic numbers decline significanti'y more than we Currently expect or capital spending programs are augmented beyond our current expectations/f the report said . - Canadian airports forecast a decline of passengertraffic in 2009 compared 'to test year." "The good news is that they have a track record of being resilient to adverse-induStry events and have in the past tended to recover-relatively quickly from previous economic downturns.? conclusion is based on the assumption that traffic wili begin to toward the and ofthis year and recover in early 2010. But "this is highly dependent on the duration and depth of the recession. 88? is part ofThe McGraw-Hill Companies as is this publication." Canadian airports have demonstrated flexibilities in terminai configu- rations that one his them to easiiy manage variabie-sized aircraft if airlines either reduce capacity or downsize aircraft gauge. They have protected themselves from revenue losses in case of potential airiine bankruptcies by "shortening the receivabies from the airlines,? the report said. The airports may increase fees if need be to further their fi- nancial positions, the report said. Toronto Pearson raised its airportim- provement fee to $25, an increase of for each departing passenger effective June 1. - believes that capital programs remain in place for now. To- ronto?s 10?year capitai deveiopment program and the Ottawa Macdonaid Cartier internationai Airport Authority?s program have been completed. Others nearing completion are at Vancouver international Airport Authority, Winnipeg Airports Authority and Haiitax international Airport Authority. Ed? monton Regional'Airport Authority?s billion miilion) pro- gram is in the early stages of a five?year term that double the gates. By continuing capital programs, Canadian airports can expect a rise in debt per enplaned passenger for the next three years before the start of a decline. Edmonton can expect a significant rise. says the air- po'rts? ability to raise fees on 60 days? notice shores up their financial position. James CONFIDENTIAL 104674 APT Page 2 February 24, 2009 Editorial 1200 Street NW. Suite 900 Washington, DC. 20005 Editorial Tel: 202-383-2015 Fax 202?383?2438 Email: Circulation Tel: 1~866~857?0148- Fax 5153376682 Fax 888385-1428, lntl. Fax 712355-7423 E?mail?: AWNord?cdsfulfilIrrenncom Edito rial Staff Jim Mathews Editorial Director James Editor Madhu Uunikrishnan Associate Editor Andy Savoie Copy Editor lngrid Lee Production Manager Charts Er Data Aaron Taylor Tel: 631-745-5735, . Emeil: earon.teyior@oliverwymencom Busmess Office Cliff Johnson, Director. 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Flinn, VP?Sales. markutiinnriebaviationweekccm. Officers of The MoGrsw~Hill Companies, Inc: Harold W. McGraw, ill, Chairman, President and Chief Executive Officer; Kenneth M. Vittor, Executive ViceFiesideril and General Counsel; Robert J. Behash, Executive Vice President and Chief Financial Officer; John Weisenseel, Senior Vice President, Treasury Operations. COPYRIGHT 2009 by The MoGriawMill Companies, lnc. All ?ghts reserve-cl. None of the content. of this publication may bc-rcpro~ duceo?, stored in a retrieval system, or transmitted in any form or by any means leisctronlc, mechanical, photo-r copying, recording or otherwise) without the prior writ- ten permission of the publisher. Available in print, World \Wide Web and Email editions. CONFIDENTIAL fro Craft ?Environmental Guidelines 1 J. ix cam? Federal . Readv? Pmiectse I i'Cenada?s airports vii/ill not - injthe 2009 budget-that passed the-House ofComirnons,'a disappoint? 'ment for'the Canadian Airports Coim'cil the industry's-lobbying arm. The Senate has not decided on the measure, but the outcome is not expected to change. . - The lack of support came: ?ais a surprise-because the gOVernment had requested a list ready" infrastructure projects. Airports respondedwith an inventory of programs valued billion billi?dnlatQS airports. None were funded in'the budget. Furthermore, the legislators eliminated a (39533.2 million fund stretching over a three- year period'that was offsetting increased costs of airport policing in the aftermath of the 9/11 terrorist attacks. . The CAC includes'among budget positives a million allot? ment 1for aviation security over two years, including the vauisition of new technology, and C314 million for cargo security. The legislators alsocommittedtc invesit million for tourism pro motion, a likely benefit for airports. The council'said it found parliament?s decision to. ignore airports irkSOme because of what it regards as airports? strong contributions to the public weal. Self-sufficient since 1992, the airports have invested billion in infra?truo?ture with no public-funding. in addition, alr- ports pay (335300 million a year in "rents" to the government. JoinsAirport, Airline Groups The American Association of Airport Execthives is handing together'with other airport and airline groups to create an industry- wide environmental policy framework. .. I The groups, which include the international ?AirTransport tion, Airports Council-international and theAe'rdspece industries As? - societion, are not specifying legislative or polidy recommendationsor changes. Instead, they are creating a set of guidelines for the indus- tries to focus their environmental energies. . As a central framework, the groups favor US. participation in in- ternational standards and recommended practices set by the Interna? tional Civil Aviation Organization. ?it is critical thatthis international ap- proach and federal preemption be maintained in aviation regulatory matters, as it would be impracticable to subject aircraft to different environmental rules in different jurisdictions,? the guidelines state. For airports, among the chief recommendations is improving the ef~ ficiency of ground services. This includes switching to alternative-fuel ground service vehicles and supplying preconditioned air to aircraft at gates. Airports have been moving toward offering these services for years, President Chip Barclay said. "Airports, "like other aviation stakeholders, have been very aggressive in their efforts to curb energy usage and embrace green technologies throughout their operatiOns.? The groups are making modernizing airtrafflc control a centerpiece of-their environmental policy guidelines. They advocate reducing con- gestion at airports both by. improving ATC and beefing up airport in- frastructure in order to get aircraft out of the sky and onto the ground moreefficiently, the policy statement says. l-Madhu Unnikrishnan, madhu_unnikris_hnen @eviatian we ask. com Copyright is 2009 by The MCGrawvHill Companiemnc APT Page 3 February 24, 2009 Legislators Suggest Privatization Of Connecticut Airports Republican legislators have proposed seliing Con- nectic ut?s six state-operated airports and suggested that a study he conducted on the impact of privatiz? ing Bradley international Airport in Windsor Locks. Fiep. Hamzy the deputy Fie- pubiican ieader, has introduced a bili to aliow the state to privatize its six airports. Ail except Bradley are email airports offering no scheduled commercial service. Two Senate biils ask that privatization be explored. A Feb. 38 hearing drew mixed reviews. The Connecticut proposals follow simiiar sugges- tions from officiais of eight city governments over the last year, The Reason Foundation's Airport Policy News pointed out. Officials have suggested privati- zation of Ontario Airport in Los Angeies and of air? ports in Austin, Long Beach, Milwau? kee, Minneapolis/St. Paul and New Orleans. The proposed $2.5 billion lease of Chicago?s Mid~ way Airport to a private company is in the works. Schiphol Endures in 2008, Prepares For Trouble Ahead Amsterdam-based Schiphol Group?s net earnings for 2008 were ?187 million miliion), down 40.8% from 2007, which "moderately pieased? CEO Jos Nijhuis. But the forecastforthe remainder of 2009 is bleak, the official said, and management strategies are changing. Schiphoi Group is expecting passengertraffic and aircraft movements to decline Bye-10% and cargo transport by 15%, compared with 2008. The intro- duction of an air passenger tax has further aggravat? ed the economic situation, Nijhuis says. The Group pians to reduce Amsterdam Schiphoi charges starting April 1 and to freeze charges start- ing Nov. 1. Schiphoi's primary focus whites to develop the 'AirportCity? concept and to maintain a reliabie, efficient and competitive multimodal hub. "it is crucial for the Netheriands and, more specificaliy, for the Randetad region that Amsterdam Airport Schiphol maintains its competitive position," Ni- jhuis says. "This means that whatever the eco- nomic conditions, we will invest in capacity and quality in order to accommodate market demand as soon as it recovers.? The Group operates airports at Amsterdam, Bot- terdarn and Leiystad and owns a 51% stake in Eindm hovan Airport. it also has subsidiaries with holdings at John F. Kennedy Airport, Brisbane, and Aaroports de Paris. lreiand Airport To Update Access Controi System Security lreiand West Airport Knock has acquired SALTO Systems products to update its access controi sys? tem security in both current and planned buildings, part of a ?46 miliion million) expansion. The company uses the X84 Mifare smart card, which is also employed by British Airways, the British Airports Authority and DHL. The irish distributor, Door- ware Ltd, will instaii X84 electronic locks to airside and iandside doors in the new terminal extension. SALTO Systems needs no hard-wi ring and provides networked electronic locking and a range of airport- taiiored features. it supports up to 64,000 users. Blue Grass Airport Names Frankl interim Director The Lexington-Fayette Urban County Airport Board has named Eric Frankl, a 20-year airport vet- era n, as interim executive director of Blue Grass Air? port in Lexington, Ky. He replaces Michael Gobb, who resigned in Jan? uary after reports of alieged abuse of expense ac- counts by unnamed officials. A search continues for a permanent director, of? ficials said. I Franki served as director of airports for the To- ledo?Lucas County Port Authority in Ohio and had responsibility for Toledo Express and i?i/letcalic Field airports. He compieted a master plan for i?v?letcaif and wrote a conceptuai pian for industrial and air cargo deveioped at Toiedo Express. Three investigations are under way at Blue Grass re- lated to aiieged credit card fraud. in addition to Gobb, three other Blue Grass officials have resigned. The airport is preparing forthe 20i0 Alltech Worid Equestrian Games, for which it is the official airport. Dance Debuts Its screens At Airport Retail Outlets Da noo, a media network that offers news and lo? cal flight information, is debuting interactive screens at 150 retail outlets at 40 US. airports. . The San Francisco company is partnering with Trofie, an airports-oriented marketing and advertising specialist. The screens are being placed in newsstands, gift stores, bookstores and speciaity shops. Programming content will inciude flight status updates, national weath? er maps and departure and arrival information, in addition to news, sports, stocks and entertainment segments. Danoo tested the program last year at Compass Books at San Francisco international Airport and decided to expand to other airports. it is advertising supported. Copyright 2009 by The McGrawni-liil Companies, Inc CONFIDENTIAL CON FIDENTIAL DAL-AARWAYWOOIO4677 Page 4 - February 24, 2008 Top 30 Worldwide Airports Ranked By Passengers, Cargo and Movements November 2008 Rank Total Passengers Change Cargo - Tonnes (Metric) Change Total Movements fa Change Atlanta Tokyo Haneda Beijing Capital London Heeihrow Chicago O?Hare Paris de Gaulie DallasfFort Worth L05 Angelee Frankfurt Hong Kong Denver Madrid . New York Kennedy Amsterdam Las Vegas Dubai Houston Singapore Changi Phoenix Guangzhou San Francisco Miami Sydney Charlotte Jakarta Bangkok New York Newark Oriando Munich Detroit 7,037,162 5,633,084 5,037,874 4,989,104 4,783,232 4,359,678 4,285,278 4,276,368 3,913,570 3,752,090 3,679,286 3,588,177 3,490,589 3,275,915 3,232,985 3,125,351 I 3,098,945 3,081,842 2,965,180 2,922,584 2,751,947 2,73? .667 2,727,588 2,723,783 2,628,971 2,808,188 2,581 ,518 2,579,492 2,573,493 2,552,473 ?3.1 Hong Kong ?3.2 "Memphis 19.9 . Shanghai Seoul 49.9 Frankfurt? -3.7 Anchorage 42.6 Paris de Gaulle 44.0 Tokyo Narita ~7.0 Dubai . Louisvilie ~45? Singapore" Changi 45.0 Miami -7.4 Ameterdam ?5.8 London Heathrow 44.8 Los Angeles 6.6 . Beijing . Capital -10.9 New YorkKennedy': -3.2 Taipei 42.8 Chicago O'Hare 5.5 Bangkok ~62 . lndien?apolis ?07 Tokyo "Heneda . New YorkNewark ?1.4 Luxembourg ~73? Osaka" 26.0 Guangzhou 41.5 . Dallas/Fort Worth 43.9 Atlanta ~52 Coiogne -9.7 Oakiend- 298,939 . 280,008 213,245 100,055 181,821 170,588 172,300 105,235 160,488 150,343 148,321 144,928 138,910 125,710 121,073- 109,824 107,073 105,288 07,107 77,597 - 72,181 08,778 88,402 07,254. 00,817 51,043 -, 50,048 40,090. 40,845 40,370 48.6 {3.6 42.3 20.4 ~28.8 -7.9 49.3 7.3 40.3 -13.8 --12.7 41.4 . 1.2 25.? ~70 426.0 ?30.3 20.5 22.9 ~52- 418.1 ~21? 24.? 47.1 ~17.9 -21'.8 -8,5 -7.0 Atlanta Chicago O?Hare Dallas/Fort Worth Denver L03 Angelee Charlotte Houston Paris ole Gaulie' Las Vegas Frankfurt Beijing Capital London Heathrow Phoenix . Philadelphia Phoenix Deer Valley Detroit: Madrid Paul New York Kennedy New York Newark Munich Amsterdam Toronto Pearson - Mexico City Juarez Miami San Francisco New York Leeuardia L05 Angelee Van Nays Salt Lake City Memphis 79,284 65,162 50,948 48,975 43,954 42,881 42,725 42.227 41 ,908 38,733 38,449 38,278 87,716 87,105 36,177 35,889 35,721 34,773 34,107 . 83,966 83,772 33,272 32,520- 29,768 29,459 29,488 I - 28,802 28,400 28,081 27,774 -12.0 -10.4 >551 -?22.0 1-1.5 41.8 5.1 40.9 ~34 20.0 5?2.9 -14.7 .-9.2 12.1 Totalpassengere and dope riihg passengers and direct transit passengersoounted only once. Cargo reported in metric tonnes. Movements Include arrivals and departures . Based on Alrpons Council International data. includes ail reporting ADI memberairports. Copyright 2009 by Tine McGraw?Hili Companies, inc .Wk? . Tuesday, February 24, 2009 9 Copyright 2009 by The McGraw-Hill Companies, inc CON FIDENTIAL . US cm Modem history of US Airways? it's amazing all that this team hasacoompiished . . . -. . We?ve seen competitors go bankrupt We?ve-Seen ioSseS'sinoe 9-11 Yet, US Airways is still here US AIRWAYS CONFIDENTEAL 254 0 Last decade for US Airways is an Amazing Story Marketlpundits consistently count Us Out a yet, we manage to surprise everyone True that we have a ?lesser hand of cards? - But we play them differently than 0A U8 AIRWAYS CONFEDENTIAL US-DOJ-OO491255 Both HP and US on numerous occasions have surprised and competitors US AIRWAYS CONFIDENTEAL 256 US AERWAYS CONFIDENTIAL (2009Source: DOT Superstar YOQ 2009 US Census Bureau Pqpulation Estimates MSA Fortune Magazine US AIRWAYS CONFIDENTIAL Metro Area Population ATL BLT 77 50 Fortune 500 EWR PHL (2009) ATL CLTE This is all about demographics. Nothing to be ashamed of, just the reaiity of our network. Not because of anything negative re: PHL, its just a smailer citythan EWR - We have to mak? up format in other ways- same as CLT vs. ATL . See the same demdgraphic effects in Fortune 500 companies US AIRWAYS CONFIDENTIAL Total 0&5 Revenue (FY09) c1360 m?mi r-itb x211- Ib? 13mg r-Iwi" urn?i Source: Fully Dated Nov 2010 DAG Schedule U8 AIRWAYS CONFIDENTIAL 01?0: r" 50% 40% 30% - 20% 10% Hub LCC Penetration of Seats) A r3213 Our hubs falltowards the bottom. You can see why CLE might be a hub UA eventually shuts down, There are a lot of small cities in the southeast that are only served by ATL and CLT, because ofthat, CLT does betterthan appears on the chart PHX is large, but it?s a very leisme focused destination rather than business .. .. LCC penetration has also hurt PHX. one of 3 markets. 3Thls Creates a situation?lvhere we generate less revenue . US AFRWAYS Fiow Rasm (LOH adj) Total Rasm (LOH adj) 11.7 DL US AA Local Rasm (LOH adj) US AIRWAYS CONFFDENTIAL We?re right in the middle of the paok~ just as good at generating connections. We have an equal shot of oompetin with everyone else. - in the local markets, we?re at the bottom. We have smaller cities demographicaily. . - This isn't going to change. Lots we can do to run 'a better atrline but this is our reaiity. This leadsl'tio a billion dollar deficit in revenues, we need to make up forthat billion doliars somewhere else US AIRWAYS U8 AIRWAYS CONFIDENTIAL . ?9-11-2001 AWA does not have adequate resources to fly through the current storm without a ?nancial reorganization,? UBS, 9/20/01 van with a bailout, the weakest majors, US Ainxvays and America West, may go $70 I bankrupt,? Michael Boyd s60 say the government might now permit Unitedto take oVert/S Aim/rays, butsome eXperts are skeptiCal. Who wants to'mer?gelthe $50 Andrea Doria With the Titanic?? MiCh'ael Boyd the hub-and?spoke majors, US Airways and America West are almost certain to disappear America West lacks the size and reach to fly profitably US Airways is trying to recast itself as a regional carrier. But it has? the costs of a major, and the shutdown of Washington '5 Ronald Reagan Airport may quicken its demise. it's unlikely that a big airline would buy either US Ain/vays or America West because of their weak finances; instead, different carriers would compete to buy their mates Fortune, 10/15/01 Prioepa's?at? e?p at?" a? United Delta Northwest New US Airways mAmerican Continental For dates prior to America West share price was ad}usted to re?ectthe merger with US Airways (New US Airww US AIRWAYS Jpn-m5,? Leek at the stock prices- a5! these airlines who started in a better position on 9-11, and where they end up People were actively planning our hubs. Many thought not but ?when? US HP shutdown Both companies surprised the market US CONFEDENTEAL loan surprises markets/pundits? . I ?,..Conditional government loan guarantee is a positive to AWA as likely to eliminate immediate liquidity risk, Smith Barney, 12/31/01. West has been given more than suf?cient liquidity to outlast the current downturn,? Goldman Sachs, 1/7 5/02 Prioepa??ae New US Air'Ways w?w American Continental United Delta m? Northwest For dates prior to 9127/05, the America West share price was adjusted to re? ec'tthe merger with Us Airways (New US Aime/ways US AIRWAYS CONFIDENTEAL We were within days of liquidating, but survived to fight another day US ?Weak economy follows 9?11? the world?s second largest carriers files for bankruptcy Merrill 12/6/02 . . United bankruptcy tough to swallow, but symbolic of extremely s70 . challenging industn/ environment, Lehman Brothers, 12/5/02 in a contest to see Who's still standing when it's all over and $50 at the end of the day we?ll still be here. There will always be an aviation industry and there will always be a Continental. But there?s at least two - more bankruptcies that I know of: one in Chicago and one in Phoenix, 5i 3 . Arizona.? Gordon Bethune, 9/29/02 5 3? $20 $1.8 billion labor package should position V. its costs between Delta and Northwest; good, not great, but suf?cient to forestall bankruptcy for several months, in our Morgan, 3/31/03 ff? fem? fame/?9 f?paef s10 ,?jyji United Delta mm- Northwest New US Airways ww American Continental For dates prior to 927l05,1he America West share price was adjusted to re?ectthe merger with US Airways (New US Airwways US AFRWAYS CONFIDENTIAL Started with UAL filing for BK, US did as welt US AIRWAYS CONFIDENTEAL ?What experts thought pro-merger? all the deal?s probiems and implementation risks, a better name would be ?Project Dumbbel, R. W. Mann 00, 4/21/05 I . .An SVP at Delta likened-the pair to Sinking o'oea'n liners. When tied together: ?the combined ship sinks faster, New York Times, 5/20/05 $70 - Straight math on US Air you had two one?legged guys and they held each other arm- w, . merger does not war and?arm, would they become track stars?? Bethune asked. Lehman Brothers 05/20/05 "What you have is two impaired airlines by default banding see . . together for the common good. It may be they hold hands while - they are both sinking. i don?t know. But it probably is better $40 - than doing nothing.? Houston Chronicle, 5/20/05 3 . 1% $30 . Even with the synergies suggested management $20 I: we are having trouble finding a strong ROIC with oil at .- $50/bbl, Bear Stearns, 5/20/05 deal has more going against it than for it, CreditSights, 7/1/05 if of it"? atUnited Deita mm? Northwest New USS Airways mm American Continental For dates prior to 91277051119 America Westehare price was adjusted to re?eotthe merger with US Airways (New US Airwways US AIRWAYS CONFIDENTIAL As we were trying to raise money, we had meetings with hedge funds telling us it?s just not possibie to make money with oil at $50/barrel. Here we are with fuei at $90 and we?re making money. US AIRWAYS CONFIDENTIAL USWDOJ-OO491272 what experts thought post-merger? Securities analyst Rey Neidl, in a research note, called the company?s passenger revenue per available seat mile . Asia, 9/26/Aim/aye is one of few names under our coverage Where we still see materiel $50 . upside, Lehman, 2/22/05 .. We think the Street is under- 540 appreciating steep capacity reductions industry Wide as well as US Aimeys? cost $30 i structure, which is signi?cantly lower than the industry Credit Suisse, $20 7/13/05 $10 Eff Kw er?? ?8?9 is? a? if New US Airways mm American Continental Uniied Delta Northwest For dates prior to 927(05, me America West share price was adjusted to re?ectt?e merger with US Airways (New US Airwways AW U8 AERWAYS US is the best performing stock of any airline post 9-11 US AIRWAYS CONFEDENTEAL ?Oil spikes to $147/bbi? The dramatic increase in jet fuel prices has increased airline costs signi?cantly over the past two months, and, if sustained, could threaten their liquidity and financial profiles,? 8&8 5/30/08 US Aim/trays is not in a great poSI'tioh - Bahkruptcyis certainly a possibility US Airways' future is heavily tied to crude oil prices. If they stay at these levels, the likelihood of bankruptcy is high,? Morningstai; 6/6/08 At current fuel prices, Chi 1 risk $60 . list ranked lowest to highest: LUV, ALK, DAL, CAL, JBLU, AMR, $50 UAUA, NWA, Morgan, . 05/18/08. 7 . . i . f6" 4039' 9?35? 68:59 9993? sf}? ??959" We? of? :f5? 6835? Off 9953? $935? gyy ?559 9935? $5.50 49450 gaff) United Delta we? Northwest New US Airways am? American Continental For dates prior to 9127105, the America West share price was adjusted ?to re? act the merger with US Airways (New US Airww US AIRWAYS Oil was next cr?sis. (Phi-s is ad industry that gags from one crisis? to the next.) and experts start to question our position US AIRWAYS $40 Pdcepa'S'a'e US AIRWAYS CONFIDENTIAL $70 - $60 - $507 $307 $20 -. F-?or dates prior to 927/05, me America Westshare price was adjusted to re?ectthe merger with US Airways (New US Airwways ?Capital raise surprises everyone? Aimays has raised $7.2 billion of cash since July to bolster the balance sheet. Investors who were concerned about US Airways? ability to survivesnouid be comforted by the company?s $2.3 billion cash position at the end of the September quarter: Jesup Lamont, 11/4/08 ?Hi-me combination of announcing ~$950 million in new signi?cantly lower we] and fineneings and a revised covenant to be?er liquidity sirengmens bold $850 million in unrestricted cash, LOGS staying power? [.00 has substantially improved its Sam/83,8, 7 0/24/08 gosition, Morgan Stanley, ff 4&9 54Airways mam American Continentai United Dena ?We Nodhwest 277' wm?rg? We surprised everyone with a large capital raise The market didn?t think we ?ouid do'this "Ogrwas a $2 biliion YOY increase US AIRWAYS CONFIDENTIAL ?The Great Recession? with much of its assets already pledged to creditors, the Tempe (Ariz) carrier doesn?t have much borrowing power left to stay out of bankruptcy, AirlineForecastcom, 12/30/08 will have some problems potentially in early 2010 if some airlines, particularly U8 Always, cannot raise additional cash, (Ia/yon, 2/24/09 concerns about liquidity, cash ?mow? indUSf?V is. Sim?wa $.30 balances, and importantly access to . . . 1770??- Situation 1 capital markets are the primary concern unprecedented, the most dif?cult $50 a of airlines. US Airways, United, and 7 eveli?/ATA CEO, 6/8/09 American are the most vulnerable,? $40 . Fitch, 6/17/Kati? as? (p - an all," 1 4r I ?11: - .71: . r: if? ?rst. in,? x? (E?is" gaffe at a New US Airways America? Continental United Dena M- Northwest For dates prior $0 927.05, the America Westshare price was adjusted to re?ectthe merger with US Airways (New US Airwways AWNO US AIRWAYS CONFIDENTIAL I Next up'? the werst recession Since the depre?sion I A number of carriers did fail US AIRWAYS US-BOJ-OO491280 $50 $40 PricemrS'a?e US $60- $307 $20 For dates prior to 91271051313 America West share price was adjusted to re?ect the merger with Airways (New US Nrwways AWNO, . it 4? 4 rite its ns ntiy ?Second capitai raise again surprises everyone? steps announced today are very positive and, along with earlier liquidity-raising measures, move US Airways further away from the abyss of a third benkrtiptcy filing, Piper Jeffrey 11/24/09 . Despite the challenges, a number of industry watchers aren?t ready to count out Parker, who is considered one of the best ?nancial minds in the business. If Doug went to Wall Street to raise capital for a new airline, he?d have $1 billion in Commitments beforehis [PowerPoint] deck, Business Week, 9/24/09 31?s New US Airways American Continentai United ?u Delta Northwest Pn'oepa'srawe $$20 $10 ?Arid here we are ?Higher revenue lower cosis earnings beat,? Stife/ Nicolaus1/26/11 has huge leverage to improving industry? trends,? Merrill ?The company reported a positive 4.6210 EPS surprise as net income was above ?Good quarter - strong 55.5? ?9 For dates prior to 9/27/05, the America West share price was adjusted to re?ect the merger with US Aimays (New US Aimways AW CONFIDENTIAL i d" 6" f?f?f?f?rr?f?ff expectations Dali/man Rose 1/26/11 1/26/11 i if" w?H New US Airways American Continental United Dena Northwest Airiine love our stock Hard to find-a puhdit saying bad things about us Airways We?ve come out second best despite handicaps of our hubs US AIRWAYS CONFIDENTIAL 283 ?/vmuh US AFRWAYS The way we?ve surmed is because We have to b? ciirf?re'nt and do thirj?gs differemanjd - . US AIRWAYS CONFEDENTIAL 85% - 30% 75% 70% 65% 60% 2010 results are YTD through December (December based on OAL data exchahge Avg high great amine 2010 DOT Be 75% . 76% 65% 60% 55% 50% 40% Cumilmmal $11 '11 1 29 inu- I US 201D DOT D0 45% 90% 70% 85% 80%) 75% 2M 0 DOT A14 Airimcs i Myth: High biocktime is a great way to run an on time airline as UA does. Very costiy and inefficient. We run a great 00- requires hard work, discipline, {93! work 80 requires scheduling guys t0 add__ 6-7 minutes to a flight _-_time . We run the [wrest biocktimge, bu; high-aging . .- .. g-Bestmeiric on'how-an'airline operates'f US AIRWAYS gramme me?? -- Consoiidation is hard not worth the effort 0 US Airways [America West ?Two one-legged men propping each other-up? ?ProjeCt Dumbbell? . I ?This deal has more goingagainst it than fori-t?f? ?The cbmbined ship sinks faster? US ALRWAYS 288 Debunked this historical that existedafter USIHR merger - . - -. ifwe hadn?t, neither eiriine wouid exist today Took the best of both, created synergies Hostiie bid for Delta ted to new management team there- merger wouldn?t have happened without our bid Sante'fer CO weuidn?t have merged if we hadn?t made a move Consoiidation has aiiowed the industry to deaiwith high . fuei and the recession - - - . Three {are increases- [able to pass along to customers because of consoiidation and because of US Airways There may be more consoiidation yet to come. Might not be the ones to get acquired. Might aiso mean nothing at __aii happens. Wefrein a good position to stand atone. 2'1 US AIRWAYS CONFIDENTIAL etemt et . Consoiidation is hard not worth the effort US Airways [America West Hosme bid for Delta United Negotiations And the future 0 US AIRWAYS 290 Myth- everyone wants more legroom Reality- as we. learned in 2008- 'p'rioe and 'aohectul'e are whet drive bookings Having our narrow body Airbus configured differently '3 than our competition is worth $lOOm a year Reality is the profitability ofthe airline is due to the fees (3 la carte) generated 2'2 US - Fuel hedging is always the right decision Even though fuel prices are up 29 percent year-overnyear, the most effective hedging strategy in 2010 was motto hedge at all . - 2010 Fuel Cost/Gal 2010 vs 2009 Unhedged Fuel Price $2.45 2.40 $2 39 . 2-30 $2.40 - - $2.37 Sevmge 2.10 $2.35 - $2.33 32 I 5 fig: $2.31 $2 23 $2.3o~ 31.2m? H/v Q) a? .2 $2.25 - a: 1.60 1/ 1.50 IL MO Mk ?veu I I. $2.20. 1.30 ?w 1.?2099 Unhedged Jet Fuel Expense 2010 Unhedged Jet Fuel Expense Note: Fuel savings based on_$14mm net income savings for each Source: Company ?lings and press releases. $0 07/98,,? relative to peer avgrage of 34 US AIRWAYS Fue; hedging is aiways the right decision: sounds prudent like buying insurance. But you wouidn?t buy insurance at any price "Faets are- fuei hedging is incredibiy expensive. if we wanted to 100k in $94/barel, eur check weuid be $335m forthe year . . That weuid be 273 of'eur annual profit going to insurance that woutdn?t pay off; .We're the oniiy-airiine?in America that doesn?t hedge and we had the iawest fuei costs in 2010 You?d '{hink weighed-ding would be smart as fuel spikes? but even with 329% increase, US had the lowest fuel .costs in the country . We saved $140m in 2010 by not hedging are Sewage leak at the facts? airiines aren?t Ithere I Hedging just d?beSh?t'giv? ya r?uch ace-aide when fuel" nses U8 AIRWAYS US AIRWAYS CONFIDENTIAL UA320LOPA Emuaz? 2 wocze?w! per USSZOLOPA Product drives share shift Cusiomers choose airiines based on schedule and price don1 - Airlines have tried overthe year to add legroom, coat slosets, . etc. they always reVerse the decision because onstoms'rs don?t buy based 0n 'IFE,'msals, etc. Customers cheese to ?y 0n jetBlue because of persona?zed TV, but that?s changing with iPst, persona: entertainment, etc. follcwed by running a good airiine? cgstomsr's will avoigjyou i'f- . . 24 U8 AIRWAYS CONFEDENTIAL All-in pricing is better Feel Product Emplementation 2010 Revenue First Bag 7/9/2008 Second Bag 5/5/2008 $61 Choice Seats 5/9/2008 $21 A la Carte Snack/Beverages 6/ 1/2009 US AERWAYS CONFSDENTIAL Product Aircraft Seat Density Coat closets Meals Onboard Entertainment US AIRWAYS CONFIDENTIAL Product drives share shift Situation Outcome Regional jets No loss of customers No new customers, program dismantled - Profitability increased by AA ?More Room Throughout Coach? - US added seats to the A330 and A321 0 75% - US eliminated coat closets if extra 0 increased of seats for seats could be added sale Revenueincreased - No change in actual behavior No loss of customers 0 Eliminated free meals, added BOB - - Campaigns with signature items - No gain in customers LiveTV on jetBlue - Personalized entertainment can impact choice US AIRWAYS CONFIDENTIAL 2009 Food Cost per Fax $7.00 $6.00 $5.75 $5.68 $5.15 - -- US AIRWAYS CONFIDENTEAL Saving $315m year in meals Customers dart?: choose based on meals Labor? have to have iower labor costs to make up the disadvantage of hubs US AERWAYS CONFIDENTIAL An Amazing Story -- We should all be proud! Market/pundits consistently count us out 0 yet, we keepsurprising' everyone- 0 Maximize value by continuing to do what we?re US AIRWAYS CONFIDENTEAL I From: Kirby, Scott To: - Eberwein, Elise; Parker, Doug Sent: 9/71?2010 2:31:08 PM Subject: RE: need to get you guys for i 0 min My idea, inter, is to try to create a eenee of pride in being different then oe. "That sterte with, we have a worse hand of Gertie to (route netirvorit) but we routineiy outoiey the oompetition in epite of having a ieseer route network. We (to this by being one making emert when oe much more just try to do exectiy whet the competition is doing we regero to whether it mekee sense tinenoieliy or not. i think a tot of our officers end are ebout US in many ways (product in Sterting with the officers, i?oi iike it to he a point of pride that we make emert instead of popuier decisions (which ie howi eotoeiiy teei about it). some of thoee iteme - Aggreeoive pureoit oi opportunities Running tower 80 end ineteeci focusing on the harder out more importent metric DO Not fuei hedging - - Our pricing structure (which wouio be different it we hed a different route network out is eoproonete for our ne?er/om) Cost control and not epenoing iuet to ?be competitive? with oe route decisions you see us wilting to underperiorming hooe titre pit, lge, tee deeoite the criticism we take? And we?d never go eopiy tor Lit or ?y LAX-8Y0 for exemple to lead and take ohenoes on revenues; Not running fare eeies etc i I i One of the heiimerke of each of the above and other decisions we make is to eveioete eeoh decision. oa teke the eirnpie approach i?li never be criticized for doing whet the competition to doing so i?rn not going to think about the decision, For just going to match their precinct offering or also out eyetemetio hedging progrern in piece, etc. when i hear Qt. thinking about putting gogo eiroeii on rte or eooiying tor int-?mie euthority, i think ?goo we?re lot smarter than them? ineteeo of what some of our ottioere feet i think which ie ?wow look at the cool, eexy stuff cii is doing?. So l?d like to pride in being and different (not tor differences seize oer so out being different when it makes sense to be different). From: Eberweln, Elise Sent: Tuesday, September 07, 2010 1:20 PM To: Parker, Doug; Kirby, Scott Subject: need to get you guys for 10 min 50 I put time on ail of our caiendars for 4 today (but was hoping we could grab 15 min sometime eariier was to have a discussion about the off site on Oct. 6. i am moving forward with Holforci in the morning, and want to get both of your inputs on the day, what you envision. if you?re around prior to 2, let me know. US AIRWAYS From: Kirby, Scott To: Parker, Doug; Eben/vein, Elise Sent: 9/7/2010 3:20:49 PM Subject: RE: need to get you guys for 30 min i have a 3:00 and i?ll just try is round both of you up when that?s done assuming it works for elise. And my new motto for ibis is ?we manage te maximize, oe manage te mediocrityii? - From: Parker, Doug Sent: Tuesday, September 07, 2010 2:14 PM To: Kirby, Scott; Eberwein, Elise Subject: RE: need to get you guys for 10 min Ithink that sounds great. We should discuss how best to get people excited about that and also feel like they?ve bought into it. To Elise?s point earlier, I can do this before 4 if youtwo can- Thx. From: Kirby, Scott Sent: Tuesday, September 07, 2010 1:31 PM To: Eberwein, Elise; Parker, Doug Subject: RE: need to get yes guys for 10 min My idea, btw, is to try to create sense of pride in being different then oe. That starts with, we leave werse bend of carols to play (route network) be? we routinely outpley the competition in spite of nsying a lesser route netwerk. We do this by being intelligent and making srnert deeisions when oer much more lypleeliy just try lo do exactly wrist the oompetitlon is eloing we regard to whether it makes sense finenoielly or net. i think a lot of our officers end employees are embarrassee about US in many Weys ('pr?oduot'in perimeter); Elening with the officers, re like ll: lo be a point of prise thei: we make smell: decisions instead of popular decisions (which is howl estueliy feel about it}. some of those items include: Aggressive pursuit of oonsolidetlon opportunities Running slower 80 end instead focusing on the harder bill: more lrnportent metric D0 Not: systematically fuel heriglng Our pricing structure (which would be different if we see different route network but is appropriate for our network) (Zest conlrol end not spending just to ?be eompetitise? with as intelligent mule decisions you see us willing is close underperlerrning bubs like pit, lge, les despite the criticism we teke. And we?d never go apply fer Lil ill-?little or fly for exemple Wilingness lo ieecl also take chances on eeoillery revenues Not running fare sales - etc I One of the hallmarks of each of the above end other decisions we make is to erllieelly evaluate each decision. Ge take the simple approach l?ll never be criticized for deing whet the competition is doing so We nor geing to think ebeet the decision, l?rn just going to meteh their product offering or else poi: systematic: hedgan progrern in place, etc. when i hear Di. thinking eboui putting gogo sireeii on as or applying fer lhr?mie authority, triin ?god we?re lot smarter than them? instead of what some of our officers feel think which is ?wow look st the cool, sexy stuff all is doing?. So l?ci like to instill pride in being intelligent and different (not for differences sake per se but being different ween it makes sense in be different). - From: Eberwein, Elise Sent: Tuesday, September 07, 2010 1:20 PM To: Parker, Doug; Kirby, Scott US 4411 Subject: need to get you guys for 10 min 80 i put time on ail of our calendars for 4 today (but was hoping we couid grab 15 min sometime earlier was to have a discussion aboui the off site on Oct. 6. I am moving forward with Hoiford in the morning, and want to get both of your inputs on the day, what you envision. if you?re around prior to 2, iet me know. . . . US From: Parker, Doug To: Sent: axe/2010 11:56:40 PM Subject: Fw: Emailing: Richard, Apologies in advance if I?m overestepping boundaries, but I decided I'd like someone to tell me about this if the situation were reversed, so I'm.passing it along. Below is an email from our head of IR to me describing a conversation he had with a sell side? analyst about DL. As written, the story comes across like a potential Reg FD issue ?u inadvertent, selective disclosure of material info (at least to this analyst who says he told the Company its stock would underperform once fully disclosed). I obviously have no clue if this story is accurate or if the info described is material and nonwpuhlic nor do 1 care. I just know that I would care if an analyst was running around making statements like this about US, so'I decided to pass it on to you to handle however you wish. I trust all is well with you. Robert says he enjoyed seeing you last weekend. See you soon.- dp Original Message From: Cravens, Daniel To: Eberwein, Elise; Parker, Doug; Kirby, Scott Cc: Kerr, Derek I Sent: Mon Aug 09 11:37:32 2010 7 Subject: RE: Emailing: amrmual As a follow up, I just got off the phone with Hunter Keay to check in with him.on a few things and he had mentioned that he had taken DAL on a non?deal roadshow last week. During one of the meetings, Hank Halter apparently unintentionally disclosed that they are going to be pulling 5 .757s, 2 7675 and 2 747s out of the desert. Taken aback from the-comment, Hunter questioned Hank again in the car and confirmed. He said he told Hank that the street was not going to be happy about this and they should expect their stock to underperform as a result. Unfortunately however, Hunter said didn't feel like he could put this in a report at the time given the torum in which it was disclosed and the fact that he told them beforehand that he wouldn?t publish anything about the trip. But, DAL has now hastily put together a sellwside only luncheon this Wednesday in NY to discuss. I will keep an out analyst reports that call them out, but Hunter did say he intends to write one Wednesday night after the luncheon. Will keep you posted. Dan ?e~?~Original Message?mmnm From: Eberwein, Elise Sent: Friday, July 30, 2010 3:11 PM To: Parker, Doug; Kirby, Scott Cc: Kerr, Derek; Cravens, Daniel Subject: Re: Emailing: amrwual Just catching up on a week of reading (don't fret) just skimming thems..if that graphic attached to this article wasn?t enough to get richard?s will make sure this aretty simple and basic concept.gets some attention. Might not be overnight but dl will make :his very easy. Original Message From: Parker, Doug US AERWAYS CONFIDENTEAL To: Kirby, Scott Cc: Kerr, Derek; Eberwein, Elise; Cravens, Daniel Sent: Mon Jul 26 18:25:22 2010 Subject: Re: Emailing: amrmual On my flight to Charlotte, I just saw a helpful article to this point in the WSJ. Page Cl, "Markets say no to expansionist companies". Delta is prime example cited. Their stock is down since last week and UA, who isn't growing, is up. Articles and sentiment like this really will help and may be the only thing that do. I think we should aggressively but quietly keep pointing out to and journalists the type of flying these guys are doing (lastyd, this lga~ord shuttle) that is hurting their profitability and unfortunately everyone else's. Scott can help you guys with where to point. Thx. Original Message .From: Parker, Doug To: Kirby, Scott Cc: Kerr, Derek; Eberwein, Elise; Cravens, Daniel Sent: Mon Jul 26 13:52:22 2010 . Subject: RE: Emailing: amr~ual Unfortunately stories like this only talk about Richard, not Glenn. Being in the press and being portrayed a tough competitor who?s going to rule the world are two-things Richard likes, so he?s not going to push back. That's Why it?s important that we keep portraying these guys as idiots to Wall Street and anyone else who'll listen (copying in Dan, Derek, and Elise now so they can work on that part behind the scenes). The only thing that will get Richard to push back on Glenn is a decline in the public?s perception of Richard. Thx. ?~e??Original From: Kirby, Scott Sent: Monday, July 26,.2010 1:29 PM 2 To: Parker, Doug . Subject: RE: Emailing: amr-uai - And he appears to be running the marketing side of things with zero oversight:..which is actually a pretty big industry problem. I like glen personally but good grief, he needs some adult supervision. - - I From: Parker, Doug Sent: Monday, July 26, 2010 1:23 PM To: Kirby, Scott Subject: Emailing: I can?t remember the last time I saw one these ?triple miles" market share battles between legacy guys. Usually it's a legacy guy using it as a way to push around an LCC. Delta has turned into the worst possible airline Mm a high?cost carrier trying to steal share where they have a revenue generating disadvantage. Thankfully it?s not in our market, but it's not a good Sign. - The message is ready to be sent with the following file or link attachments: Shortcut to: Note: To protect against computer viruses, e~mail programs may prevent sending or receiving certain types of file attachments. Check your e?mail security settings to determine how attachments are handled. US AIRWAYS From: Parker, Doug . To: Johnson, Stephen; Eberwein, Elise; Kirby, Scott; Kerr, Derek; lsom, Robert; Hewlett, CA Sent: . 6/18l2010 12:54:40 PM - . Subject: Re: Swelbieg Swelbar on Airiines i know that?s what I?m worried abbot. Surer these guys aren't reaily planning to keep Cleveland open. i'm hopeful they're just saying what they need to (inciuciing to Bill) to get this approved. - - From: Johnson, Stephen To: Parker, Deog; Eben/vein, Elise; Kirby, Scott; Kerr, Derek; Isom, Robert; Hewiett, CA . Sent: Fri Jun 1811;33:10 2010 . - .. Subject: Re: Sweiblog Sweibar on Airlines very unlike swelbar a go out on a time me that Without madam, From: Parker, Doug To: Eberwein, Elise; Kirby, Scott; Kerr,_Derek; Johnson, Stephen; Isem, Robert; Hewlett, CA Sent: Fri Jun 18 11:10:33 2010 . . . . Subject: Re: Swelbleg Swelbar on Airlines This is nicely done. 'lbepe he is Wrong about Cieveiand though. From: Eberwein, Elise . To: Parker, Doug; Kirby, Scott; Kerr, Derek; Johnson, Stephen; Isom, Robert; Hewlett, CA Sent: Fri Jun 18 Subject: Fw: Sweiblog Sweibar on Airlines From: To: Ebenmein,'Elisei 3 - Sent: Fri Jun 18 03:33:13 2010 Subject: Sweiblog Swelbar on Airlines Link to Swelblog Meme; gr; Airlines Seething r" iitereiber on ?ririines my testimony on the continental - united merger before the house judiciary committee - Posteo: it? Jon one 04:38 PM PDT Good afternoon Chairman Conyers, Ranking Member Smithg'end members of the committee. My name is William Sweibar. I am a Research Engineer with the Massachusetts Institute otTeehnology?s International Center for Air Transportation. Our program is focused on the economic, financial, operational and competitive aspects of the giebai airline industry. i appreciate the opportunity to speak today in support of the merger of United and US Continental Airlines. Whereas i have worked with each United and Continental in a consulting capacity in the past, i appear today as an independent expert on the US. and globai airiine industry. Many see the giobal airiine industry as somehow U.S.-centric. it is not. in aviation, the US. is'but one piece of a big puzzie that is infiuenced by global economic interdependencies, just as the US. economic recovery coutd be affected if by events in Greece, Portugal, Spain and Hungary. United and Continental presented in their testimony before the Senate Committee on Commerce Science and Transportation an exhibit showing where US. airlines have fallen in their ranking among the glObe?s iargest airlines. i am bothered by the fact that the U8. carriers have been surpassed by Lufthansa/Swiss and Air France/KLM. This fact is but one reason that heips to explain why United and Continentai are pursuing this merger. For the network carriers like United and Continental, this round of consoiidation is as much about preparing to compete with the world?s other big carriers for international traffic as it is about competing with tow cost carriers (LGCs) like Southwest, AirTran, or Frontier in the domestic market. After ail, it is the network Carriers and not the iow? cost carriers that serve communities of ail sizes. Despite the footprint estabiished by the low fare carriersthat is new national in scope, with their share of domestic traffic approaching 40 percent, it is the network carriers that connect the smallest US. markets to the globe?s air transportation grid. wouid like to debunk some of the have heard said about the merger of United and Continental. a OVERLAPPING ROUTESIHIGHER PRICES: There are just 15 nonstop, Overlapping routes flown by? each United and Continental. None of the 15 would be a monopoiy United route after the proposed merger. Elevenof the 15 overlapping city pairs wouid have at ieast two competitors. Of the four routes that would have but one other nonstop competitor (Houston_?? Washington, Houston Los Angeies, Houston SanFrancisco and Cleveland Denver), that other competitor is Southwest Airiines in three of the four and Frontier on the other. in each of the four routes, the LCC competitor has at least a 25 percent share of traffic. in addition to a nonstop competitor, two of the routes have four other carriers providing connecting service; One" has I three other carriers providing connecting service; and one has two other'carriers providing connecting Service. The I i airiine industry is a network industry and connecting options for passengers must be taken into account when considering competitive impacts as they also work to discipiine prices. The US. market shouid not fear the ?end to end? network co?nsoiidation iike Delta - Northwest and the proposed United Continentai merger. The low cost carrier segment of thetJS airline industry would regale inthe fact that network carriers would price weil above the market as was-the caSe in the late 1990s and early 2000s as it would Serve as the . oataiyst for growth at the expense of the network carriers again. The market has demonstrated time and again that where competition is vulnerable, a new entrant will exploit that vuinerabil'rty. Where there are market opportunities, there will be a carrier to leverage that opportunity. And where there is insufficient capacity, capacity will find the insuf?ciency. a START OF ANOTHER BIG MERGER WAVE: some predicted that the Northwest?Delta merger in 2008 would be the catalyst to a big merger wave. Two years Eater, we have a second merger announcement. That hardly seems to be a wave. Nonetheless, each merger case should be considered on its own merits, not based upon what someone speculates might happen. Moreover, the concerns are most relevant in highly concentrated industries. The US. domestic airiine industry will remain fragmented should the proposed merger be approved as seven airlines wiil have at least a 5 percent market share. When thinking about airlines in a global context, no one airiine has a 5 percent share of the globai market. The top to firms producing mobile handsets comprise 85 percent of their industry; the top 10 automotive manufacturers make up 76 percent of their industry; and the top to container shipping ?rms equal 63 percent of their industry. Yet the worlds to largest airlines make up only 36 percent of the globai airline industry. These define a fragmented industry prohibited from operating as other giobal industries, not a concentrated one. US CONFIDENTIAL a HUB CLOSURES AND The fear mongers would have us believe unequivocatly that there will be reductions in ?ying, the dislocation of email communities from the global airline map and even hub closures because of consolidation. Many use TWA and its St. Louis hub as an example. American Airlines did not merge with a failing TWA. Rather it acquired certain assets of a failed TWA. As a result it is a very poor exempts of what could happen to a hub. But was it consolidation of the industry that ultimately caused American to downsize St. Louis or was it the events of 9/11 and the changed economics of the industry that followed that ultimately rendered St. Louis uneconomic? Might the local economy in St. Louis have contributed to the city no longer being an attractive hub city that produces significant local traffic to support the hub carrier? St. Louis is but one example of hub closures since September 2001 as US Airways/America West has in effect cldsed it Las Vegas hub and its Pittsburgh hub. Neither of the closures can be iaid at the feet at the carrier?s merger with US Airways. in fact if America West had not agreed to merge with US Airways it is highiy likely that the old US Airways would have been liquidated. in the case of this merger, there has been much speculation about the future of Continental?s Cleveland hub. 'There is nothing that i can see from this merger that would make Cleveland redundant. Without knowing what the internal data might say but being knowledgeable about airline planning models, i would guess that the modeiing would suggest that Cleveland would be made stronger as a result of the merger and not weaker. The answer to Cleveland remaining a critical point on the combined carrier rnap will have everything to do with the condition of the local Cleveland economy as well as the price of oil and little to nothing to do with the decision to merge. - EMPLOYEEIEMPLOYMENT DISRUPTIONS: Since 2001, the industry has shed nearly 140,000 airline jobs. But 400,000+ good jobs where wages and benefits average over $81,000 per year per fuli time equivalent remain. in fact, the average wage for airline employment reached its high point for the decade during the third quarter of 2009. This average employee cost comes after the significant concessions granted at each of the five remaining network carriers between 2002 and 2307. Headcount reductions were significant during the period as well as companies were forced to reduce their size in response to a changed revenue environment and increasing fuel prices. The reductions continued into 2008 as climbed to $147 per barrel and jet fuel to the equivalent of $172 per barrel. 2.009 marked the second largest decrease in industry capacity since 1942. Susan Carey of The Walt Street Journal wrote an article titled: ?Airline lndustry Sees Pain E> Towers Watson is not empowered to render tax, accounting, securities or legal advice. Recipients of this message (including any attachments) should seek definitive guidance in these areas by consulting with their appropriate advisors for these matters. IRS Circular 230 Disclosure To ensure compliance with requirements imposed by the IRS, we inform you that any US federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. - 2 Notice of Confidentiality This transmission contains information that may be confidential. It has been prepared for the sole and exclusive use of the intended recipient and on the basis agreed with that person. If you are not the intended recipient of the message (or authorized to receive it for the US AIRWAYS CONFIDENTIAL intended recipient), you Should notify us immediately; you Should delete it from your system and may not disclose its contents to anyone else. This emmail has come to you from Towers Watson Delaware Inc. US AERWAYS CONFIDENTIAL From: Rodgers, Beokyj [Beoky.JRodgers@aa.oom] Sent: Tuesday, September 2011 3:35 PM To: Same, Kevin Subject: BOSDFW market aa vs us US is continuing to cause problems in so tired of answering these same questions from everyone about them in our non-stops. They are stiil way undercutting us and getting significant share. Should we try adding a fare somewhere in the middle to cut the difference on 3 connect only routing? l?m thinking around their ievel as a rt junk that cooid be inventory controiied? it would stiil be a decent value for the two iocals considering the fares are half that out of and it shouldn?t cause US to reduce fares because they already have a GAP at that level and have other tower. Our business traveiers will likely choose the nonwstop so by putting it on connect oniy it should help w/ the other one~off price sensitive customers choosing do you think? Of course, not have much anyhow since it runs pretty fuil most of the time. Or, should we just try to take up this battle w/ them again? This is a iot more than their usual $40 and AP undercut0/79 U3 0/ lf?? FQHELF FDR ABOUT THE hEu PSGR CHARGES FGR EAPER TECKET MAY BE RDQED in 0403113. ITIN ?73 BK CK 3. 278.90 US 2 6 338.60 US R. 3 1? 034.00 US 4 455.00 US 5 692.00 US F?o? 6?5.00 43 7 352 ?0 704.00 US a 739.0G RA 9 404 66 808.90 US 16 834.00 AA 11 $74.00 AA 12 973.0? RA TUE U30 AA 19/ 1/99 {3 0/ 4f83 FQHELF FOR INF ABQUT THE NEW FREE PSGR . ET MAI BE RQDEQ WHEN ITIN 9R1CEB Q4OCT11 FARE BASIS BK CK TRAVEL-TICKET 179.09 358.00 US 2 134.03 363,00 U3 3 GKR7NR4F 194.33 388.03 US 4 199.90 393.03 ES 5 224.Q0 US 6 3 25l.273.09 mw~~ 9 1, Us 13 w, 314.VXA7NRSP 369.00 738.03 US 13 394 G9 787.00 US 34 i 45? 03 993.09 US 15 476.30 952 WV US 16 999.00 RH CONFIDENTIAL From: Pricing?Schedullng, Paxsaies Sent: Tuesday, September 27, 2011 12:38 PM "fa: Rodgers, Becky; Subject: FW: BOSDFW market aa vs us From: Victoria . - - - Sent: Tuesday, September 27, 2611 . Te: Pricing-Scheduling, Paxsales . . . Subjectmm. mmFrom: Angelakes, Colleen Sent: Tuesaciay, September 27, 2011 11:32 AM Te: Victoria Subject: BOSDFW market aa vs us Hello Victoria, 1 know this is a stretch to send to our pricing team, but here goes. AA space nonstop rounci trip same day prices at 204140. US space through an eutbound connex or: return round trip same day 391.80. l?t looks like the OA space doesn?t have a minimum stay AA does. See below for further details. Thank; Co?een 9NR - PFSATB 1 AA1625K 04OCT BOSBFW 855A 1205? HRS 2 AA 614K O4OCT DFWBOS SZSP 95533 HRS 3 ARNK 4 D4OCTT BOSDFW 630A 1210? HRS OAOCTT S4OP 94713 HRS 6 US334OT PH LBOS 1045!? 1158? HRS BY US AIRWAYS AIRLINES PQ RQ BASE FARE TAXES TOTAL U501884.66 162.74XT USD2047.40ADT XT 141.34US 7.4DZP 5.00AY 9.00XF KAOOERMS LAST DAY TO PURCHASE 805 AA DFW94233KAOOERMS AA 805942.33KAO0ERM5 USD1884.66END ZPBOSD FW CARRIER AA AA-QR-nnerl95-zne 010 BUS AA 1625K OQOCT 855A KAOGERMS 02 DFW AA 514K (MOIST S2SP KAOOERMS D4OCTNIL 805 SB 518 0950/2753? PRICE-5Y5 PQ 2 BASE FARE TAXES TOTAL USD331.16 60.64XT USSBQIBOADT XT 14.8IJZP 7.591330! 13.50XF UXA7NA6P TXA7NA4P LAST DAY TO PURCHASE 805 US US US 305201.86TXA7NA4P 1.15END VALIDATING CARRIER US BY FLT 01 805 US 1153U D4OCT 530A UXATNAGP 04OCTO4OCTNIL 02 DFW US 12901" O4OCT 540!? TXA7NA4P O4GCT040CTNIL 03 PHL US 33401" (MOIST 104SP WATNAZIP O4OCT04OCTNIL BOS 5J8 5J8 0959/27533 STATUS-EXPIRED CONFIDENTIAL an? an. From: Kirby, Scott To: Nocena, Andrew CC: Trenga, Tom 7/25/2011 3:36:10 PM Subject: Re: Phl-pit/mht Wow; Rational industry behavior. Encouraging Original Message From: Nocella, Andrew Sent: Monday, July 25, 2011 02:34 PM To: Kirby, Scott Subject: Re: Yes Pit Man Jax Plus down one rdu from 4 to 3 Original Message From: Kirby, Scott Sent: Monday, July 25, 2011 02:20 PM To: Trenga, Tom; Nocella, Andrew Subject: Phl?pit/mht Did wn pull out? US AIRWAYS From: Comm, Corp [Corp.Comm@aa.corn] Sent: Wednesday, July 20, 2011 0:10 AM To: Comm, Corp - Subject: Heads Up: American Takes Aggressive Steps to Address Near-Term Chaiienges and Position the Company to Win importance; High HEAQS tit-it 0?.20.2011 For AA Managers Level 3+ Subject: American Takes Aggressive Steps to Address Near-Term Challenges and Position the Company to Win Summary: Today American is making history by announcing the largest aircraft order in aviation history. Through landmark agreements with Boeing and Airbus, American plans to take deiivery of 460 narrowbody aircraft beginning in 2013 through 2022. This move will transform our narrowbody fleet over five years and solidify our fleet plan into the next decade. AMER is also reporting a second quarter 2011 net loss of $286 million, due in iarge part to a 31 percent year- over-year increase in fuel costs. To heip us manage through our near-term challenges and continue on the path to success, we are taking several aggressive steps including our intention to move forward with a divestiture of American Eagle, network adjustments and additionai cost management initiatives. Key Points: Largest Aircraft Order in History - We?ve inked th-e?higgest aircnaft. order in history, making a bold move to reshape our company and our future: American will acquire 460 narrowbody aircraft from the Boeing 737' and Airbus A320 beginning in 2013 through 2022, allowing us to replace and transform our narrowoody fieet and giving the youngest fleet in the industry within five years. - Boeing a American plans to acquire 200 additional 7375, with Options for another 100 7'3? aircraft and the flexibility to convert the new deliveries into fleet types within the 737 family. a As part of the Boeing agreement, American will take delivery of 100 aircraft from Boeing?s current 737NG family starting in 2013. a American also plans to order 100 of Boeing?s expected new evoiution of the 737NG, with a new engine that wouid offer even more significant fuel-efficiency gains over today?s models. a American is the first airline to commit to order this newer version of 737. Airbus a We intend to purchase 250 Airbus aircraft from the A320 family, which consists of the A319, A320 and A821 aircraft. We will also have 365 options and purchase rights for additional aircraft with the flexibility to convert the deliveries into any of the A320 variants within the family. 5 Beginning in 2013, we will take deiivery of ??30 current-generation aircraft from the A320 family. a Beginning in 2017, we will begin taking deiivery of 130 A320neo aircraft with next-generation engine technology, which is approximately 15 percent more fuel efficient than today?s models. American will be the first US. network airline to deploy this new-technoiogy aircraft 1 CONFIDENTIAL Other Order Details The new aircraft will help American significantly reduce our operating and fuel costs, continue our fleet simplification efforts, improve and deliver a state?oi?the?art product to customers. _s American will also benefit from $13 billion of committed financing from the manufacturers through lease transactions. Thefinancing covers fully the first 230 deliveries; a These agreements give American the for replacement as well as growth under the right economic and financial conditions. While these 480 deliveries are intended to be replacement aircraft, we have a total of 465 options for additional aircraft from both manufacturers through 2025, giving us the ability to acquire up to 925 aircraft in total over i2 years. a Beyond today?s announcement, American continues to execute on other elements of a comprehensive fleet renewal plan that wilt deliver customer benefits in a' range of aircraft types and sizes. - . . . - For more information, seethe news release on AAcorri and the Fleet Talking Points on Jetnet's Manager Resources page, and the Fleet Announcement on Jetnet. American Eagle intention to Divest - Today, AMR announced its intent to move forward with the divestiture of American Eagle and expects the, divestiture to take the form of a spin-off of Eagle stock to AMR shareholders. AMR believes the divestiture of Eagle is in the best interests of both airlines: - i - a would benefit from diversifying its regional feed overtime among additional regionai airlines, to ensure access to the most competitive rates and service. - a . Eagle wouid gain the opportunity to compete for other airlines? flying, something that is not feasible today, as a wholiy-ovvhed SubsidiaryofAMR. in August, American Eagle expectsto file a ?Ferm'tti Registration Statement? with the Securities 8: Exchange Commission, outlining apossible divestiture. Moredetails will be, avaiiacle after these forms have been filed. . . . . For now, it remains business as usual for employees of American and Eagie. As previously announced, once a divestiture occurs, employees of American andEagle will have reciprocal travelprivileges m' just as they do today for a period of at least five yearsFor more information see the on Jetnet and the news release on Ascent. Financial Results and How American is Responding AMR today reported a net loss of $286 million for the second quarter of 2011 compared to a net loss of $11 million in the second quarter of 2010. This is in large part because of fuel prices that increased 3? percent compared to the second quarter of 2010. As a resuit, the company paid $524 million more for fuel in the second quarter of'201t than it would have paid during the same time period a year ago. We continue with a laser focus on taking the necessary steps to help us manage through our near?term chaiienges and continue on the path to success. The company is taking severai immediate actions to be more competitive and efficient, including the following: Network reductions a American has adjusted its network for the fail, with the cancellation of its San Francisco to Honoluiu and Los Angeles to San Salvador flights, as well as a number of other adjustments to reduce costs and improve revenue performance. in coniunction with Americans trans?Atlanticjoint business partners,__the company isievaiuating its winter flying, and anticipates making Seasonal route and flying adjustments in early 2012 to improve results. Ciosing Dublin Reservation Office a American amounted it is intendingto close the European reservations office-in Dublin, lreiand. We are evatuating a lower-cost offshoring proposai and have entered a formal consultation with the lrish CommunicationsWorkers? Union. - . a This decision does not affect American?s domestic US. Reservations employees. a The US. resenrations teams are all American Airlines employees. There are no plans for this to change. - - - - Temporary suspension of JFK-Haneda (HND) a Customer demand in the US. Ja?pan market continues to be low following the tragic Japanese earthquake and tsunami earlier this year. - - a Because of this, American aopiied for awaiver from the US. Department of Transportation to temporarily suspend service from New York?s JFK to Tokyo?s Haneda Airport. a While we are etiil awaiting DOT response, American plans to suspend service beginning early September 2011 through mid 2012. 3" I . For more information see the news release on AAcom. We?re Making Bold Metres FiightPian 20-20 in Action . a Today?s announcements are concrete examples of our absolute focus on executing 2020. 9 Now it?s up to each of us to take the opportunity to differentiate ourselves from our competitors to secure ourtutureBuying new air-planes is just one'oart oft-hie overall solution} Ultimate suc_ceSs will require each of us to understand our roleinthe business and to deliver on that expectation every day. a SignifECant Challenges are still ahead, but we have a clear plan toaddress-these obstacles and dedicated employees who are determined to get us there. i . - Subject Matter Experts: Andrew Becket/er, Corporate Communications, andrew.oackover@aa.com; Susan Gordon, Corporate Communications, susanoordon?iaacom. 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US AIRWAYS CONFIDENTIAL . .- From: LandauParker, Doug; Kirby, Scott; isom, Robert; Hester, Kerry; Romantic, John; Eitaib, Nura; Lindernann, Tim; Pon, Daniel; Ulrich, Cari; Thompson, Bonnie; Eberwein, Eiise; Liss, Meagan; Bateman, Jennifer Corporate Communications Distro - 3/24/2011 4:37:07 PM Subject: are: RIO Town Halt recap Hello all, Below is a brief recap of today?s Rio West Town Hall session hosted by Doug. Video will be posted on Wings in the next few days. ?liz introduction 2010 was a fantastic year, both financially and operationally, and it?s the hard work of so many great people at US Airways that make these results possible. We did a lot of things in 2008 and 2009 that helped return us to profitability. We have some concern about the economy and how events in Japan could have a global impact. A 2011 profit is not impossible, but it?s not guaranteed either. Key Topics Consolidation 0 We?re getting cioser to where we need to be as an industry. There were 7' major carriers in 2005 when we did the America West-U8 Airways transaction and today we?re down to 4 carriers. Four may be the right number, or it may be one too many. . 0 As the smailest of the carriers, and because the other 3 are too big to combine with each other, we need to be in a position where it?s our choice whether or not we want to participate in a transaction. 0 We get in that position by providing consistent results and keeping our costs in check. 0 Of the Soutwest/AirTran merger, we?ve been competing with Southwestfor a long time, so we don?t see their merger as a big problem. We?ll have fewer airlines than before, and that?s a good thing. Reservations insourcing Ail reservations work will be brought back to the US. by Oct. 31, 2011 as required by our contract. 0 Although it?s required, we?re happy to do so. While our MNL team is proud to work for us and they provide the best service they can, they aren?t as good as our own empioyees as they'have a limited knowledge of US Airways and traveling around our airports. 0 Lots of work has been done in preparation over the last 3 years, including making more self?service tools available to our customers. We?re also working to roll out a new that will direct caiis where they need to go without reducing the headcount. We are, however, backfilling approx. 400 positions that are vacant due to increased attrition. . 0 internet support wili stay in MNL, which is aliowed contractually and gives us a cost savings. Previously, web support questions were being handied by Res agents who would bandied the transaction instead of provided technical assistance. MNL team is better trained for it" questions and they have more resources available for that, including being able to join the web browsing session with the customer. Self-service during irreguiar ops The question asked specificaliy about plans we had to add kiosks behind security for customers to use during service recovery. 0 Service recovery is very important to us and we?ve made some progress by implementing things like added web functionality, BeNotified and improved flifo., 0 We?re stilt looking at kiosks, but so many customers today have mobile devices so it makes sense to look in that direction as well. lnfiight entertainment 0 it?s becoming less and less likely that we?ll bring ll??E back, given that so many customers have personal devices with content they want. We achieved in fuel savings when we removed IFE systems, so you can?t really justify the price of adding it back on. One year from now, IFE will probably be even less relevant: A question then arose about adding power outlets so customers can use their devices for the longer ?ights. We removed po from the aircraft that had them they?re often unreliable and add a lot of weight. We do look at this as an option for intemationai ?ying, but battery technology is continually improving. 0 Wi?Fi is currently on all of our A3215 but the usage isn?t paying for itself. if it becomes something all airlines have across their fleets, that?s something we?ll have to took at. - -END - Ug A?rways 8mg} Eric at ?PMorgar?r Avia?oh, Frahsoortat?on ?1 ?efome ?onf?erome Even? ?atemm: Mar. 22? 291'? THOMSON REUTERS STREETEVENTS 1 Contact Us ?2011 Thomson Reuters. AIS rights reserved. Repubtica?on or redistribu?on of Thomson Reu?rers content including by framing or simiiar means. is prohibited without the pn?or written consent of Thomson Reuters. ?Thomson Reuters? and the Thomson Reuters logo are registered irademarks of Thomson Reuters and its affiliated companies, US AERWAYS .7 7 7 7 CORPORATE i?ARTlEll?Ai?li?S Scott Kirby US Airways Group, inc. President reassersrlea Scott Kirby a US Airways Group, inc. President (CALL 1N PROGRESS) discipiined and maintain discipline and improve these margins on a goingsforward basis. US Airways is very waif?positioned in this environment. We have done all that we could in challenging environments. We are very proud of our operationai results and to the 34,000 empioyees at US Airways who turned around what was a challenging operation in 2007, as you can see on this chart at the bottom of all ofthe various performance metrics across the industry. Turned that around in 2008, 2009, 2010 and we are now at or near the top of the charts and, really, all the metrics and improved -- continued to improve in all of the metrics. So something that we at US Airways are very proud of. At the same time, we had very good revenue performance in 201 0. Despite no exposure to the Pacific nearthe top ofthe industry and year?over?yea;r revenue production. Atso very proud of fuel discipiine. Unlike many in the rest of the industry, on this chart we dramaticaliy outperformed keeping our CASM fuel flat while the industry, many carriers were up, as you can see, in the 6% range. - And then, this chart, l'm sometimes afraid to put this up especiaily with what has happened in the last few weeks. But fuel hedging, and our fuel hedging strategy has actually been apretty signi?cant advantage for US Airways. And i think over the long term, it will continue to be an advantagelwon?t belabor therpoint, because 1 have talked aboutit at other conferences i've talked to many ofyou individuaily, But the . fact of the matter is'that fuel hedging is incredibly expensive. Particuiarly ifyou are buying cail options. The premiums are very largebecause of the volatility in fuel price is so ageopolitical risk premium priced into oil price options and you are buying everything at [KatangoZ at ieast for the last few years. And the fact is that those premiums, theKatango and the premiums for that insurance policy are more expensive than the benefit that you've gotten, even when fuel prices have gone up. So in 2010, fuel prices were up 29%. The only airline in the country that didn't hedge had the lowest fuel prices in the country because those premiums are so large, that insurance policy is so expensive, that it couldn't cover even a 29% increase in fuel price. Now, the ?rst quarter as it seemed to even more rapid spike in fuei prices so I suspect we will be on the ieft?hand side of this chart. But if you look at it over a longer period of time, we are going to consistently be at the right-hand side of this chart . and have lower fuel prices. 50 it really is an advantage for US Airways to have a fuel hedging policy that saves us money, even in an environment where fuel prices are generally rising. - You add all that together, good revenue performance, best~in~class CASM fuel performance and best~inwclass fuei expense and US Airways had the best year over year" or amongst the best year~over~year improvement in pretax margin last year. You see the other two carriers, United and Delta, that are there close to it have massive exposure to the Pacific, which dramaticain outperformed in RASM. So 2010 was an excellent year for US Airways and we really outperformed across the board, and are proud of what happened in 2010. THOMSON REUTERS STREETEVENTS i 3 Contact Us @2011 Thomson Reuters. Ail rights reserved. Republication or redistribution of Thomson Reuters content. including by framing or similar means. is prohibited without the prior written consent of Thomson Reuters."Thomson Reuters? and the Thomson Reuters iogo are registered trademarks of Thomson Reuters and its affiliated companies. US "100018 r7 ltAL rig 5x Now what all of you, i think, are probably more interested in is to taikabout the outlook going forward. 30 l'il spend some time on that and in particular, i will spend some time on this chart and talkabout the revenue environment. As i said earlier, in February the fare increases that we saw, combined with a strong demand environment, led to the strongest, most rapid acceieration in revenue that We seen in my entire career. There were fa re increases. Not only were there fare increases, there was a cieanup in the fa re structure so changing viewer clay advance purchase to seven?day advance purchase.While those don't always make headlines, something iike changing the viewer day advance purchase far to a seven?day advance purchase fare, it lowers viewer clay advance purchase fare to a seven-day advance purchase fare; in some cases had the effect ofcioubiing the fare for business travelers on walk?up traffic. 3 50 significant increase in revenue across February. As we look into March, that strength carried over. There are two things thatare going to affect March performance at US Airways and,lthink, for theindustry. - - - . . The first is the shift of Easter because Easter has moved back to the back half of Aprii. The week before Easter is actually one of the strongest travel weeks of the entire year; Last year it had occurred in March. This year it will occur in April. That is going to move about 300 basis points of revenue out of March and into April. So it is going to iowerl?viarch by 300 basis points. But it will raise revenue in April. So net net, it?s nota negative. ltjost will change the timing ofwhen that revenue comes in. And secondly, we have actually seen an effect. i think it is a affect more'than anything mm the earthquake, the tsunami inJapan, and the following nuclear crisis that has unfolded across time. I On the Friday that that earthquake occurred, bookings which had been running up 2% to 3% were down over 20%. Over the next few days, they were doWn over 20%. Again i think that is a effect as peoplejust sit arOund and watch CNN, don't traVel. You see anecdotes'iike General Motors saying they aren't going to that they stopped ali nonessential travei until theijist sort out the'uncert'ainty oftheir suppiy chain and what's going on. i suspect that all of that comes back. Matter of fact, it largely has by this point in time. The bookings are stili down a couple of percent from where they were running prior to the nuclear issue in iapan. But that kind of effect will affect the back half of March and probably the first half of April for us'and the industry at large. To pUt some perspective on those numbers, the first half of April our?- or the first half of march, our RASM was up i3% through March ?lS.The back half of March is looking like it is going to be up something like I Again, i think that is a temporary effect. We saw a big drop-off in business traffic at the end, but that comes back. if you took out to April, we are Lip use. So it looks like a'temporary effect. For those of you who do lots of sequential modeiing, which i know a lot ofyou do, hopefully that help you with some guidance on what is going to happen in the very near term. But I thinkthe underlying demand environment remains very strong; To that end, i get a lot of questions as well about Atlantic versus domestic. The Atlantic is certainly going to underperform. i know you have already heard this from other carriers. in the first quarter, our best guess right now is that the Atlantic in the second and third quarter will do as weii or betterthan domestic. You know, there?s iots of capacity growth in the first quarter. The fare increases were slower to happen across the Atiantic. The booking curve is further out across the Atlantic, so the fare increases had iess ability to take hold in the first quarter. And our best guess is right now that the second and third quarter transatiantic demand will dojust as well as domestic demand. THOMSON REUTERS STREETEVENTS Contact Us . a ?2011 Thomson Reuters All rights reserved. Republication or redistribution of Thomson Reuters content. including by framing or similar means. is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its af?liated companies. US irast?rasasrasrr The other good news on an outlook going forward is that the industry is being discipiined about capacity. We have a bullet point on here that says we are going to -- we will reissue our next official guidance. We are going to reduce our capacity in the fourth quarter by 3% to Those are amounts we've aiready identified. The capacity cuts won?t be counted until after the summer, so we are still finalizing the exact numbers because we won't be loading that schedule for a while, but at the moment range for reduction and we will have that further guidance in our next updated capacity, which should come in eariy April. The good news, though, is thatacross the industry capacity discipline remains intact. i think despite thefact that we have largely been abie to pass aiong fuel increases in the forms of higher fares and higher revenue, the fact that fuel prices have gone up and the volatility has increased ieads you to a bias to reduce capacity. That volatility even if your earnings forecasts stayed exactly the same, that makes you more prone to reduce capacity. Because the downside of being wrong and having too much capacity is larger than the upside of having a little iess capacity and missing a little less opportunity. So that is certainly true at US Airways, and I think it is something that is true across the industry. So, in summary, despite a pretty iethargic economy in 2010, it was a great year for US Airways, a great year for the industry. But the best returns that we have had m? or best margins that we've had in a decade. The revenue environment remains robust. guess lwili put an asteriskon that and say, what's happening in Japan has had some effect. Again, i think that is temporary, but Idon?t have any data to prove that that is temporary. i certainly think it is temporary in a effect as people deal with the uncertainty oftheir supply chains around the world. Domestic capacity remains disciplined and they are starting to be more disciplined across the Atlantic. So we feet good about the capacity environment. And remarkably, unlike 2008, the industry is managing to deal with this crisis or what would have been a crisis by passing on the fare increases. And again, i at this point is one that think is hard to overemphasize. Not only does it affect the margins and what we are all going to earn this year, that we are able to pass these fare increases on, overa ionger time horizon, it probably affects the valuation metrics that ail of you use for investing in airlines. Because historicaiiy, airlines trade at iower, pickyour valuation method, to enterprise value or lower PE ratios, because we had this big risk that if something goes bad we couid all go bankrupt. And if this industry can prove that we've become a more rational industryand can ride out the cycles, can deal with higher fuel prices, can deai with fuel price spikes, suspect that over the longer term that the vaiuations to the industry start to migrate up cioser to where other industrial companies are. So ifthere is any story, I think the story for 203? is the industry response to high fuei prices and the fact that, ifindicative ofan industry that has restructured, it ended on a much more soiid footing and ability to deal with prices. So with that open it up -- i guess am supposed to put through these -- and these are available on iine as well, our GAAP to non GAAP Reconciliation. And with that i will open up for comments, questions, whoever wants to ask anything. QUESYIGNS ANSWERS Unidentified Audience Member Jamie asked a question earlier after American?s presentation about the flexibility and being able to change capacity and the constraints that some carriers may have in terms of capacity. So ifyou ifthe demand environment were to suddenly get a lot worse than it is today and fuei remain high, what kind of flexibility does US Airways have? And what might the constraints be? THOMSON REUTERS STREETEVE NTS Contact Us @2011 Thomson Reuters. All rights reserved. Repubiicaiion ?redistribution of Thomson Reuters content. induding by framing or simiiar means, is prohibited without the prior written consent of Thomson Reuters. Thomson Reuters? and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its companies. US AIRWAYS Scott Kirby US Airways Group, Inc. President As many of you know, we -- our ?exibility is constrained by our labor contracts and we?ve aiready reduced our aircraft down essentially to the minimum that we can. So we havefiexibility. Qur flexibility is in reducing the utilization. And We could probabiy reduce anothere?i/a to 5% without violating any of ouriabor'issues and have a littie bit [officiali left. But not much beyond that or we would start to have iabor contract issues. unidentified Audience-Member And what about on the express side? Scott Kirby US Airways Group, Inc. - President. On the express side we could ground airplanes. You don't have any contractual commitment. But we wouid still be paying for the airplanes. So we do have the ability to ground airoianesrbut we would stilt be paying for the airptanes,_we couldn't get rid of theshelves. So we have tots of flexibility there in theory, bUt it is e'xpent'sive flexibility. The rnarginal cost is 50 it is unliker that you will see dramatic reductions in express capacity, unless things were really bad. Unidentified Participant And Joe, from a the other thing is the Embraer ??905, those arenot part of the labor contract. So we couid reduce, we have 15 {h 'Em braer 1903, we could reduce the entire fleet. Which is about worth about 2% of ASMs. Unidentified Participant Over the last, say, three or four-years it would -- ldon?t think it would have been unfair to charaCterize US Airways as unhappy with who they were and'i'ooking for a home in an industry that Was changing and thinking that it wasn't a' very hospitable environment unless you could find Something eise to be. And I'was wondering whether this nveound industry maturity has dramatically changed your attitude in that respect? Scott Kirby US Airways Group, Inc. President First, (Dr. Levine], it is an honor was an honorto meet you after reading you:r name in the press for years today. So it was nice to meet you. wouid not characterize US Airways position as unhappy. it?s always wanted to make things better over the past few years. And those ofyou that foliow us know we have been optimistic to try to improve our position, even if we are happy with where we were, to always try to improve. And in that regard, have aggressively pursued consolidation. Just to tout our own horn, I think uch of the consolidation that has occurred in last five years is really because of US Airways. it started with the America West US Airways merger. Our hostile ta keover~~ or hostile bid for Delta, while it didn't lead to a deal where we got it done, certainly created a fertile field for the Deita Northwest merger to occur and then that was foiiowed up with us getting ciose to a deal with United that ted to the United Continental deal. . 4 THOMSON REUTERS STREETEVENTS Contact Us ?2911 Thomson Reuters. Ail rights reserved. Repubtication or redistribution of Thomson Reuters content. including by framing or similar means. is prohibited without the prior written consent of Thomson Reuters. Thomson Reuters and the Thomson Reuters 3090 are registered trademarks of Thomson Reuters and its affiliated companies. U8 AIRWAYS CONFIDENTEAL Fill A l. 3 3 if? And whiie we would have liked to have been at the altar in both of those transactions, we were very happy to see them occur. And i think you are seeing that in theindustry, the benefits of consoiidation in the industry. So we have been happy with that. I would say that from our perspective, on a standalone basis, we do feel good about where we are in this industry. And we can continue tobe successful and continue to have margins that arejust as good as the rest of the industry. . We have to do it in a different way.We havea route networkthatis notasstrong asAmerican, Delta, orUnited and can't generate as much revenue as American, Delta, and united. It is not a criticism of our route network. We have great hubs. But the demographic reality is that Charlotte isa smaller city than Atlanta,and it will always generate less revenues than Atianta because it is a much smaller city. Phiiadelphia is a fantastic hub and a fantastic internationai gateway for us. But it is a smaller metropolitan area than Newark and it wiil aiwaysgenerate less revenue than Newark does,just because of demographics,?ust because it's smaller. Because of that, we have to make up for what with cost adva ntages in other areas. And We have done that successfuliy, and we continue to do that inde?nitely going forward. Now, all that said, While we are happy with where we are on a Standalone basis, we thi'nkthere is significant value to be created through anbther'round of consoiidation that would intiude'_US Airways and it wbuld include US Airways conSOlidated with one of the other big three. But I don't know when that will happen or how it will happen. I think it is a high probability five to seven years from now, that it will happen in one way, shape, or form. But i don't know-how we get between here and there. I often tell people there's -- We a're'here today and there's three possibilities and there's 100 paths between here and there and how we get from here to there. Each one has less than a 3% probability. But you sum up acrossaii I GO paths, and it is a pretty high So it does create more vaiue forUS Airways and for the industry. So I think it is iogical that it happens. But if it doesn?t-yet; know we feel very good about where we are and what we've done and ourability to compete as the fourth largest network carrier in the country. Unidentified Audience Member Scott, a followup to that. Alliances have always puzzled me. First, as a passenger, just based on my own personal experience, I think alliances tend to sort-Cf overpromise and underdeliver, but as. an analyst, I've never really understood what the switching costs have been. You know, the degree to which the anchor tenants can vote other members off the island for iack better term. Though I realize that show is not even on teievision anymore'so the concept may be lost on some. But as we think about consolidation, shouid we consider your membership is your membership in {Star Alliance] atall reievant to the points that You were}ust making about the 100 paths to the altar? - Scott Kirby US Airways Group, Inc. President Well first I would say -- Star Ailiance, you know we are very happy to be at Star Alliance. it is the best alliance out there. It is the largest, it is the most well developed, has the most opportunities for us to [co?chair here], and so we are happy to be in Star Alliance. - In consolidation in the consolidating worid, you just saw Continentai switch aliiances even outside ofconsolldation. It is a pain. You have got to go through a iot of work. There are transition expenses. THOMSON REUTERS i Contact Us . ?2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content. including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. ?Thomson Reuters" and the Thomson Reuters logo are registered Inadem arks of Thomson Reuters and its af?liated companies. US AIRWAYS CONFIDENTIAL Errirhl?t?liinl??SCREPl Yet in terms ofthe total transition expenses, it is a very smail fraction of the transition expenses you have from consolidation. So it does add something. It wouid be a little ea'sierto consolidate with United because we are in Star Alliance than it would be with someone eise, but it is not meaningful enough to really be a factor into who you consolidate with. Airiines have switched alliances before. We could switch. The Ultimate benefits are going to be similar in all the aliiances. It is just a transition period that you spend some money and you lose some benefits over the transition period. So it is a onetime expense that when we've io'oked at it, it is south of $100 million. And so it?s just part of the cost of doing a merger. Unidentified Audience Member Scott, I?m wondering if we can-dig a iittle bit deeper into the fuel hedging rationale. Because you mentioned industry multiples and that is one thing Jamie and struggle with, obviously, is what is the right m?uitiple for the industry and so forth, especiaily in this post several rounds of consolidation world? And the probiem that we see orhave to walkinve_stors__through is, one, there'salways one outlier andyou are the outlier from a fuel hedging perspective. Then, you run the risk of, wait, is the industry rational enough to price for extreme fuel ifwe get there? And are you putting the franchiseat riskby not having that insurance? - - And so, does that then impact your multiple? And there is a perception right or wrong that US Air-Ways is still one ofthe weaker credits and it doesn't have the same lifelines available to it assomeof your network peers do interms ofwhether it is vendor support or credit ca rd support or whatever. - So I am wondering, how do you balance that when you think about the extreme scenarios that are out there and how that might impact US Airways? . . .. Scott Kirby - US Airways Group, Inc. President l'il start maybe in reverse on some of those questions with the insurance policy and the extreme scenarios and the disaster insurance. . . . . The rationale for fuel hedging as disaster insurance conceptuaiiy makes a lot of sense to me. Systematic fuel hedging, don?t understand the rationale. But disasterinsurance hedging, buying a big hedge forthe next two years, makes conceptuai sense. Now you have got to talk about does the price makes sense. You know, it might make sense to do it, but if the price is too expensive, it doesn?t make sense. But that is where we currently come out. And what would say is all -- virtually all of our competitors also don't have disaster insurance. They are hedging systematicaily for the next few months, so kind of next six months at 50%. So they got three months of production hedge. We have zero, but they have three. if there is the catastrophic rise in fuei prices, of us are exposed. None of us are immune to that. And i think the industry has to respond. lw'ould be worried ifthere were several carriers in the industry that were 100% hedged like Southwest was back in 2008 if they were 100% hedged for the next three years. would be a iot more concerned. But other carriers have chosen to buy insurance policies for-? myanalogy is for one room of their house. If their house burns down, they are still homeless. They still have a problem. Because the whoie house burned down, they ensured one room, butthe whole house burned down. THOMSON REUTERS STREETEVENTS i Contact ?2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content. including by f} framing or simiiar means, is prohibited withoutthe prior written consent of Thomson Reuters. ?Thomson'Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its companies. US AIRWAYS CONFIDENTIAL I 700023 ?Nat Tii?alilSClili?l So i would argue that no one has disaster insurance hedging policies in place today. So we are no different from a disaster insurance perspective than any other airline. i understand that there are investors who would like us to have it hedge because it would give more -- some additional certainty to eamings and maybe that affects the multiples. Butjust look at the numbers for 2010. We could have earned $140 million less, so we could have reduced our earnings by 35%. Maybe we would have gotten a higher multiple, but i think i would take a lower muitiple on higher earnings and lthink our stock price is higher. Which is really how we you know, is the analysis that we go through. And over the long term, I think that wins. if you've got something that is going to consistent?- a policy that is going to consistently lead to higher earnings over the long term, that is going to lead to higher stock prices. It might not lead to a higher stock price tomorrow, but it is going to, over the long term, lead to a higher stock price. At least that is our theory. - As to our ability to deal with adverse circumstances, one, i think the whole industry as I've said is much better prepared to deal with adverse'circumstances. And We are a part of that. - - - - And then I would also add ifthings got worse in the industry, and you know,we've been in that boat many time before where it was, everyone thought US Airways wasn't going to make it and there was no chance and we have consistently proven them wrong. in fact 'we just did a presentation with we had ali of our managers out in Phoenix and the presentation that I went through was called -- i think it was called Beating The Odds. - But i went through it, it'had a humber'of quotes year after year after year'and apologize, Jamieiseveral ofthem were from you I as saying, US Airways is doomed. (laughter). i didn't have that one in there. US Airways is doomed, blah, blah, blah. And it is remarkable, employees came up afterwards iike you live through it, but you forget all of the times that everyone has said US Airways wasn't going to make it. And every time, we do. And so I wouldn't underestimate Ourcreativity or ability to deal with adverse circumstances because we have always done that in the past. We are also very well positioned. Our cash balances are much higher now. Our balance sheet has improved. We are much better positioned to deal with a crisis if one comes up. Unidentified Participant Well, just follow up on that and-those -- ora couple of those, l'm sure those quotes came from Jamie Baker reports without my name on them. But is your willingness notto hedge right now, how much ofit is a function ofyour comfortin liquidity and the improvement in profitability and so forth? And how much of it is the more rational industry andthe industry?s ability to react more rapidly to fair prices, meaning you are less exposed by not being hedged? I I I Scott Kirby - us Airways Group, Inc. - President Yes, well, i think it?s both of those things. The second one actually I didn't say it in talking about [field] hedging because i give this speech so much, I'm trying to abbreviate it. But we really think of ourseives as better hedged than most airlines because we are hedged to -- the relationship between the economyand fuel price.What we?re not hedged to, though, is something like what has happened in the Middle East where a geopolitical event drives oil prices up as opposed to demand. lf underiined demand drives oil prices up, i think we are very well hedged and the industry passes that on. But both of those things make us more comfortable. But beyond that it'sjust the intellectual rationale for hedging. THOMSON REUTERS STREETEVENTS i Contact Us . . - - 3' ?20ii Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content. including by framing or similar means, is prohibited withoutthe prior written consent of Thomson Reuters. Thomson Reuters' and the Thomson Reuters iogo are registered trademarks of Thomson Reuters and its affiliated companies. US AIRWAYS CONFIDENTEAL {Mini You know, what has really'changed from 2008, ifyou step backfrom it, in 2008 ali of us hedged with basically everyone hedged with either swaps or [cost as coliars]. And so the cost of fuel there was some friction cost ofthat, but it'was small. What changed is in 2009 when fuel prices deciined very rapidly, all of us had to start posting coiiateral for our swaps and we realized, Oh my God, we could go bankrupt ironically because fuel prices are deciining so fast and lam'havlng to post collateral. So everyone said, i can't do swaps, can?t do cost as coilars anymore, but you just kept hedging and you did it by buying call options. And the problem with just buying call options, particularly if you are buying every month andjust roiling over and buying, and buying, and buying, is you are paying that premium and you're paying that Katango every single month. And you virtually can't, you can?t win unless fuel prices go up to infinity. lf fuel prices ever stop going up, you are guaranteed to lose because you are paying all that premium and you are suffering the time decay and the coiiapse of the Katango consistently. And so that is what has changed. And that changed our mind. We used to hedge with swaps. But then we decided we can't hedge with swaps because that'is too risky, like everyone else decided. Wejust did not then make the leap to say, Well, let's switch it to an option strategy because an option strategy is so expensiveUnidentified Farticipant Scott, you've scared methatl shouldn?t fiy US Air because my name might be recognized by some of the crew. And in my defense, 1 was, right about the trans-con expansion. - . Scotti-Kirby US AirWoys Group, inc. 7 President . You were. Unidentified Participant Any update on the Delta La Guardia net well, more thanjust Delta, but the siot swap potential and where we are in that? Scott Kirby US Airways Group, Inc. President This continues to be a rocky road, up a nd down day-to-day basis. it depends on'what day you taiked to me if I was going to tell you that the assessment of the'probability. We continue to work with Delta and the Department of Transportation. thinkall three of us Would like to ?nd a way to get the deal done. We certainly wouid like to get it done. I I The inteilectual case is as strong as ever and We ought to be able to get it done. I think it has created a 50?50 chance now that we will find a way to get it clone, but we aren't there yet. And hopefully, we are going to have something to announce sometime soon. - - - We said that though, kind of been saying that for Several months and the story hasn't changed yet. So it is not done, but we are cautiously optimistic that it can get done. Unidentified Participant (inaudible - microphone inaccessible) 5060, does that imply that there's some benefit (inaudible) forecast in the second half? THOMSON REUTERS STREETEVENTS 3 3 Contact Us jar-a j' - . ?f @2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. Thomson Remers? and the Thomson Reuters iogo are registered trademarks of Thomson Reuters and its companies, U8 US AIRWAYS FINAL YRAESCREPY Scott Kirby USAirways Group, Inc. President No. We no. (multiple speakers). Yes and ifwe get it done, it probabiy won?t have any impact on our Pisa. until nextyear. Because by the time you change the schedules and stuff it wiil be next yearat this point. Yes sir? Unidentified Participant Sorry foranother hedge question, but if there was significant backwardization and the cost Went down signi?cantly, would that change your view? Or are you basically no hedging regardless? Scott Kirby US Airways Group, Inc.? President on no, we aren't not no hedging regardiess. We are not systematic hedgers and that might change our View about hedging. Unidentified Participant Have the fare increases fully offset the fuel increases? And if not, are you could you comment'on the elasticity? Scott Kirby US Airways Group, Inc. - President Yes. First, as we said in our traf?c release for February, we at least thought to the end of February, fuel increases had fully offset our fare increases have fully offset the fare increases, which to clarify that remark because i got some questionsfrom people. At that point fuel is up about $1 biliion on a year?over?year basis price,just for price-Which im piled that our RASM was going to be up enough to bring in we thought our RASM would be up enough to bring in another $1 billion of revenue. . We could be wrong on that foreCast, but that is what we thought at that point in time. Since then, guess fuei prices are a Iittie higher today. So we haven?t made an updated comment. still think that We are-passing through most or all of thatfare? increase. i will add the one caveat that we have seen weakness in the last weekand a haif since Japan happened. Again, think that is a temporary phenomena, but you know I don?t have any data yet to prove that that is a temporary phenomenon. But with that caveat, I think we have passed through most if not ail of the increase in fuel prices. And to the price eiasticity effect, get this question l've gotten this question frequentiy. So I will spend some time on it and start with the fact that air travel remains a fantastic bargain. You know, paid more for my hotel room here in New York East night than probably 50%.of the customers who flew in on the airpiane with me from Phoenix paid fortheir round-trip airfare. Justas one comparison point. I A more relevant point is that in real terms, airfares are some 50% below where they were when the ind ustry was deregulated in 3980. And so air travel remains a fantastic bargain. And we are a iong ways away from getting a point on the price eiasticity curve where we start to see reai pushback from customers. i also have done i OOanaiyses. i?ve toid some people earliertoday my firstjob at American Airiines was doing analysis, estimating price elasticity of demand and typical at least in those days, American fashion, it was a six?month project. But at the end ofit, we came up with the price elasticity ofdemand for leisure travel was about minus 0.7 and for business travel it was about minus 0.3. Which not coincidentaiiy was the exact numbers that the Civil Aeronautics Board used prior to dereguiation. THOMSON REUTERS STREETEVENTS Contact Us geaoason ?2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content. induding by framing or simitar means, is prohibited without the prior written consent of Thomson Reuters. Thomson Reuters? and the Thomson Reuters iogo are registered tradem arks of Thomson Reuters and its companies. FINAL There'sjust lots of evidence that demand is elastic. So raising fares causes revenue to go up. i would also add that, as you can see, this tong-term seculardecline in airline revenues as a percentage of GDP and while it has bounced back in 2010 and is bouncing back more in 2011,:tis only bouncing back to where was kind of in the 2007, 2008 level time period. It is well below where it was historically. That is a function, in my view Some peopie argue it is Internet transparency, videoconferencing, and other is a function almost exclusiveiy of the growth of Iow'cost carriers. You have an inelastic good as you lowered the price and so revenues have come down systematically over time. Low-cost carriers are now fully penetrating the company, So that phenomena at least is not growing and their cost structures are starting to go up and so they are starting to raise fares. So you are raising fares and you are starting to see airline revenues as a percentage of GDP start to climb back up, all of which I think is a price elasticity of demand function. It is nothing other than that or is almost exclusively that. And so all of that is a very long-winded way of saying, we haven't really seen pushback from customers on fare increases. And I think that is because air travel remains a fantastic bargain compared to everything else that you buy, and that we are a tong ways away from that pushback. Unidentified Audience Member And just one follow-up question. Southwest mentioned two new cities in the Southeast. Would that represent a new source of competition for you? - Scott Kirby-- US Airways Group, Inc. President I You are talking about the new cities that they flyto in South Carolina? Yes. We carry a lot of revenue out of South Carolina out of both of those cities and that is more competition. 1 mean it is a rounding -n not even a rounding [here] probably in terms of I ourtotal revenue. Southwest is a very good competitor. We compete with them all overthe country and expect that to continue to grow. And then once they have merged with Aerra n, we will have even more competition with Southwest. Okay. Well, thankyou all very much. i enjoyed talking and DISCLAIMER Thomson Reuters reserves the right to make changes to documents, content, or other information on this Web site without obligation to notify any person of such changes. in the conference calis upon which Event Transcripts are based, companies may make projections or other fomr?rddooking statements regarding a variety of items. Such forward-Icelan statements are based upon current expectations and involve risks and uncertainties. Actual results may differ materially from those stated in any forwardviooking statement based on a number of important factors and risks, which are more speci?caliy identified in the companies' most recent SEC Although the companies may indicate and believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate or incorrect and, therefore, there can be no assurance that the results contemplated in theforward-Iooking statements will be realized. THE INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTU AL REPRESENTATIO OF TH APPLICABLE CONFERENCE CALI. AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIFTEON, THERE MAY BE MATERIAL ERRORS, OMISSIONS, 0R INACCURACIES THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS, IN NO WAYDDES THOMSON REUTERS OR THE APPLICABLE COMPANY ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECESIONS MADE BASED UPON THE PROVIDED ON THIS WEB SITE OR IN ANY EVENT TRANSCREPT. USERS ARE ADVISED TO REVIEWTHE APPLICABLE CONFERENCE CALL ITSELF AND THE APPLICABLE SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. @201 1. Thomson Reuters. All Rights ReserVed. 10 r' THOMSON REUTERS STREETEVENTS Contact Us ?2011 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content. including by I framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thornson Reuters? and the Thomson Reuters logo are registered trademarks of Thomson Reuters and Its affiliated companies. US AIRWAYS CONFIDENTIAL From: Johnson, Stephen To: Parker, Doug; Kirby, Scott; Kerr, Derek; Eberwein, Elise; 150m, Robert CC: Cravens, Daniel "tirSent: 3/22/2011 5:57:57 PM A'Subject: RE: JPM Exactly. And everyone now has more legroom. And, having seen Richard's TV commercial twice, I know Jeff is sitting in his office on Wacky Drive grinding his teeth in envy. But, heyfew minutes ago asked that it be extended to the DCA flights. From: Parker, Doug Sent: Tuesday, March 22, 2011 4:21 PM . . To: Johnson, Stephen; Kirby, Scott; Kerr, Derek; Eberwein, Elise; Isom, Robert Cc: Cravens, Daniel Subject: Re: JPM Easy now. Consolidation will help stop much of the stupid stuff but inflight internet is not one of them. And with fewer of us now, it?s more obvious if you?re an outlier on-something people care about. ~we~e Original Message From: Johnson, Stephen Sent: Tuesday, March 22, 2011 04:06 PM To: Parker, Doug; Kirby, Scott; Kerr, Derek; Eberwein, Elise; Isom, Robert Cc: Cravens, Daniel - - Subject: RE: JPM it will be more legroomi Then industry standard labor contracts. Then better wines. mThen the ability to book on Facebook. Penultimately, television commercials. Then, finally, we 1 ill pay the NYSE an exorbitant fee to change our ticker symbolg From: Parker, Doug Sent: Tuesday, March 22, 2011 4:01 PM . To: Kirby, Scott; Kerr, Derek; Johnson, Stephen; Eberwein, Elise; Isom, Robert Cc: Cravens, Daniel Subject: Re: JPM Yeah, I know. I was kidding, but the reality is four or five people are using it in this first class cabin. It'll never pay for itself, but if we don't have it and everyone else does, it will create a large negative perception about our airline over time. We might as well look into doing it before we get to that point. Original Message ?w-ww From; Kirby, Scott Sent: Tuesday, March 22, 2011 03:56 PM To: Parker, Doug; Kerr, Derek; Johnson, Stephen; Eberwein, Elise; Isom, Robert Cc: Cravens, Daniel Subject: Re: JPM We?re going to conclude we have to. It will be a defensive payback. Industry will cost itself money with no share-shift since we'll all have it. Original Message From: Parker, Doug Sent: Tuesday, March 22, 2011 03:47 PM To: Kerr, Derek; Johnson, Stephen; Kirby, Scott; Eberwein, Elise; Isom, Robert ?Ec: Cravens, Daniel gj?ggubject: Re: JPN He is a "Distinguished Research Scholar" at NYU Law School whatever that is. He?s a lot smaller because he had lap band surgery about ten years ago. Why was he there? U8 AERWAYS CONFIDENTIAL I And, btw, I knew what his title was thanks to the Google, which I accessed inflight through the miracle of gogo. We really need to put this on every airplane in the fleet. - - - Original Message qj'g ?rom: Kerr, Derek 6 ent: Tuesday, March 22, 2011 03:18 PM To: Johnson, Stephen; Kirby, Scott; Parker, Doug; Eberwein, Elise; Isom, Robert Cc: Cravens, Daniel Subject: Re: JPM He is a professor. Not sure if it is Law. Original Message From: Johnson, Stephen Sent: Tuesday, March 22, 2011 03:18 PM To: Kerr, Derek; Kirby, Scott; Parker, Doug; Eberwein, Elise; Isom, Robert Cc: Cravens, Daniel - Subject: RE: JPM He is a law school professor now? ee~~?Original From: Kerr, Derek Sent: Tuesday, March 22, 2011 3:17 PM To: Johnson, Stephen; Kirby, Scott; Parker, Doug; EberWein, Elise; Isom, Robert Cc: Cravens, Daniel Subject: Re: JPM Yes THE Levine. Or half the Levine I used to know. Original Message From: Johnson, Stephen - - \Sent: Tuesday, March 22, 2011 03:14 PM 0: Kerr, Derek; Kirby, Scott; Parker, Doug; Eberwein, Elise; Isom, Robert ?Cc: Cravens, Daniel Subject: RE: JPM THE Levine? Messagew-mwe From: Kerr, Derek Sent: Tuesday, March 22, 2011 3:11 PM To: Kirby, Scott; Parker, Doug; Eberwein, Elise; Johnson, Stephen; Isom, Robert Cc: Cravens, Daniel Subject: Re: JPM I thought the day went well. Scott did well with the presentation and QAJ As he said the only negative, if any, was the rev guidance of 13% in the first half of March and 3% in the back half. He followed up with 12% in April (partly due to shift in Easter) so that calmed everyone. The reduction of 1?2% capacity in the 4th quarter was received well. Although people did ask that if we were really covering all the fuel increase with revenue, why pull capacity. We explained it is the right thing to do in this volatile environment. All else good. Conference was very well attended. We saw at least 25 people in our so called one on ones. Levine was sucking up to Scott about the brilliant hedge strategy. Dan watched some other presentations and will send a followwup later tonight. Original Message From: Kirby, Scott Sent: Tuesday, March 22, 2011 02:57 PM To: Parker, Doug; Kerr, Derek HrSubject: Re: JPM {KOur march guidance was negative but otherwise good. Same ole same ole fuel and revenue. But more and more people seek us out to tell us we have the smartest fuel hedging strategy and the can?t understand why oa don't see it. Mike levine actually tracked me down to tell me that. Ow, largely uneventful. Eetc guys tomorrow US AERWAYS CONFIDENTIAL 2927 Original Message From: Parker, Doug Sent: Tuesday, March 22, 2011 02:42 PM Kirby; Scott; Kerr' 3ubject: JPM How?d it go? Thx. US AIRWAYS CONFIDENTIAL CONFEDENTIAL - RESTRECTED DISSEMINATEON ONLY The New Amer?cm - . 9298 I HIGHLY RESTRICTED DISSEMINATION ONLY y? own a We wanted an opportunity to open up to you about our plan in full disclosure I As might be expected, its been a challenging year for everyone I We?ve probably been a bit too rigid in how we have been communicating to - date - I We recognize that the employees are the company andyou, the-pilot's are the key to our long term success . . - a We are now at the tail end of a painful restructuring process that positions us for a decade of prosperity, something we haven?t been able to see in a very long time a This is an opportune time to let things go, let bygones be bygones and move forward into a successful future American Airlines 2 7 - RESTRICTED ONLY We are ail cemeieting a highiy successful it One of the fastest restructuring efforts of all the major carriers in the past decade - United: 38 months in bankruptcy Northwest: 20 months Delta: 19 months Air Canada: 18 months US Airways: 2003 filing 7 months; 2005 filing 12 n?icinths1 End result is a company that is, once and for all, well?positioned for long term success Everyone participated fairiy industry leading prefitability Newfeund labor stability with all labor groups for the first time in 30 years Management, labor?, and ovlmers are all aligned and invested in the company?s success a The path is defined and there is no remaining ambiguity to the plan 1 Exclude 2007 and 2009 out of court restructuring effort American Airlines 3 CONFIDENTIAL - RESTRICTED DESSEMINATION ONLY Revenue grewth has eutpaced the-industry I Since April, our unit revenue growth has been at or near the top of the industry every month 5 Since we began restructuring, we have renewed or won more corporate account agreements than over the same period last year Censetidated Yev Unit Revenue (PRASM) Growth by Menth us 6.0% 6.09? 4.7% 4-5? 4.0% 4.1% . 0.8 . (0.3m (3. April May June July August September October 1/ As Reparted Consolidated PRASM Growth - - - I Z/Exduding the Impact ofBook-Away - Am Ca Al 1 ?es 5 DNFIDENTIAL HIGHLY .-. DISSEMINATION ONLY American has cfai? air??nes after??ingtor bankruptcy pmtecticn Mainline YOY in second Quarter FniloWing Bankruptcy Filing @Carrier Industry 12.American i United Bankruptcy USl-Aiirways Delta Bankruptcy Northwest I Bankruptcy Bankruptcy Bankruptcy .. .CONFIDENTIAL 9301 HIGHLY CONFIDENTIAL - DISSEMENATION ONLY eohtinoe tie dose the margin gap to the industry - For the 3rd consecutive quarter, we have narrowed our margin gap to the industry yoy, by more than hallC in 3Q12, with the majority of cost savings yetto come, and essentially no restructuring related reVenue'initlatives impeding the Corporate Pare?Tex Margins 8% 6.6% industry (em. AMR) I . LastYr AMR Last?l?r his Yr (rats) "2.0 '41? 4.9 industry Margins are Weighted on Total Revenue and exclude special lte Industry includes DAL, UAL, ?smer'can Alrl'nes JNFIDENTIAL CONFIDENTIAL - RESTRECTED DISSEMINATION ONLY The cews?ees w??i pay div?dends test evewene over theiongterm $4.23 in non?tabo?f Cost Savings over 5 years Rejectedo'r renegotiated' aircraft. financing .- of>400aircraft . - -. - . :3 Lea-dingnon-Iabor cost position amongst '1 Rejected ornrenegotiated #9000 vendor; . the US Majms: . I contracts, including >500 real estate leases - - - -- - -- . . - .- - Docilefleet structure able to change as market cond?tions warrant- Combrornised $2.53 of debt inaddition to . a} Most resilient balance sheet among the US aircraft leases - .. Major; . - Pianned Irefi'nancii'ng for $1.38 of equipment 30% reduction in net debt backed debtReduced Over LSOO'manalgementandc .. .. ?on decision making structure With support staffpositiOns, or approximate? 1.6% flexibility: - Best management ptOdoc'tMty of the-majors i Renegotiated and ratified labor contracts a New growth flying Needed scope revisions . Fair and market based compensation American Airlines, 7 CONFIDENTIAL CON-RDENTIAL - RESTRICTED SSEMINATION ONLY gag?mm success 4/ . Am??rican Airlines . 8 DNFIDENTIAL CONFEDENTEAL - RESTRICTEB DISSEMINATION ONLY Amehicen: Preferred giehai eewierim High Vaiue Custemers Hubs in the cities with the iargest concentration of high yalue customers An expanding internationeinetwerk designed around the'plajces the-mest important customers want to fly . . . Deeper end broaden? partnerShips With the World's premium'airiines- Leadinguedge inveStment in service upgrade; that high-value- custom'Ers' desire l- Superlative passenger productivity and cbnnectivity through itechncilegy A seamless and co'miorta'bie total travel experience for high vaiue cUStemers Bread pertfelio of aircraft creates a convenient scheduie'patfegjn . RejWenated ?eet'offers I madam experience and best fuel. Efficiency :a'nicing US peers .. . Moving to youngest, most efficient ?eet amang US peers American Airlin??s . 9 9306 - QISSEMINATION ONLY American: Weterred giobei eerrier for investors Among the iowest non-labor costs of any major US carrier Competitive labor costs Retirement and medical benefits in line with industry leaders Fleet flexibility to adapt ta changing market conditions Broad portfolio of aircraft choices to address network opportunities it Market~based scope clauses to expand regional oeerations and codeshering with domestic partners 8 Ability to outsource maintenance and airport operations it Among the lowest leverage of any major US network carrier Liquidity and financial resilieoce to withstand market volatility American Airlines 1? . AA-SR-00019307 HIGHLY - RESTRICTED ONLY American: ereferred giobe cerrier tor er ots XX new routes launched, with a focus on long-haul flying XX new aircraft on firm order ?rY aircraft on option Focus on globai growth iniine with traffic projections XX Active pilots today growing te YY Active pilots by 2017 XX seat movements projected Average time in seat will decrease Mark to market pay contract in three years Equity stake in the new American industry standard scope agreement Retirement and medical benefits in iine with industry Collaborative approach to freezing pensions American Airlines 11 . HIGHLY DISSEMINATEON ONLY Ame?ma?g mm are Emma righ?em?ms am 530E386 fm? Fortune 500 US. Popuiatgon Corporations i - . American has hubs'jn the four 68 largest 8W . -- - . . the United States . - 139 of FortuneSOO 19 L05 Angeles companies are-located indur key cities; manyofo'qrfhigh[if value customerSfarthheir top 29 Chicago travelers - - 18 Dalias 5 Miami Cakpdr'a?t? are?wuo'n based o'nfitofnetwmkandaccoi?ht t'r?vejpatterhs; . . ?QSEnce December, Corgi-grate a?COuntwinsanjd {enemals have accelerated - - Source: US Census, 2010, Fortune 2012 Amer: HES I 12 DNFIDENTPAL - Emmwe ?with Number of Top City Pairs Served 95% {mm 1 Top 25 Pairs CONFIDENTIAL - RESYRICTED ONLY Amer?gan?s netwammw?des competi?ve mwmge whim an 84% T69 50 City Pairs Top iOO'City Pairs Top Dom Mt"! p'ar'r's baked (in fatal seats fb'fa? carriers Source: 0110 schedule for 2012 CONFIDENTIAL "American: Airlin?s 13 931 HIGHLY CONFIDENTEAL - RESTRICTED ONLY Americana; our 33 Partnerships are streng in the most important markets ?1 -. - American and its Joint Business partnerships are among the leaders in the industry in projected corporate revenue share in the biggest markets -- We continue to have a positive corporate rev and pax share gap in all of our hubs Prejeeted Corporate Revenue Share Pro?ected Corporate Revende Share -. Top 50 Markets by Carrier . Top 50 Markets by Joint Business 36.8% 352% . United American . Delta US UAJB DUB . NO 13 Airways I Source: YElune 2012 weightedfor travel All companies in PRISM were usedfar industry revenue 7 Arise?0001931 1 HIGHLY. CONFIDENTIAL RESTRICTED DISSEMINATION ONLY eaeworld is tite etefetted a tame aeal generates I revenue share a revenue share validates oneworld?s positioning as the premium global alliance and its resonance with. the High Value Customers Largest Worldwide Premium Markets Revenue Share Premium international Premium Passengers Per Day Each Way versus Seat Share (pts) 4.0 LHR HKG SIN NRT CDG onewotld 7 JFK ICN FRA (5.0) PVG BKK American Airline-s 15 CONFIDENTIAL . 9312- HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Cross Geography Passenger Growth RPM Growth shown as CAGR Percent IATA AMR forecast (20124?) Domestic 3.2 UK Latin North 59 Latin South Asia Other United Total Delta Industry exoeCtatEons 2012 international Capacity Percent of ASMs American Us Airways American 2017531311 ,mmrx Source: FY2012 Dir" Schedule Date: Am?f?I Ca I DNFIDENTIAL MGR-00019313 .- ONLY have an enviaib nositionin iatin America Latin America is one of the fastest growing economic regions a American?s position is signifit?anitly Stronger" than any of our competitors; even in their best entities Atiantic . Pacific._ ?$95;ng 23% i 14%- - .- -- - . 'Amegicangiriines10% American?i?ines? *Atlanticand Pacific airlinesinclude joint business agreements Americanrlines HIGHLY CONFWENTIAL - RESTRECTED DISSEMINATION ONLY I ?nveetment is ee?ng made in We WEE see resmts En ?enuaw at DF Our ?airpor?c of the future? will open at DFW Terminal A this january American Airiines .13 SNFIBENTIAL 931 5 - RESTRECTED DESSEMINATEQN ONLY "And in the Sky with the Beeieg 777?3?3m I In ianuary we start service with our new which have best in class pmducts and service in all cabins it American Airiines 19 AA-SR-oomeme HIGHLY CONFIDENTEAL - RESTRICTED DISSEMENATION ONLY Eth the Ee?mdue?e? a? the 777-33GER andihe we Wm have the best pre?uct ny?ng I I. 77w and A321?r] Ame-fitan Airlines - 20 DNFIDENTIAL . HIGHLY - RESTRICTED ONLY Et?s Net Abeut Buffale..m it?s abeut Seoul Porto Alegre Delhi Edinburgh Hong Kong Amsterdam Osaka Tel Aviv Dusseldorf Valencia CONFIDENTIAL . American-Airlines 21 HIGHLY - DESSEMINATION ONLY Amer?can?s Eatema?am? ?etwm?k mag-2317 [insert network maps] American Airlines 22 DNFIDENTIAL 9319 CONFIDENTIAL RESTRICTED DISSEMENAYION ONLY What it gm New in ihteme?iienel flying Changes in scope enable codesharing, which will give us the critical feed to grow our long? haul operations in JFK Additionally, we can better utilize our limited slots: 5 We plan to add four frequencies in JFK-LAX with our new A321T New Reutes By Entity {2613-2817) Domestic 6 2 1 2 Latin 4 8 8' 4 1 Atia mi: 2 1 A 1 1 Pacific 1 3 3 1 Middle East/lndia/Africa 1 1 TOTAL 13 14 17 9 2 American Airlines 23 CONFIDENTIAL - 9320 HIGHLY CONFIDENTIAL DISSEMENATION ONLY it m'eaas'm pilots: ?rm aircraft oo ?order than - I U'oited/Delta/US Airways combioeo 1' Not only do we have more aircraft on order than the combined legacy carriers, we also have 537 options to utilize for flexibility and growth a Scope agreement will alSo allow us to fly Ultra?Long Haul Markets Firm Fleet Orders TOTAL 3738 31 20 20 20 30 100 B777-300ER 8 5 2 . . 2 3787-8 2 1o 1 2 8787-9 i 1 12 7 7 A320 Family American-Airlines I 24 9321 HEGHLY CONFIDENTIAL- RESTRICTED DESSEMSNATEON ONLY What it Far P??ets ACTIVE PILOTS 2013 2014 2015 2016 2017 American - Bar Chart? American Airlines 25 CON FEDENTIAL HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY What It Elm Mats Pilot pay'i's iricreasing Show examples of W2 and F0 to CA movement 13.5% Equity in the New American American AirIines . 25 DNFIDENTIAL - 9323 Debt eveis WE HIGHLY CONFIDENTIAL - DISSEMINATION ONLY ?3e red-med near Adjusted Debt $173 a Leverage Adjusted Net us Airways United American Year Ending September 2012 'N?w American 2013-2017 ra ng? Y1) Debt shown includes an and off balance sheet debt and capital leases; includes capitalizad mainh?ne aircraft {eases at 7x American Airlines CONFIBENTEAL RESTRICTED ONLY Eghiy cemeettive eaerall Lani? met struemre *3 American will have the lowest non?labor CASM of all full?service international airlines Lam Total Mainline Ex?Fuei Unit Costs Stage Length Adjusted Non?Labor United American Delta US Airways New American Year ending September 2012 I Soume: SEC documents. Mainline, stage length adjusted CASM New American adjusted for projected labor and non?labor restructuring savings 28 DNFIDENTIAL 7 CONFIDENTIAL RESTRICTED DISSEMINATION ONLY est mewememe em revenue enhenc_emeets_ emduee eadmg m?mm Iw EBITDAR Margin 13.2% 12.8% 11.2% 8.1% America nited US Airways Delta New American 2813?17 Range Vear ending September 2012 CONFIDENTIAL . 9326 HIGHLY CONFIDENTEAL RESTRECTED ONLY One mm?eSME H'?am?a? Parfa?ir'ance XX American Airiin?s 30 ONFIDENTIAL HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Igmasmm You made it happen BRAND American Airlines 31 CONFIDENTIAL 9328 Entity Summary Domestic Atlantic MEIA 21.11, 33 LGA Summary 2012 2017_ Destinatian DFW Summary 2012 2017 CAGR .7 eshnangns i 1 0RD Summary 2012 2017 5'02; 4D MIA Summary 2012 2017 29"? .92 LAX Summary. 2012 I 2017' JFK summary 2012 2017 :4 Year1: Year 2: 2012 2012 2017 2017 .ASMSCAGR 69% 61%) 37% Post Completion Factor Adj 589,855 ASMSCAGR 1 From: Mathias, Eric To: Athen, Blake CC: Schmeltzer, Michael; Beall, Wallace; Barman, Brett .3 sz?I?Sent: 11l20/2012 11:26:46 AM Subject: First bag Charge Transat flights Attachments: TATL Bag Fee 2012?11?12 (2).ppt Blake, As per my previous note: sorry was stuck on a call with a rather difficult customer (Egencia) and dialed up too late for your cell. i am not sure what was discussed and where we stand, but I wanted to share with you in this note what was going to share with you on the phone. (adding Michael, Brett and Wallace for info) Whilst this looks like a great additional revenue initially (Eastbound only) then i think that we need to carefully measure the possible impact on the transat revenue, especially in low season (8 to 9 months year). Some of my initial concerns as the sales guy POS international: - For POS international, US is too small of a player in Europe to be the one initiating this: customers can easily avoid us as an airline, 9 months out of 12. There is more capacity than demand and all airlines quasi offer the same fareslcommission programs. - We Would hope that 0A would follow us right away. but there is no guarantee and no airline has followed us so for when we have introduced the first bag fee out of the Laser Region. The Lacar P08 revenue is very small: 4.2% only overall, so we are not feeling the pain too much. The POS Europe fluctuates between 46% and 29% depending on the season and the market, with a heavy European POS in winter. lf we were the only airline to charge for the first bag, there would be a real risk in winter for us selling in Europe. - Back of the envelop calculation: just looking at the total revenue issued POS lnternationai for Trensat flights (BR and Premium revenue excluded) between Jan and Sep 2012: we generated if 10% of this revenue books away from us because of the bag, we lose more than what the first bag fee will bring us. And we need to add the potential loss from the US POS booking away. Again, it is just a gross/back of the envelop calculation and we need to ascertain what of revenue would book away from U8. is there a follow up call? Thanks and sorry againl did not make it. Eric?of? ijitt??dbt {$613?34132J13f?atlV?Ja t} Minis} US AIRWAYS CONFIDENTEAL - City ABQ ANC ATL AUA AUS BCN BDA BDL BHIVI BNA 808 BRU BTR BUF BWI CAE CDG CHA CH0 CH8 CLE CLT CMH CRW CUN CVG DAY DCA DEN DFW DRO DSM DTW DUB ELP EWR FAT FCO FLL FPO FRA GCM GDL GIG GJT GNV GSO GSP HNL HPN IAD- IAH AA daily departures 13 740 MN CDC US daily departures 3-400: Total IND JAN JAX JFK KOA LAS LAX LEX LGA LHR LIH LIT MAD MAN MBJ MCI MCO MDT MEM MEX MGM MIA MKE MOB MRY MSP MSY NAS OGG OMA ONT 0RD ORF PDX PHL PHX PIT PLS PNS PSP PUJ PVR RDU RIC RNO ROC RSW SAN SAT SAV SBA SDF SEA SFO 'SJC ZRH Totai Shared Grand Total Shared Source: May 2012 Schedufe 3,080 3,520 87.5% nun-L A N?Qco *3 2,891 3,231 89.5,972 6,751 88.5% Destinations Shared Total ABQ ANC ATL AUA AUS BCN BDA BDL BHM BNA BOS BRU BTR BUF BWI OAE CDG CHA CHO CHS CLE CLT CMH CRW CUN cve DAY DCA DEN DFW DRO DSM DTW DUB ELP EWR FAT FCO FLL FPO FRA GCM GDL Shared GJT GNV GPT GSO GSP HNL HPN HSV IAD EAH IND JAN JAX JFK KOA LAS LAX LEX LGA LHR L1H LIT MAD MAN MBJ MCI MCO MDT MEM MEX MGM MIA MKE MOB MRY MSP MSY NAS OGG OMA ONT 0RD ORF 131 Total Shared Source: Peak Fn?day May 2012 Scheduie from OAG Shared PDX PHL PHX PIT PLS PNS P8P PUJ PVR RDU RIC RNO ROC RSW SAN SAT SAV SBA SDF SEA SFO SJC SJD Un?que ACT AEX AGU ALO AMA ART BGI BJX BOG BRO BZE CCS CID CLL CLO GMI CNF COS CRP CSG CUR CUU CWA CZM DBQ DOM EIS ELH EW EYW EZE FAR FDF FNT FSD F-SM FWA GCK GGT AA Unique GRB GRI GRK GRR GRU GUA GYE HOU ICT JLN KIN LAW LBB LCH LFT LIM LIR LRD LRM LSE MAF MAR MDE, MFE MGA MHH MHK MLI MLM MLU MOT MSN MTY MXP NRT OKC PAP PEK PIA POP P08 PTP PTY PVG ?122 AA Unique AA Unique QRO RAP REC ROW RST SAF SAL SAP SCL socUnique ABE AGS ALB AMS ATH AVL AVP BFL BGM BGR BHB BTV BUR CAK DAB ELM ERI EWN FAY FLG Unique US Unique PGV PHF PQI PVD PWM SBP SBY SCE SRQ SWF TLV VCE YEG YHZ YQB YUM CONFIDENTIAL Revenue Quality Valuation To value the impact of the pricing program on the merged carrier, we compared yields for US flow traffic in common 0&Ds, where UA and/or Di. operate non-stop US ?ow yields in these 0&Ds are actually 3% higher than local yields among legacy carriers, flow yields are lower on average ihan the local carrier If US eliminates its program, its flow-yields will fall insline with typical legacy carrier flow yields ?{his reduction in flow yield represents a value of roughly in common 08:05 with Belta and United, where DL and UA are the non?stop carrier To measure the net impact of the program, we added back the value of US non-stops no longer being impacted by reactionary pricing practices If US abandoned its pricing program, Di. would no longer price as it doestoday in US non~stops I I The value of the removal of Selta's lower flow fares in US non~stop markets is worth roughly Therefore, the net impact of program pricing is valued at roughly American Airlines 373818 CONFIDENTIAL Revenue Quality belief that revenues would increase if the program were eliminated is flawed We are only removing the revenue impact of pricing program reiative to UA and DL ~Therefore, we are not reducing revenues associated with its program pricing in AA non~stop markets, as it is assumed we would assimilate that revenue A final important result ofthe elimination of program pricing is the inherent impact on traffic volumes As mentioned previously, US depends on its pricing program to drive flow traffic over its hubs - - We did not value the resultant impact of traffic; but it is safe to assume that traffic mix would begin to iook more like traditional legacy carriers, rather than its current mix today which is heavily weighted toward flow traffic US has argued that eliminating the pricing-program might be positive for the merged carrier, with no analytical basis for this argument "So, even if one accepts the [AA-premise, the'anaiysis should show that eliminating the program would be a net positive to New American" - American Airlines AA-8 373819 CONFIDENTIAL Revenue Quality - Overview a US empioys a "pricing program? in which it offers flow itineraries at a discount to the iocal (nomstop) carrier, particularly close to departure I The program results in both benefits to US'as well as potential threats: Allows US to drive a disproportionate share of high?yieiding flow traffic in 0&Ds in which a legacy non?stop carrier operates a US depends on this fiow traffic to fill pianes into and out of its hubs, which are iocated in smailer locai markets than typicai legacy carriers In response, iegacy carriers have historically imposed the same ?ow pricing strategy in US non-stop markets, puliing iocal traffic off of US non-stops Today, only Delta uses this pricing strategy in US non-stop 08:05 The program is net positive for US today, despite the reactionary pricing by Delta, because the vaiue of the traffic taken off of CNS iarge nonnstop markets is more valuable than the traffic lost in smalier non~stop markets I The program would have to be eiiminated in a merger with AmeriCan, as American's iarge non-stop markets wouid now be susceptibie to reactionary pricing from Delta and United American Airlines AA-S 373817 "g Revenue Quail?! Valuation I To value the impact of the pricing program on the merged carrier, we compared yields 1for US flow traffic in common 0&05, where UA and/or Di. operate non?stop - US flow yields in these 0&Ds are actually 3% higher than local yields w?i?ypicaily, among legacy carriers, flow yields are lower on average than the locai carrier If US eliminates its program, its flow yieids fali in-line with typical legacy carrier flow yieids nihis reduction in flow yield represents a value of roughiy in common 0&Ds with Delta and United, where DL and UA are the non-stop carrier To measure the net? impact of the program, we added back the value of US non~stops no longer being impacted byDL?s reactionary pricing practices . if US abandoned its pricing program, DL Would no longer price as it does today in US nonwstops - . - - w- The value of the removai of Deita?s lower fiowfares in US non?stop markets is worth roughly I I I I Therefore, the net impact of program pricing is valued at roughly S214M - - 1 American Airiines Q2 2%6 iiS Airwayg Earnings Ennietencn ?nii Event gate/Yime: iui. 2366/ ET Contact Us it}? 2006 Thomson Financial. Repubiished with permission. No part of th is publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial. US AIRWAYS CONFIDENTIAL I bulk. HML marinaser CGRPORATE Elise Eberwein US Airways Corporate Communications Do ug Parker US Airways Chairman, CEO 81 President Derek Kerr US Airways CFO Scott Kirby US Airways - EVP, Marketing and Saies Ai Cre?in US Aim/ays - COO CONFERENCE CALL David Strine Bear, Steams ?Anaiys{ Jamie Baker JPMorgan Chase ~An?aiysr - Kevin Crissey U85 ?An_aiyst Ray Neidi . Caiyon ?Anaiys_t Helane Becker Benchmark Company - Analyst Danie] Mckenzie Credit SUisse Analyst Gary Chase Lehman 'Broibers ?Anaiys_t_ Mike Linenberg Anaiyst .- D?wn Giibertson Arizona Republic - Media Tom Beiden Phiiadeiphia Enquirer - Media Dan Fitzpatrick Pittsburgh PostuGazetre . Media Ted Reed TiieStreermm Media Steva Lott Aviation Daily Media Tom Olson Tribune~Review Media Chris Kahn Associated Press Media Contact Us 2006 Thomson Fina nma . Repubiished with permission. No part ofthis pubiication may be reproduced or transmitted in any form or by any means without-the prior written consent of Thomson Financial. US AIRWAYS CONFIDENTIAL ?ames? Flii?il. Andy Compart Travel Weekly - Media Bill Mastoris Bank of New York Capitoi Markets ~Anaiyst Melanie Trottman Wail Streetjoumal Media PRESENTATION Operator Good day, everyone, and welcome to this US Airways Group second quarter 2006 earnings conference call.Today's callis being recorded. At this time, for opening remarks and introductions, i would like to turn the call over to Ms. Elise Eberwein, Senior Vice President, Corporate Communications. Please go ahead, Ms. Eberwein. Elise Eberwein US Airways Corporate Communications Thank you, Peter. Good morning, everyone. Thank you for joining us. We're here in Tempe this morning, and i'm going to introduce who is in the room,and give you an outline ofthe call and how we anticipate this going today. We have Doug Parker, our Chairman, CEO and President, here; Scott Kirby, Executive VP Marketing and Safes,- Chief Operating Officer, Al Crellin; Chief Financial Of?cer, Derek Kerr. We're alsojoined by Al Hemenway, who is Vice President of Labor Relations, and General Counsel, Jim Walsh, and Deputy General Counsel, Janet Dhillon, are aiso with us. Doug is going to do his general overview, and then Derek will provide a few more thoughts on the quarter. Scott is then going to provide comments on the revenue environment and our performance, and hewill also provide an update on integration. And after those comments, we'il open it up foranaiyst I I questions and then we will go to media questions. - - - And of course, before all that starts, let mejust give you a few notes about today's call. it does contain forward-loo king statements, including statements concerning future fuel prices and our future financiai performance. These statements represent our predictions and expectations as to future events, but numerous risks and uncertainties could cause actual results to differ materiaiiy from those projected. information about some of these risks and uncertainties can be found in our earnings press release, which we issued this morning, our Form 1 0?0 for the quarter ended June 30th, 2006,and in otherfilings of the Company with the SEC. In addition, we'li also be discussing certain ?nancial measures, such as net loss and CASM exciuding unusual items. A reconciliation of such numbers to GAAP ?nancial measures is included in our earnings release, which can be found on our website. That website address, wwaSAinrvaysCom, andjust click the public investor Relationstab. Webcast of this cali is also available on the website. it will be archived on the website for about a month. And lastly, information that We're talking abouttoday on this caii is oftoday?s date. We undertake no obiigation to update such information subsequentiy. At this point, turn it overto Doug. Doug Parker US Airways Ch airman, CEO 8: President Thank you, Elise. Elise Eberwein US Airways - SVP, Corporate Communications Thank you, Doug. - Contact Us 3 LG 2006 Thomson Financial. Republished with permission. No part ofth is publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Fina nciai. US I Io A A n4074no: slim TRA SCWR PE, Doug Parker_-_ US Airways Chairman, CEO 8: President Okay, and thank you all for being on the line. We this morning released amounted second quarter pro?ts of $305 million, $315 million if you exclude special items. Theseare, we believe, it?s really remarkable results, given where US Airways wasjust a year ago, an-airline that wasstruggling to survive. We had announced a merger that__Was pending, that had a good bit of skepticism from others about how weii it could work. We're happy to report todaythat it's working exceptionally weil. we?re pleased both with the magnitude of these earnings, as well as the relathre results. So on an absolute basis,'the pro?ts are a record for our current Company, US Airways Group, which has as its history the old America West financials'. The predecessor Company, the older US Airways, had only oneequarter that was ever higher than this excluding speciai items, and that was all the way backin the second quarterof'98. These numbers are alsomuch higherthan our merger model estimates.The numbers we put together last year as we were showing numbers to investors about whatwe thought our prospects might be. While we didn?t do it by quarter, for the entire year, our merger model numbers estimated we Would earn about Si SO miliion, excluding special items. So to 5 million in _1 quarter are clearly wellahead of where we projectedwe would be at this point. I On a relative basis, while a number of airlines are reporting profitsand doing better than" their expectations were also a year ago, our relative results are much better than the other major hub and spoke. airlines_._if_ you justlook to pretax margin, our pretax margin for the quarter, atjust above 10%, is nearly double the second highest, Continental, Who is a iittle So We are, like i-say, pleased not just with the absolute resuits, butalso the relative performance. We're particularly pleased to include a pro?t~sharing accrual in this quarter's results. There?s $36 million accruedfor profitusmting. This will this goes to our employees who ate the driving force behind the suc_cess,__And want to use thisopportunity tojthank all of them for the greatjob they'reidoing in making thisiwork. Whileii'm thanking employees, alsowaht to pause and thank our'management team. Thegroupweiput together aswe put these 2 airlines together is absolutely the best in the business. They are Working their tails offtoget this integrationto work. And as they?re doing a iantasticjob. i get far too much personal credit for what is absolutely a team effort. A number ofthem'arein this room, EliSe {inaUdiblel introducedQBut also a number of them are listening in, so thanksto all of you guys. You're doing a greatjob, and please keep it up/ As a result of their efforts the integration is on track. We detailed some of our progress 'in'_'the release. Scott will covier that'as welliSuf?ce it to say, we?vegotten a tremendousamount of workdone, and are-very pleased with the-integration process So fa r. And then lturnit over to Dierek,justone more point, Which is our caSh balance billion, whichis Up nicely from the $2.6 billion that we closed the mergerwith .i 0 monthsago. While we?re_eXCited about how we've improved the earnings. capabilities of this Company, hopefully you?ve also noticed that we're working to improve the cash flow prospects from areas otherthan earnings,as well. I I I I We closedan extremely important transaction earlier this year, that pushed over $1 of debtamortization out of the next few years. So today, unlike all of our: large competitors, we hate no material debt amortizations until the year 2011. We have no cash pension obligations, and we haye a substantial cash balance, which makes us extremely'comfortabie with our cash position today, and our relative cash position. We?ve been approached byinvestment banks suggesting that we could sell several $100 million of equity overnight, like a few of our competitors have done. We've politely told them no thanks, we're not interested, because we don't need the cash. It's been a iong time sinceairlines have rejected offers of straight equity financing, particularly an airline named US Airvvays. But think that gives you a good idea of how comfortable we are Withourcurrent position, and how goodwe feel about our prospects. So withthat _Said, i?li turn it over to Derek to tell you more about-the numbers themselvesDerek Kerr - USAin/vays CFO Thanks, Doug. We ?ledour second quarter for the US Airways Group this morning, and as Doug said in that quarter, we I reported a pro?t of $305 million, or $3.25 per diluted share. This competes in the press tables to a loss of $3million or $0.20 per diluted share a year ago. Now, forthose ofyou that haven't iistened to the last couple ofcails, I still want to explain thatincluded in the numbers, we have America West Holdings oniy in the 2005 numbers. This is although the mergerwas [inaudible] structured that America West holdings was acquired by the, and became a wholly owned subsidiary of US Airways Groups, America West Contact Us 2006 Thomson FinanCIal. Repub ushed with permission. No part of this publication may be reproduced or transmitted in any form or'by any means without the prior written consent of Thomson FinancialRWAYS Holdings is treated as the acquiring Company foraccounting purposes. So that muddles the numbers a little bit. As a resuit, the secbnd quarter results of the-new US Airways__(3roups, Which are combined US Airways and America West, are compared to 2005 results that-contain only America West data. This wlii happen for 1 more quarter per GAAP rules. We will have "complete -- we will be able to compare quarterly data to America West lnc. While the GAAP numbers aren't extremely meaningful, We encourage you to look atthe which we have in the press tables for year?oyer?year'cemparisons; if you just combine both-P815 see that the second-quarter 2005 was a slight loss for the combined airlines. Getting back to the second quarter 2006, When you exciude'special items, the Compa ny'reported a'net profit for the second quarter of$315 million or$ 3.35 per diluted share, versus a pro?t of $4 million or $0.21 per Idiiuted share in 2005 for stand-alone America West Holdings. Company second quarter 2006 results intlude 3 special items that net to a $10 million expense-These 3 items are the $35 million for merger related transition expenses,_whECh l'll talk-a little bit abdut later. These are offset by $18 million unrealized gain tel-ated to the-airline's fuel hedges, and a $7 million gain from interest income earned on Certain prior yearfederal incometax refunds. The quarter aiso includes, as Doug says, a $36 billion accrual for employee profit?sharing, and this is included in the saiary'and benefit'line'. This number is calculated on 10% of pretax income, excluding special items and before profit-sharing expense-on a yeat-to?date basis. And we will-do that as We movethr?ough each quarter. 7 Looking at eachcompany's reported on a humberson 'a'stand?alone basis, US'Ai'rWays'inc. reported a net pro?t of of $246 million for the second quarter 2006, whichiincluded $12 million of tranSition costs dueto the merger. Excluding "the speciai item, US Airways inc. reported a net profit of of $258 millionfor'the"second'quarter 2006. This was-a dramatic improvement over the second quarter 2005, when USAirWays reported a net loss stpecial items Iof$18 million; America West reported a net pro?t of$68 miliion for the second qua tier, which included a net $2Imillion credit for special item 5-. That included the transition expenses, the unrealized 'hedge.gain,and the interest income from the tax? rernd. Excluding" thoSe special items, America West reported a net profit of $66 miliion for the quarter compared to net profit of $5 million in the Second quarter 2005. America West main line capacity for the quarter was 7.6 billion ASM's down, 2.3% from a year ago, while US Airways main line capacity for'the quarter was 12.1 down 12.8% from the quarter We continued to return aircraft to lessors. Saircraft returned in the quarter, leavirig us at 359uaircraft. it's about all of the-6O airc'raft'hav'e' been returned at this time. I think there's 1 or 2 that will be returned in thethird quarter, but all of the aircraft have gone out Of the fleet. We're forecasting our fleet to be 3_60__aircraft by year?end, including the 3 ERJ 190 deiiveries for the fourth quarter. From a standalone basis, total RASM for America West Airlines increased 18.6% to $01116 during the second quarter, Edrivenp'rii'narily by an increase in main line yields of16.4% to $01197. For US Airways total RASM increased 28.8% for the sameperiod main line yields increased 16.8% versus 2005 to $01452. We continue to experience high fuei- prices, as'eye'rybody else is, that have led to material costs for-the US Airways Group. Had our main lineand express fuel expenses remained constant versus the sedoncl quarter Airways group second quarter 2006 operating expenses would have been $183- million tower. on a stand?alone basis US Airways average fuel price for the quarter was $2.16 per gallon Versus $1.68 for'2005', which Wasa 28.2% increase. While America West average unhedged' fuelprice forthe quarterwas $2.18 per gallon versus $1.74 for 2005, which was a 25.3% increase. For the qUarter,-we had approximately 41% ofthe main-line fuel hedged which'resultedin a realized gain of $11 million. If you include therealized gain, the net fuel price on the America West side was $2.08 per gailon, or $1.63 for a 27.6% increase. We have continued to increase our hedge positions throughout the quarter. We?re ?44% in the third quarter, 37% in the fourth'qua rter. And for 2007 we have 2i% in the first quarter and 10% in the second quarter. And these all reflect main line volumes. US Alnivays Groups main line operating costs per was $01115. Excluding special items, fuel, and realizad gains on the fuel hedging instruments, costs per ASM came in at $00771. Express operating costs per ASM X-fuel was $01212. America West mainline unit costs excluding special items, fuel, and realized gain on fuel hedging instruments were $00692, an increase of 7.4% versUs 2005, on a 2.3% decrease in ASM's. This increase includedan accrual for pro?t?sharing that accounted for approximately 3 points of the increaseContact Us (Q 2006 Thomson FlnanCIal. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial. US UCLA A n4 '27rit?1'2?7 illil?ii On the US Airways side, CASM excluding fuel and special charges increased 7.9% to $00808 versus 2005 on a i2.8% decrease in ASli/is. This increase was driven primarily by the profit-sharing accrual in 2006 and a $31 million credit associated with US Airways post~retirement bene?ts, that was in 2005. These items had an impact of approximately 5 points on a year?ovenyear increase in CASM. Transition costs were $35 million for the second quarter, which is slightiy higher than our previous guidance. The increase was driven by the integration of the 2 Frequent Fiyer programs. The Company recorded $i1 million of expense to increase its estimated cost of providing free travel based on the terms ofthe new dividend miles program. So as we move the America West people into the dividend miles on the US Airways side, and that was not contemplated in the previous guidance. Other major categories of transition costs include professional and legal fees ofabout $8 million, and severance and reiocation ofabout $5 million. On the liquidity side, as Doug said, we ?nished the quarterwith $2.3 biliion in total cash and investments, of which $2.2 billion was unrestricted. We did complete the transaction of $?i.25 billion refinancing during the quarter. The last haifof it, ifyou recall in the last call, we had $1.1 million done, and we had another 150 to go and we completed that. We also announced the redemption ofapproximately $112 million in principal amount ofAmerica West Holdings Corporation 7.5% convertible notes that were due in 2009. These notes were converted into approximately 3.9 million shares of common stock. We continue to look at ways to improve our balance sheet and reduce our future obligations. in July we compieted 2 transactions that accomplished those goais. We paid Aircap $20 million to prepay $33 million in supplementai rent. That was a result of America West?s previous bankruptcy. This will resolve going forward in rentai expense being reduced by $1.9 miliion annually through 2013. We also converted approximateiy $21 million of our $144 million outstanding US Airways Group 7% senior note. We conVerted that into 883,000 shares of common stock. We'll continue to look at other opportunities as we move throughout the year. For guidance for the remainder of2006, we have updated our investor Reiations report on ourwebsite this morning, whichjust went upjust prior to this call. With main line and express guidance, it wili include ASM's, CASM, fuel for each quarter for the fuii yea r. We've enhanced it a little bit since the last call as you have seen, and it's up on the website. For some high level main line guidance, we expect combined ASMs to be 77.2 billion, down 5.8% for the fuil year 2006. By quarter, the third quarter we'Il be down 4.4% to 20.2.biliion. Fourth quarter we?ll be up 1.9% to 19.2 billion. This is consistent with all previous guidance that we have given. As for CASM X?fuel, we are adjusting our guidance Wehave tightened the ranges a little bit and adjusted primarily due to second quarter actuals and higher pro?t-sharing expense. For the fuli year, we expect CASM X?fuel to be between $0.074 and $0.076. By quarter, we expect $00715 to $0.0731n the third quarter, and $00735 to $0.075 in the fourth quarter. Fueiprice inciuding taxes forecasteci to be $2.17 to $2.22 for the full year 2006. Third quarter to come in at between $2.29 to $2.34, and the fourth quarter between $2.32 and $2.37. For more detailed guidance, please referto our IR update page that's on our website. For transition expenses, we are now projecting $227 million in merger reiated transition expenses in 2006. $137 million ofthat will be expensed and hit through the and our estimation of capitalized transition expenses of $90 million has stayed the same, and that will be spread out over the next few years. i'ii turn it over to Scott to go through the revenue. Scott Kirby US Airways EVP, Marketing and Soles Thanks, Derek. l'il take a minute to taikabout the 02 results, a little bitabout our outlook going forward, and then a brief update on how the integration is going. To start, we were obviously very pleased with our second quarter RASM, up 16% and 24% year-over-year respectively in the former America West and US Airways main line rdute networks. Additionaliy, our express RASM was up even stronger, up over 40% year?over?year in each of the 2 route networks. We believe that our year-over~year second quarter RASM performance was once again the absolute best in the industry. Our year-over?year RASM improvement continued to be driven by 1, reduced industry capacity, 2, pricing power that has resulted from the reduced industry capacity, and 3, revenUe synergies from the merger. Contact Us 2006 Thomson Fina ncrai. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent ofThomson Financial. US AIRWAYS CONFEDENTIAL ramscsier The tevenue synergy from merging our2 airiines is one ofthe mostsigni?ca nt factors heiping US Airways continue to oLitperform the rest of the industry. Specifically, we're seeing benefit from i, implementing a full code sharebetween AWA and US Airways, 2, an improved combined. Frequent Flyer program, 3, a rationalized routenetwork that eliminated capacity on our weakest routes, and 4, increased SCheduiing synergies between our East and West Coast route networks. Turning to our outlook goingfon/vard, the revenue environment remainsvery strong. On a yearaover-year basis, however, our comps are starting to get more dif?cult, since the revenue improvement at US Airways began in iast year's thirdouarter. While we don't see any weakening in the revenue environment, we expect o'clr year-over-year RASM growth to be less than'it was in eitherthe first or second quarter due simply to thefact thatour comps are getting more difficult. in summary, we see continuing acceleration in the revenue environment, though we expect our to begin to moderate from the 20 plus range yea r?over?year, into the. high teens due simply to more dif?cult comps. I'dnow like to take a minute to talk about how the integration-efforts are proceeding. On the whole, we continue to be very pleasedwith our progress-on integrating the 2 airlines, aithoug'h we still have much dif?cult Work yet to accomplish. We have more details in the press release, but some of the significant milestones we achieved in this quarterinclude: 1, we combined our Frequent Flyer and website systems, the ?rst of 3 major systems conversions thatwe have to complete) 2, signed a new long term labor agreement with our customerservice employees; continue consolidati_n_g_'our co-located airport operations and eXpect tohave operations inall but i airport consolidated by the end. of this quarter; and 4,_we_began deploymentof new infrastructureinto the airports in anticipation of the reservation system cutover in the-?rst halfof 2007. Over a longer horizon, some of our signi?cant milestones that we need to achieve remain i, reaching ?nal agreements with'each ofour labor groups; 2, converting to a single reservation system; and 3, obtaining a single operating certificate. in conclusion, we're very pleased with and financiai returns from the merger thusifar. The integration is going well and the Irevenue results continue to exceed our expectations. Whiie there's a lot :of he rd work ieft to do, the future outiook remains very bright from both integration and revenue perspective. Doug? . i Doug Packer Ain/vqys Chairman, CEO 82 President Thank you, Scott. Just 1 more point l-want to make before questions, Which is a few ofour investors have asked recently why it is we think we may be underVaIUed versus other airlines, that is, our stock has clone extremeiy weli, but apparently those of you that track relative v'aitrations say that we're still not priced at a value that refiects how much better we're-performing than the otheralriines,vversus where they?re valued. To that I'd say, we're obvioUSiy we're not sure why that is. We're'doing our best to run the airline as best we can, endowe'li continue to do that. But I imagine?part of it is due to how quickly this turnaround has happened. Many people still find it rather hard to beiieve, and are looking for proof rather than for projections. We thinkthat's fair. We?re committed to doingjus?t that. We plan to keep running a great airline?, and iet the results speak for themselves.Today's results are i quarter's worth ofactuals that we're very proud of, and we iook forward to continuing to produce strong actuais as we go forward. To that point, we disclosed today in the release that we project a pro?table third quarter and a profitable full year 2006, which we feel good about. And with all that said, we're now ready for questions, operator. Hello? Operator Yes, are you ready for question?anci-answer session? Scott Kirby - US Airways - EVP, Marketing and Sales Yes. ContaCt Us' I I 2006 Thomson Financial. Repubiished with permission. No part ofthis publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financiai. us AERWAYS .m ale-mm Filer-ii RANSC QUESTEGNS ANS ANSWERS Operator David Strine, Bear, Stearns. David Strine Bear, Stearns -Anaiyst A couple questions. First question, Doug, it was interesting in your beginning remarks you mentioned that you had rejected a couple of recent suggestions by bankers to do secondaries. And ljust want to geta sense with respect to your View, and perhaps it relates to your sense of the capital structure ofthe business, but do you feel confident enough in the trajectory ofthe business -- and the capital structure at this point, to go ali the way the other way, and actually begin to return cash to shareholders in the form ofa dividend? I - - Doug Parker US Airways - Chairman, President No, David. But thanks for asking. We haven't reached that threshold yet. And indeed, l?m looking around the room, but i'm not even sure we have the ability to do that through some of the terms of our debt. But even if we did, that'snot -- we haven?t gotten that fat,'David. We have gotten to the point where we're happy enough with the trajectory, as you said. I mean right now, as we stand today, I thinkyou propany canistill make an argument the Company is overlevered. Well, actuaiiy if you iook at kind of the debt-to-market cap, ydu could argue that maybe we're not. Because we're getting into thiskind of 2 to 1 ratio, not quite there ofdebt to equity, which i think is probably a pretty good ratio. But clearly, if we thought we were going to stay Where we were, we wouldn?t be rejecting offers for raising equity. What we believe. is, given the kind of cash we?re generating today, the cash requirements we hate going forward, which again are not iarg e, as i've noted, we thinkyou?re going to see that number continue to fail, and there's no need for us to go raise equity, particularly at a time when we thinkwe're undervalued. David Strine Bear, Stearns -Anolyst Okay.Thankyou,,and the second question is for Scott.'You mentioned in'your're marks about thirdq uarter RASM. You mentioned a number, you said high teens. Were you referring tothe main line business, or on a consolidated basis? Scott Kirby US Airways - EVP, Marketing and Sales I . That was on a consolidated basis. David Strine - Bear, 5 teams - Analyst Okay, thanks a lot, and best of luck in the__third quarter. Operator Jamie Baker,JPMorgan Chase. Jamie Baker ?JPMorgan Chase ?Anaiyst Doug, following on some comments that you made, if you do look at how the equity trades relative to the peer group, the market seems very apprehensive, as it relates to the integration. You're already the second most pro?table airline out there. l'm Contact Us ',sem 2006 Thomson Financial. Republished with permission. No part ofthis publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial. - US AIRWAYS RA wondering ifyoujust considered shelving the integration ail together? mean it may seem like?a rhetorical question, but wouldn?t that apparently be in your shareholder's best interest? Doug Parker US Airways - Chairman, CEO 8! President Well, tell me what you?re talking about? Jamie Baker ?Jvalo_rgan Chose Well, in terms ofincremental integration from here, that seems to be the risk, the overhang on your equity. l'm wondering why you just don't, what?s wrong with the status quo? Look at your pro?tability. Doug Parker US Always - Chairman, CEO 8: President Yes, okay, well that's what I said what are you-talking about. talk about where we are in terms ofintegration, and if that's what it is,'i would argue We haven?t done a Very godd job ofdescribing how the integration far aiong we are and what's left-But anyway, where we are is mean again, as you see right now there's a good bit of integration that?s been done. We still have a lot we need to do so thatthe customer sees i airline, Jamie..We got-to paint airplanes, we have to get to 1 computer reservation system. We have done a lot, like the website and Frequent Flyer, but we still have more to do there, and that's important to get done. That Will all be done thOugh in -- that all should be done, everything ljust described, in early '07. The airplanes actualiywtil take full year-?07 to get the old US Airways livery into the new, but we'wilihave every airplane saying US Airways by ?rst quarter "of ?07 and we'll have the reservation systems cut over. That is that's value to the Company, and that's value to ourconsumers that will continue to create synergiesmean, should note, we still believe, which probably people don?t give us enough credit for,that there's anotheranother$100 million of synergies left to be created from the integration. it's not done yet. We said all along it was going to be $600 million. $300 million of that expenses, and 150 of expenses would be in '06, and the next ??00 would come once we got all the systems integrated in '07. so that?s still to come, and that happens as we do the things ljust indicated. We" also -- we also need also we should get to'i certi?cate. There's no reason not to get to i certificate, and we'reona great path to get that done. Our people are doing a fantasticjob of getting the airlines integrated into i FAA certi?cate, and that wiil get done hopefully some time second quarter '07. That's not going to have enormous synergy impact, but it'sjust the right way to runan airline. So that we will continue to proceed with. I I I I I think what you're getting at, and what i don't necessariiy disagree with, is la bor integration. And we have first off Scott touched on this briefly, but we've made some nice progress.Our largest represented group, which is the agents, actually came to an agreement during this quarter. And we're going to get, once we have the reservation systems integrated, they will move to 1 contract. So that's great news. On the other fronts, we're in negotiations. We hope to get to 1 contract. But if we don't, there's nothing that forces us to go workto get the 2 contracts together in the rest ofthe groups and we don?t --a'nd we wouldn't. So if people -- to the extent that's what you say you're hearing from the market, that there?s some concern that we?re not going to be able to integrate the workforces, we have valid contracts in place on both sides. We clearly would like to get, as we have with the agents, to 1 contract because that helps somewhat with synergies. But they are not overly material. And indeed they probably not, in the realm of numbers we're talking about, material at all. So our pian is to work really hard with-our labor unions to try and get to 1 contract. But if we can?t, We can easily run the airline with i certificate that looks like i airline to all of oUr customers, but has 2 separate labor contracts for pilots, flight attendants, mechanics, et cetera. And that is what we'll do. Contact Us 2006 Thomson Fina ncial? Republished with permission. No part ofthis publication may be reproduced or transmitted in any form or by any means without the prior written consant of Thomson Financial. US AIRWAYS Fli?i?ii Jamie Baker -JPIl/lorgan Chase ?Analyst Okay, that's helpful. Thanks, Doug. And a follow-up for Scott. 1 just to con?rm that the RASM guidance, the high teen, was a third quarter and not a second half number. And secondly, i?m just curious, the strength that yoU?re seeing on the Express side ofthe equation, is that uniform across sortofall mileage bands? You know, we've been thinking more and more aboutautomotive substitution during this quarter. Just wondering if you thinkthat?s contributing? - - - Scott Kirby - US Airways EVP, Marketing and Safes Yes, Jamie. it was a third quarter number. And as to the across ail mileage bands, we see more strength excuse me, in the short and medium haui. I'm not sure if it's automotive substitution, because i'm sure that's partially there. Hard to delineate 7 though, became the other effect in those short haul markets has been particularly on the East Coast, large reductions in capacity and Independence Air going away. So with RASM up a little hard for us to determine_whetherthat-- how much of that is from automotive substitution, fromeconomic strength, from reducing capacity. But we definiteiy'havemore strength in the short and medium haui markets than theiong .haul markets of 2,000 miies and greater. I I Jamie Baker ?JPI?l/lorgan Chase -Analys_t Get you. Got you'Okay, thanks a lot, guys.'And Eiise?, thanks. Operator Kevin_Crissey, BS.- Kevin Crissey UBS ?Anofy$r Just wanted to ask what is the potentiai for future rationalization of routes? Where do you see that, Scott? Scott Kirby - US Airways Marketingond Sales In ourown route network, we don't see any materiai changes to our own capacity coming up. That means not any reai growth and not any shrinking. There will be some tweaking around the margins. Theone place that we do expect to grow is our international route network, which we?il probably add to next summer. Absent that, we don't see much changing in our own route network, If your question is about the industry, i'm not sure how to respond to it. Kevin Cris-say - OBS -Anoiyst Right, no. Scott Kirby - US Airways EVP, Marketing and Sales For us, there's not much change. Kevin Crissey UBS ~Analysr That?s fine. How about if we were to say that there was a merger within the industry, a major merger within the industry within a year, would you be willing to participate in that, given where you are in the integration and everything? Contact Us - \o 2006 Thomson Fina ncral. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any meansvvithoutthe prior written consent of Thomson Financial. . - - US AIRWAYS I FINAL Doug Parker- us Airways ca airman, CEO President Yes, I guess-Look, the answer to this is, and l'll spend a little time on this. i think our results, if you hook at them, show what tremendous vaiue can be created through consolidation. First off, i talked about our operating marginperformance. talked about the relatiVe performance. But ifyou look at the change yea r-over?year, getting to 10% pretax margin from a loss Eastyear, we're up over 10 points. No other airline, legacy, low cost,anyone, is seeing that kind ofimprovement in margin year-ovenyear. Almost ail of them are up about 5 points. So while everyone is seeing improvement because theindustry is getting better, no one is seeing anything close to the improvement we've seen. And to be clear, none of that, on a year-over-year basis, is labor cost savings. All the labor contract savings were done last year at US Airways at'this time. 50 others were getting some of that through anniversaryiab'or cost savings. I -. . - Ours is all driven by improvement in the industry, and th'e'val'ue of the merger. And that's the difference between our numbers and everybody else, is the value is created by con-soiidation. And if that's not obvious enoUgh, just look to the market cap of the Company. We had a Company, that a yearago, America WeSt was trading for about about $200 million of market cap. US Airways in bankruptcy, obviously worth nothing. We added about $800 miliion of equity to that, so about $1 billion of total value is now worth nearly $5 biliion in total vaiue. And again, the industry is some of that, but the vast majority ofthat is due to the fact We consoiidated 2 airlines and created value through consolidation. So if people den't see the'vaiu'e at consolidation in this industry right now, it's because they don't want to. The evidence is obvious and it?s compelling-SQ what's less obvious to some, but clear to us, is that that vaIUe is created much more when one of those airlines is in bankruptcy. And you have 2' airlines in bankruptcy right now. So having said all of that, we are fully engaged in getting these 2 airlines integrated and are, 4 as i have said, extremely happy with our progress. But it would be negligent for us to ignore the fact that there are2 airlines stilt in bankruptcy that are going to have to emerge at some point. And think this evidence is going to be so compelling and so obvious to their constituents, that they are going to need to investigate it, and when they do, we would have to be there, or we wouldn't be doing ourjobs. So that's along way of saying I guess, yes. - Kevin Crissey UBS ?Analyst Well thanks for the candid answer. How do you see the reguiatory environment regarding this? is it stili better perhaps than it was, or not an obstacle? Or how big ofan obstacie? Doug Parker US Airways - Chairman, CEO President it varies by transaction of course, and overlap and all sorts ofthings. But'indeed, on that point, and again I don't want to make it sound like we're off doing a lot on this rightnow. We're working on our own transactions. But everything ljust said was from a veryglobal perspective, and could be said not just about US Airways, but about any other airline. And about any other combinations, wouldjust say about the global regulatory environment, the -- Washington has toid the airiines in no uncertain term s,go ?x yourselves. We're tired of you guys coming and asking for help every time something goes wrong, and goengage in self?heip. So, i think it's a iot harder for them with that attitude to preclude self-help. Kevin Crissey U85 ?Anaiysr Great. Thank you very much. Operator Ray Neidl, Ca lyon. Contact Us a? 2006 Thomson Financial. Repubiished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financiali A FINAL TRANSCREPT Ray Neidl Colyon ?Anolyst Can you say anything about the progress being made between your unions and their contract, and trying to merge their operations? I I Doug Parker US Airways Chairman, CEO 8! President l'm sorry, Ray? Ray Neidl - Calyon ?Analyst The unions. You saidthat's one of your goals, to unite the airline and get the union contracts together. Can you Update us on what progress is being made? - Doug Parker US Airways Chairman, CEO President Sure, sorry. Again, first off we had ahuge deVeiopment in the quarter, which was all of our agents who are represented by a .joint venture of thech and the IBT, came to an agreement o'n'a' consolidated contract, and that'sivery'good news; So that one is done. Now, indeed to be Ciea r, they wont actually move to consolidate'the'contracts until we getto 1 combined computer reservation system earlier nextyear, because that's'kind of re'qLiired to integrate thatworkforce. Butall the terms a nd conditions are agreed opon._So that one is done-Thearest of them vary byWOrk group; I - The next furthest along would be both our'pilots and our flight atte'ndants,'who had the-same onions representing them at each airline, the-case of the pilots, AFA in the case of the?tlight attendants. in those cases, fora number of months now, we have had transition agreements in place that kind of dictate how we will operate in reEatio?n to those represented Workforces until we get -- until such time as we get to a consolidated agreement. So the transition agreement were nice milestones to pass. Those have been passed some numbers ofmonths ago, probably 6, 8 months ago. Since that time we've been in negotiations so with them, on reaching consolidated contracts. Those negotiations are contract negotiations, and they are going to' be probably going on forawhile,beca use as we sit here today, ma na gement's objective is to put those 2 contracts together withont increasing the cost to the firm at all. Basically saying the contracts are the same -- or are essentially identical in terms of cost to the Com pa ny at both airlines. So we want to put them together in a way that optimizes the that optimizes what AEPA and AFA want to get done. But we don?t Want to put them together and have the costs increase. ALPA and AFA are obviously at this point saying, gee, the Company is doing well. We want to put them together now and have the costs increase. We're not prepared to agree to that. So?lNe're going to be in negotiations for aware imagine. And my comments earlier to Jamie were just to note that we can be in negotiations for awhile. We do have valid contracts at both airlinesThere's nothing that is going to force -- that requires us to get to consolidated contracts. We would like to, because we think that?sjust a better way to run things. But we don't need to, and we'll probably my guess is we'li be in ne'gotiatiOns for quite awhile with both those groups. I Getting into the other large groups, the mechanics. We still aren't sure who is going to be representing our mechanics. There were 2 separate unions at the 2 airlines. And those it's the EST at America West. it was IAM at US Airways. They're still waiting to hear back from the NMV as to who will be representing our mechanics. And whoever our mechanics decide they would like to represent them with, we will obviously work with and try to get to a consolidated contract. But in that case, We're not sure who it is.?And as it relates to the last large group, which is our ramp em pioyees,-we do now know that they have chosen through a process to be represented by the and we have just begun work with the IAM on trying to get to a transition agreement, which will be followed by contract negotiations. But it varies by group. We're about where would expect we would be at this point, and again, this is n? at this point, largely negotiations like you see at other airlines. Contact Us 2006 Thomson Emanuel. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson FinancialRWAYS US-AA-01371944 i ii A 1 a A Ray Neidl - Calyon -Anaiyst Okay, and the pension bill that Congress is trying to hammer out, that has no effect on the new US Airways, does it? Doug Parker US Airways Chairman, CEO 8.: President It does not. Ray Neidl - Caiyon -Analyst Okay. And then ?naily, you did mention that you're comfortable with your cashlevels and there?s no major-debt maturities coming. You still do have a very high debt to capitalization ratio right now. Do you have a goal of where you would feel comfortable with that ratio? Doug Parker US Airways Chairman, CEO 8! President Yes. Again, it depends on how you're doing the analysis. i don't know, it depends on what you call very high'l guess as Welt. if you__ ook at ourmarketcap as. opposed to book ca p,_which I would arg we is a better measure, and properly adjusted debt, I think we look better than anyother hub and spoke carrier. And we're actually leaning to where we think a be'tterrneas'ineis some sort of to debt ratios. Anyway, as we look atall of thoseas l'said earlier, We don?t if We thought We were goingto stay Wh ere we are today, I'd argue we're overlevered. We obviously don't believe We're going to stay where we are tOday. We?re generating cash. We expect to continue to generate.cash._We don't have anymajor cash outlays, so our projections indicate that ifwe're not where we wanttobe rightnow, w'e'viIill be pretty Soon. Andtherefore, we feelvery good about the baiance sheet, at least as we IookforwardWith some .?of your surplus'cash flow, which looks like it?s going to be Very strong, i take it then you may pay down some debt or operating leases on arrearly basisDoug Parker - US Airways - Chairman, CEO 8r President Right now, we're just buiiding the cash balances, butaitsome point we would need-to look to things like that, yes. Ray Neidl: Calyon -Ana{yst . Great. Thank you. Operator Heiane Becker, Benchmark company. Contact Us .l L6 2006 Thomson Financra . Republished with permission. No part ofthis publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial. US. AERWAYS CONFIDFNTIAI rI-gaammowoan ?llilAL TRANSCRIBY Helene Becker Benchmark Company -Anaiyst So I just wanted to talk to you a littie bit about your thoughts on the international expansion. 1 think Scott said that you're looking to do that maybe next year. Does that mean that you'll have to place an aircraft order to accomplish that? Or is it more like, with companies in bankruptcy, you have an opportunity to pick off some of their internationai routes? Scott Kirby US Airways EVP, Marketing and Sales Yes, uh Helene Becker Benchmark Company ~A'nalysr I Like maybe buy them for their international routes. Scott Kirby? U5 AirVrays Marketing and Sales It probably doesn't well we definitety don't need anaircraft order to grow internationally. We are currently in the process of equipping more of our 7575 to fly transatlantic routes,whicn allows us to eitheradd 757 transatlantic routes, orto change some existing routes to 7575 and use our widebody aircraftito fly longer haui into Europe. So my guess is that's where our growth witl come from, from ourown fleet of 7575Helane Becker Benchmark Company - Analyst Okay, great. And couid ljust ask'l foiiow?up question? Scott Kirby US Airways - EVP, Marketing and Sales - S'u re. Helene Becker - Benchmark Company Analyst In terms of like you're looking at Europe. You're not looking art-Mexico and Latin or Sout?l?rAmerica? You're kind of looking East? You're not iooking West? ls that how we should think about it? so you're looking at it for the aid US Airways system? Scott Kirby Airways EVP, Marketing and Sales Well, not that we aren't tooking at Latin America. It's possible that we would add 3 mi! routes to Latin America. But we aremuch more certain about our growth to Europe, because we've already done all of the work. We?yeinvested in equipping ouralrcraft to fly transatiantic to Europe. So we just have a lot moreicertainty around Europe growth, than we do anywhere else. Helane Becker - Benchmark Company?Analyst Okay, thank you. Contact Us 2006 Thomson Financial. Repubtished with permission. No part of this pdblication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial. US AIRWAYS Flit?il. Operator Daniel McKenzie, Credit Suisse. Daniel Mckenzie - Credit Suisse ?Analyst Doug and Derek, I wonder ifl couid just circle back on some of Ray's questions regarding cash? You have $675 miliion cash generated so far this year from operating activities, and are you comfortable with this at this ievel? Next year is even going to be a betteryea r, so at least based on the outlook right now, generating more cash. And just wondering what your conderns are with respect to CapEx priorities going into ?07, even though it's kind of early to pinpoint a CapEx number at this point. But and just '07, is it reasonable to assume that you foiks would probably prepay some debt at ieast in ?07? Doug Parker - US Airways Chairman, CEO President Again, Dan, we're not to that point. Again our own our modeis right now assume we generate cash, use it to buiid cash. At some point you get to where you have enough cash that you that we would be looking to do other things like paying down some debt or perhaps building rip equityin "aircraft'it?s aiways made'sense, at theold America West and today at US Airways, to acquire aircraft on straight operating leases for the most part, primarily because "we're not cash tax payers. And you allow the tax benefit to go'to the ownerL'And so it?s more ef?cient to go into operating ieases. As we become a cash tax payer, which we wiil at some point, it makes more sense to actually have equity in the airplane, instead of straight'operating leases. So there are a number ofthings that we might do. At this point though, nothing to announce. Just to teii you that we feel very good about the current cash balance, and where we beiieve the cash balances will head. So as long as we remain-profitable because wejust don't have large cash payments in the coming years. - - Daniel Mckenzie - Credit Suisse - Analyst Okay. And just touching a little bit more on the fleet plans, it looks like there are 123 scheduled aircraft-iease expirations coming up over the next 2, 2.5 years or so. Any color you can provide about plans for those planes? And as well, and also the CRJ 700 order with Bombardier? Derek Kerr US Airways CFO Dan, I'll talk about where we are on those aircraft. i mean, we have announced that we are iooking at replacing aircraft orthe olderaircraft and the oider 755. Right now, we are in talks with both airplane manufacturers, as we've said before, to look at a possibie replacement for the 737. We haven't made any determinations'yet, and we're just working through the analysis to see whether?- what we will do with those fieet types. 50 overtime, it might be the next6 months or so,_so down the road. But we are currently looking at that, and what we're going to do there with those aircraft. Some of the Embraer 1905 that are coming in will replace some of those aircraft. We just haven't determined how'ma ny yet. There's 25 aircraft coming in, but we haven't determined Whether they will replace any cit-the 7375 yet or not, but they could possibly. Right now we haven't decided yet, and we'll go forward with that, and l?ll let Scott talk about the other 'order. I Scott Kirby US Airways EVP, Marketing and Sales As to the Bombardier aircraft order, we have worked with Bombardier to restructure that and tum it into CRJ 9005. And our pifots at PSAare currently voting on a deal that would require our pilots to ratify an agreement for us to fly them lnhouse. That is our preference, to fly them with their own employees, and to give that business to PSA, so our pilots are currently voting on that deal, and we should know some time in the month ofAugust. - . Contact Us' 2006 Thomson Financial. Republished with permission. No part of this pubiication may be reproduced or transmitted in anyform or by any means without the prior written consent of Thomson Financial. us AIRWAYS ?a FINN. Daniel Mckenzie - Credit Sulsse ?Anaiyst Okay. Good. Thank you very much. Operator Gary Chase, Lehman Brothers. Gary Chase - Lehman Brothers -- Analyst Just a quick nit, and then i've got a question for Scott. i don't want to tie up the cail forthis, but i wonder ifafterwards you guys might be Willing to distribute some of the regional data for Europe and Latin America so we can see kind of what?s going on for RASM domestic versus those entities? Scott Kirby US Airways EVP, Marketing and Sales i can give it to you quickly, Gary. Gary Chase Lehman Brothers ?Anolyst Okay. Scott Kirby US Airways EVP, Marketing and Sales On a consolidated basis, domestic was up 28.5%, transatlantic up a iittle over 1 3, and Latin was up i9. Gary Chase Lehman Brothers - Analyst And actually your traf?c reports don't have the ASM, so at some point if someone could just shoot that out it wouid be helpfui just to take a look at that. Scott Kirby US Airways EVP, Marketing and Sales kay. Gary Chase - ehmon Brothers Analyst The question I had for you, Scott, was one of the things that you talked about as you started to put this transaction together, was the ability to approach more corporates with a better network, better product. US Airways at one point was viewed as struggling. There was an opportunity on that front as well. Just wondering for what color you've got on that to date, how far along in that process do you think you might be? Are there additionai opportunities, so on and so forth? Contact US 2006 Thomson Financial. Republished with permission. No part ofthis publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial. US AIRWAYS Scott Kirby US Airways - EVP, Marke ring and Sales We have been trying to work with our corporate and travel agency account base. We do have a more comprehensive product offering and also more certainty fortheirtravelers, so we've had pretty good success with our corporate accounts?urcorporate account business is up significantly. We actually have fewer corporate accounts, because we have a philosophy of trying to work with corporations that actually can move business. And if they are not able to actively manage market share shifts, that doesn't make a lot of sense to give big discounts. So we have fewer corporate accounts, but we have more corporate account revenues and increasing corporate account yield. So we feei very good about where we are today. That is an ongoing process, although for the most part, we are through of our big corporate accounts. We're through renegotiating with all of our big corporate accounts. Gary Chase - Lehman Brothers -Analyst Okay. Andiusti lastquick one. i mea n, I know you look atthe absolute RASM gains Eastand Westand they look more impressive on the East Coast, but whenyou consider the capacity that's coming out there and everything else, just the America West network is stili very surprising how well that?s doing. is that kind of getting a larger portion of the synergy that you create as you pull?down dupiicative flying, or is it realiyjust you?ve got that much demand out there in the WestScott Kirby - US Ainrroys' EVP, Marketing and Sales Weli, I think it?s, as much as anything, it is a re?ection of the merger, and as Doug said in his comments, it demonstrates much value you can create through consolidation. Had We not gone through the merger, Our RASM in the West would not be up nearly as much as it is because, A) we got rid ofof our weakest capacity. With US Airways in bankruptcy we could return more aircraft at US Airways, move aircraft from the West Coast to the East Coast. For 'eXample, we moved 18 CR) 9005 thatwouid ,7 be fiying in the West are now flying in Chariotte. And some mainland aircraft as well. As a result ofthat, we gotrid ofourwea kest performing routes in the West. We also have more synergies and more Frequent Fiyers flying, ali ofthe typical merge-Ir synergies. But it is lthink a potent demonstration of how much value you can create through consolidation, because wouldn't *be'up nearly that much had'we not merged with US Airways. Garychase - Lehman Brothers -Arra.?yst Okay, thanks, guys. Operator Mike Linenberg, Merrill Mike Linenberg Merrfii -Anolyst Yes,just I guess 2 quick ones. Doug, in your response I think, to one ofthe earlier questions, I heard you mention a debt to 'eq uity ratio. You sort of threw out 2_ to 1 times, and Ijust we haven't heard'people refer to debt and equity on an airline call, guess save for Southwest, in yearswas there some sort of targeted debt to'cap ratio that you were Doug Parker - US Airways Chairman, CEO&President Yes, i proba biy should n't th row around numbers without becaUSe that number is probably a little off. But it's been a little don't have it in front of me. lt's been awhile since we iooked at it. But if you take our total debt balance sheet debt, capitalize - Contact us 2006 Thomson Financiai. Republished with permission. No part ofthis pubfication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial. us AERWAYS CONFIDENTIAL Ho A A nae-mm FINAL resescrrer the operating leases, and divide that number by the market cap of the Company, I think you come up with a numberthat?s not quite 2 to i, probably closer -- somewhere between 2 and 3 to i. Mike Linenberg -/l/lerrili ?Analyst Uh-huh. Doug Parker US Airways - Chairman, CEO 8r President For the Company, and what historically, where you seen airlines in good times get to where they start getting investment grade?type ratings, is somewhere in the 2 to 1 area. So what i was just trying to relay, is that if you look at our balance sheet right now on that basis, think you can make a pretty fair argument that we're certainly, and compared to others by the way, whatyou'd see is we are not overly levered versus oth er airlines, and if you believe, like we do, thatwe?re going to keep producing pro?ts as we move forward, you'd quickly get yourseives -- get the airline into a range that is at least on a historic basis, where airlines have stopped delevering. So, i think we're close to that, is my point, and as we look forward We're certainly going to get there. And as a result, we're just not interested in doing things like adding equity to accelerate any leverage, particularly when the stock is undervalued. So that was what was trying to get at. We certainly do look at it on a regular basis. I haven't looked at it in a couple months. But we look at it, and when we do look at it, we come to the conclusion that we?re on the right track, and we don't need to be doing anything immediately to deiever. Mike Linenberg Merrii! -Anoiyst Okay. And then just my second, and maybe this is more for Scott, as you broke out the RASM by regions. Really iooking at the domestic, what realty I thought stood out in this press release was that the profitability of your US Airways system, was it looks like it?s about 4 times as pro?table as the America West system, and it?s only, I don't know, is it 2, 2.5 times the revenue? Is there anything that you can say on maybe the strength that you were seeing in the Airways system? l-mean is it that for years this was a franchise thatjust was really operating under potential? Is there access to a huge pool of corporate customers that may be coming back to the Airways? Any additional color? i don?t want to beata dead horse here, but it was impressive the differentiai between the 2 networks. Scott Kirby USAirwoys - EVP, Marketing and Sales Weil the US Ainrvays route network is a great route network It is a better route network than the former America West route network, with strong positions in some large business markets on the East Coast. Charlotte, Philadelphia, LaGuardia, Boston, DCA, Pittsburgh. And so a richer set of markets than the historical America West network. It was an airline, i think, that had a lot ofother issues to deai with, been through 2 bankruptcies, and that was proba biy distracting and worrisome to customers, and yes, I think we are winning some of those customers back. Not oniy by being out of bankruptcy, but by having a dramatic improvementin the operation of the Company. And so i think we are winning those customers back. But it was, at it's core, Was a better route network to start with, and with a cost structure that was brought down to America West-type levels in bankruptcy, a core network that in today's environment is more profitable. Mike Linenberg ?Merri1l?ynch -Anaiyst Scott,as you look out and you look at potential opportunities, do you think that there is much more upside coming offthe East Coast than maybe what you?re able to get out of the West Coast operation? Contact US 2006 Thomson Fina ncral. Repubiished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial. US AIRWAYS Scott Kirby - US Ainrrays EVP, Marketing and Sales 1 think we expect to see continuing improvement in both areas. l'm not sure that one is more than the other. I think that the East Coast will continue to out perform the West for the next quarter or 2, just because the comps are a little easier. Aithough they are getting more dif?cult in both networks. But given that comps are stili a little easier on the East Coast network, i would expect some outperformance there. Mike Linenberg ?Merril{ -Anaiyst Okay, good. Nice quarter. Thank you. Operator insraucno'n's; Bill Mastoris,'l3ank a? New tart; ca p'ital Markets. Bill_ Masteris' {Bank ofNeW York Capital Markets l'd kind of like to start outwith the liquidity benchmark, and maybeDoug and Derekyou couid articulate. Do you think ofit in terms of percent of revenues, or is there a cash level range that you have there? Any guidance that you could provide there going forward would be very helpful. - Doug Parker - USAirwaysr Chairman, CEO &"President Yes, sure, Bill. We look at a number of measures, one ofiwhich frankly is we iook at where we areversus the other airlines-And we have all beenthrough this enough to. know that what one of the things youwa'nt'to be sureis that you have more cashon hand than your. competitors in case things don?t go the way you planned. On thatme?a'sure, we iook very strong. ifyou just took at our cash relative to. cash expenses, we're, other than Southwest, i think we are-the higheston that meastrre in the business. So that gives us a level of comfort. And the rest ofit really, Bill, is it gets back to capital structure, and making sure that you're headed in the-right direction there. But at some point when you get we're going to be very conservative in this regard?when i get done with this. We?re going to be very conservative, because what we've all been through in this industry and we know that holding cash, while it's not the best use of capitai, can be an extremely valuable use of capital iithings don?t go the right way. So we?ll err the conservative side of having more, perhaps, than an MBA's analysis might suggest you should hold. But that we think is prudent. And so think without giving you real metrics because we frankly don?t have a'ny'real soiid ones, the metrics are we look at where everybody else is, make sure we're'comfortably above them, and then having done that, and look at Our projections-going forward and our certainty aboutthose'projections that We?re going to have suf?cient liquidity, then we start looking to things like reclucingdebtf Bill MastorisI?BankofNew York Capitoirl/iarkets -Anaiyst I I All right. Doug, you've also suggested in the past that a better metric for measuring leverage is adjusted debt to and you even hinted at that a littie bit earlier in the cali. i?m wondering what type of ratio or what type of range you'd like to be, or what you're targeting? Doug Parker U3 Aimays - Chairman, CEO President Yes, Bill, l'm going to have to get back to you on that one, or maybe on the next call we'll come up with because don't have those numbers in front of me. don?t want to give you numbers thatare off. But I do know, because we have done this recently, it you look at those numbers versus other airlines, we look Very good, which gives us additional comfort about where we are. . Co nta'ct' Us to 2006 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial. Fll?illi Bill Mastoris - Bank of New York Capitol Markets Analyst Okay. And then this is a follow?upto an earlier question. I guess I was underthe impression in your bank covenantthey prohibited stock repurcha ses. Would I be cerrect? I'djust like to confirm that, because when I read the English language, that?s pretty much what it says, but I also know that many of these covenants are written by attorneys, and the English language sometimes can vary from the convention. Doug Parker - US Airs/rays - Chairman, CEO 8r President I'm going to defer to one'of my attorneys. Oh, she doesn't wantto answer. Anyway, look, 'Bill,'that my recollection as well, but none Of us have it in frontof us. Whose ever question it was at the Very start of this, I think?it was David Strine asked about that, that was what I was getting at when I said I thinkwe have agreements that preclude us from doing things like stock repurchase and dividend payment. We?re not contemplating doing it anyway, so it's a kind of a moot point at this point. But I think if we were contemplating it, we would have restrictions on doing so anyway. I know we did in things like the ATSB loan and other things that we have since re?nanced. ijust can't say for certain off the top of my head if-in the refinancing they st?ll have those covenants in there, but I think they do. Bili Mastoris Bank ofl?v?ew York Capital Markets - Analyst And that was my impression Doug Parker US Ainrvoys CEO President If it's really important to you, they are public documents, and we will -?just give Derek a call and he will tell you what's in the public documents. Bill Mastoris Bank of New York Capital Markets - Analyst Okay. And then ?nally, Doug, given this performance, would you want to renegotiate those bank lines? Doug Parker - US Airways Chairman, CEO President Wejust did, really. We did what we thought was an efficient financing earlier this year. The tail end of the first quarter. 50 that pushed offa lot, that did ?a what we thought was very good ?nancing. I don?t know if we can go do better now. My guess is it wouldn't be enough that would be worth the effort or the fees. But if when it gets to that point, yes, we'Il go look at it. But right now, we've got one that's pretty recent. Bill Mastoris Bank of New York Capital Markets -Anolyst Okay, thank you. Operator Dawn Gilbertson, Arizona Republic. contact Us 2006 "momson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial. us AERWAYS CONFIDENTIAL users-01371952 TRANSCRIPT Dawn Gilbert-son ?Arizona Republic Media A coupie questions. First one is for Scott. Southwest and Alaska both noted that they haveseen a iittle bit pockets of resistance to higherfares. Can you comment whatare you guys seeing, and is that something that worries you with all ofthese subsequent increases? - - I I Scott Kirby US Airways - EVP, Marketing and Sales Yes, we really have not seen that. We haven't seen any resistance to increasing fares yet. We?re still running very high load factors, even as we move into theoff peak periods. ofAugust and September, our bookings are very strong, so we really haven?t seen that. As I've said before, fares in the historical context, still remain iow, with the, industry up some 30%on an inflation adjusted basis below fare levels in 2000._Airtravel remains a great bargain. Airtravel remains a great even better bargain relative to driving, as the cost of fuel has gone up. So we have actually not seen that resistance to date, and i think' that?s part of the reason whyDawn Gilbertson -Arizona Republic - Media And the second question is for Doug. Doug, you mentioned when everybody was tatking about further consolidation, you said idon?t want to make it sound like we're off doing a iot on this right now. Are you doing anything on this right now? - Doug Parker us Airways Chairman, CEO President Other than talking to you guys about it? I - - - Dawn Gilbertson ~Arizona Republic? Media Yes. Doug Parker US Airways Chairman, CEO President I probably shouldjust not comment Dawn, because at some point l'm going to'have to not as much as we comment in generalities about things, l'm not comfortable commenting on the specifics that might be going on. Dawn Gilbertson ~Arizonaiiepubiic - Media Okay. i?li save my last question for after other peopie have had a chance. Operator Melanie Trottma n, Wall Street Journal. Melanie Trottman - Wail StreetJournai Media have a question about the yearago compa risen. in the press release, the ?rst graph it says the profit ofthe latest second quarter compares to a netloss of $3 million in the yearago. But then lower down it says America West on a stand-atone basis had a net loss of of $2 million. Can you explain the difference? Contact Us 2005 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent ofThomson Financial. f??klr?lhr?ki??lnl . I 1- . A - FINAL Doug Pa rker - US Airways Chairman, CEO 8: President There must have been a loss at the hoiding company ievel. Melanie Trottman - Wail Streetjoumof -Media' Which ?gure, wouid you say, would be the current one to use? Doug Parker - US Airways - Chairman, CEO 8: President Well the correct audited number to use is the 3 miilion, ifyou want to compare. That's our consolidated financial loss for last yearwas $3 miliion. . - Meianie Trottman Wail Streetlournnl - Media So, but if] word it as on a standaaione basis, America West Holdings Corp. reported a also ofXamount in the year ago quarter, it would be the 3 million? Doug Parker - US Airways - Chairman, CEO 8: President Yes, again, let me just back up on ali of this Meianie, which-is probably helpful to everybody, because it's certainly confusing- right now. What we have in these financials, i think you know as well, but I'll go back for everybody what Derek went through. ls because, for accounting reasons, America West is deemed to be the acquiring company, we have to show these combined consoiidated ?nancials against last year?s America West Holdings consolidated ?nancials, essentially. Okay. So When you'iook at the highest level, at the consolidated levei, you see that we made 305 million versus'a loss of 3 miilion. That, I think, is a number what I see the Wall Street Journai use, those are the right comparisons. Melanie Trottman Wail Streetjoumal Media) Okay. Doug Parker US Airways - Chairman, CEO 8c President But nowjust -- but iet me ?nish now so peopie aren't confused. Because we think it's important for people to understand that that?s comparing apples and oranges, we do our best to give people a little more insight into what really is the improvement in the Company. But the only way that we're actually aiiowed to do that is by breaking out 2 stand-alone companies. So the 2 stand?alone companies are America West Airlinesnot America West Holdings --. - - Melanie Trottman Waii' Streetlournai Media i see, okay, i understand. Doug Parker? US Airways Chairman, CEO President and so then we show America West Airlines, that made a pro?t of 68 million versus a loss of 2. And US Airways, which made 246 million versus losing 44. So, while we?re not supposed to add those numbers up, i think the right way really to understand Contact US . Lo 2006 Thomson Financial. Republished with permission. No part ofthis pubiicatiori may be reproduced or tra nsmitted in any form or by any means Without the prior written consent of Thomson Financial. US AERWAYS CONFIDENTEAL 371954 what happened is this Company made 305 million versus 2 Companies that together lost 46 million last year. But that's the part thatwe're not supposed to consoiidate that way, so we consolidate itjust showing the 1 . But we think it gives better information to people to show also the stand?alone numbers. I Meianie Trottman Wail Streeijournal A Media Okay. i understand. 1 other question. Most airlines are talking about the need to cut costs further, fuel is high. don?t know, you all didn?t really taik about that in the release. Are you seeing the need to continue to do that? Doug Parker US Airways - Chairman, CEO 81 President Well we'd always like to do anything we can to reduce our costs, but we have already done it. We thinkwe?ve done it. Melanie Trottman Wali Streetiournal Media Okay. Doug Parker US Airways Chairman, CEO President US Airways went through an expensive bankruptcy. lithe costs weren'tcut, shame on management. So --. Melanie Trottman Wall StreetJournai ?lMedia So do you see room to cut further? Cut significantly of signi?ca ntamounts? Doug Parker US Airways - Chairman, CEO President I?m sorry. Melanie Trottman Wall Streetjournai - Media Do you see room to cut? Doug Parker US AIM/ays Chairman, CEO President . Well we have the synergies still left i talked about. There's again, of the $250 million of synergies that we think this transaction creates, of them we think, estimate to be achievable in year i, and the next 100 come in year 2. So there?s we believe another $100 million of cost synergies through the merger. Melanie Trottman Wail Streetlournaf Media Okay. Thankyou. - Contact Us o. 2006 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial. Ilt?l I In. a - - Flitill Operator Tom Belden, Philadeiphia lnquirer. Tom Belden Philadefphia Enquirer - Media Can you give us a progress report on the upgrades to equipment and addition of staffin Philadelphia to help with the chronic baggage chailenges there? How "just teil us how that's going, and is all of the equipment that you planned to purchase in piace? And do you have enough people? Have you had enough people this summer? Creliin - USAinn/ays - COO This is Ai Creliin. l?li talk a littie bit about Philadelphia where we are. We've spent several million dollars on ground equipment in Philadelphia, most ofthat equipment is in place, and was operational for the summer operation. On the staf?ng side, we've had a little higher a attrition than we had anticipated in the summer. We're currently in a hiring process in Philadelphia, and we'll continue that process. The baggage system upgrades are not completed yet, but in the process of being completed. They should be done, think by the end ofAugust orthe first to middie part of September. So all those things are moving in the right direction. We looked at the Philadelphia stats over this last 4to 6 weeks. We did have a iittle bit of a difficuityjust on 1 day, on a night shift I think, where we were short some number of people. Tom Belden - Philadelphia Enquirer Media That must have been the day that ail the customers called me. Al Creilin US Airways - COO Welt, that?s certainly very possibie, and quite didn't do-a very good job. I think it was a Saturday night actually. And on the night shift, we were short a number of employees there, and we had a number ofdelays that were associated with that. What we did as a resuit of that, is We brought in some more management folks to help with the oversight of the operation and to move peopie around to minimize any impact. We have felt time recruiters there__.tha.t are hiring people as we speak. We've putin some programs to heip our employees sign up for additional overtime. And i think the combination of both those things, as We been looking at the performance in Philadelphia, their performance I believe continues to improve. Doug Parker - US Chairman, CEO President . Yes. And l'll just add to what Al said,Tom, and to be ciea r. We're certainly not happy with the performance that we had in Philadelphia over the last 6 weeks probably. it's not to our standards. The reason is, as Ai indicated, iargely due to us not having~~ getting enough staffat Philadelphia to handle the exceptionally high loads that we ran through there. That's no one's fault but ours. Our rationale for that is we did see higher attrition, as A1 said, than we thought we would see. This is -- at the attrition leveis are kind of new to US Airways. As you get to more market-rate ievels, you see attrition increase, as we should expect. it's something we know very well at America West. We've always had, and we just need to do a better job of getting ourself staffed. Having said that, as Al said, we're on top of it now. And i think you're going to see we've already seen nice improvement in the last couple weeks trending up, and overthe next few weeks we think we have our hands completely around this now, and it's behind us. But it's one of the disappointments of the last couple of months, is that we just didn't hit our standards there. But we're committed to providing the highest levels of customer service in the business, and we?ll get that done in Philadelphia as well. Contact US omson inancra . epu Ished with permission. No part ofthis publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial. US Al RWAYS limit-L Tom Beiden - Philadelphia Enquirer - Media Ail right, thank you. Operator I Dan Fitzpatrick, Pittsburgh Post-Gazette. Dan Fitzpatrick Pittsburgh Post?Gazette Media 1 quick sort ofobligatory question from Pittsburgh. Scott, you mentioned the ofadding to the international route network next summer. Any possibility that thatcould happen from here, or as you look at Pittsburgh, does it still not make sense for-you to add international flights? Scott Kirby .USAirwoys Marketingond Sales i Yes, 'i'm sorry to report that my answer hasn't-changed from the last quarter. We don't have any imminent plans to add service from Pittsburgh internationally. We would obviously iove to ?y from Pittsburgh to Europe, but we would only do so to the extent that the market can be pro?table. With the size of Pittsburgh hub today, and the size ofthe iocal market, and with fuei prices where theyare, it is not a service that we thinkcan be pro?table. But we would love to do it ifwe could ever get to a point where we think itwill be profitabie. I -- oan Fitzpatrick Pittsburgh Post-GGZette 4 Media Okay. Thanks a lot, Scott. Operator Ted Reed,TheStreet.com. - Ted Reed - TheStreet.com ~Medio? Doug, know you talked about the value of capacity restraint in the industry a tot, but at the same time, successfut companies have to grow. And most ofthe strongest airlines are in fact growing. So i know you have a few new some new planes on order, but I wonder going forward, how are you going'to grow? Newai?rplanes or consolidation? - - - DOug Parker US Ain/vay's Chairman, CEO 8: President Well first off,Ted,_ I'm not sure that I accept the premisethatyou have to grow, particulariy in a business rig ht now that Ith?rnk is relatively mature. The way we'll grow -.- our revenues are growing very, very rapidiy without ASMs growing, so I do believe you need to grow revenues and earnings and things like that. We can do that without necessarily adding capacity. Having said that, i also believethat probably the right path for US Airways moving forward is toaddsorne capacity, but not nothing extreme. I believe as we move forward in the coming years, you'll see us adding modest amounts of cap-aCity. It'all matters on what happens in the entire industry, but ifthe last few years haven't taught us how much'ca pacity how levered this Company is how levered this industry is around capacity, then no one is paying attention. Because the reason the industry is doing well right now, is because of capacity reductions. it's not great management. it's because a bunch of seats went away. Contact Us: xj 3 @s 2006 Thomson Financral. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial. AEDXAIAVD FINAL And that's what?s driving up industry revenues. And that's why we couidn?t, at a time when everybody is saying, gee, why don?t you guysjust raise fares, because fuel prices are going up. The reason that great management couldn't do that is because there was too many seats in the system. But as seats have gone away, as you have seen the ability to raise fares, and there's an inextricable link between those 2 things. And we're certainly not going to be the ones that screwitup by going outand starting a bunch of capacity adds. Right now, we feei good about where the system is. We feel good about our to continue to grow earnings at the existing level of capacity. And ifwe see opportunities in the future to expand at levels that cover the cost of capital, then of course we'll do it. But right now, we feel Very good about where we are, and where the industry is. We're very pleased actually to see I would argue again, to one of your introductory comments, that the mostsuccessfulalrlines are growing rapidly. I?m not sure to agree with that comment. Some airlines that growing rapidly are doing very poorly. Ted Reed TheStreet.com Media Igoess was thinking of the other low cost carriers. Doug Parker - US Aierays Chairman, President Well i of them is'doing very poorly.? Ted Reed - TfieStreetcorn - Media 1 of them is. Doug Parker US Airways Chairman, CEO President 1 of themis some of them are doing weil. But they are doing well because other capacity Went away, and they were going it: grow anyway. The airlines seeing the most improvement are the big airlines that aren't growing nearly very much. And were encouraged to see them all saying things that sound like they get it, and don't plan to be adding a lot of capacity._ Ted Reed TheStreet.Corn Media But one more thing. The number of passengers is it grows every year. You notice that the forecast is a billion passengers by some year. So the number of passengers is growing. Doug Parker US Airways Chairman, CEO President We could grow passengers a lot just lowering fares. What we need is the ability to charge what it costs to provide the transportation. And again, the way that happens is by notjust adding seats because there?s demand for travel at below the cost that it takes to provide the travel. But only do so when you can do so at levels that cover the cost, and the cost of the capital. And right now this industry is not at that point. - Ted Reed TheStreet.com Media Thank you. wvvw.streetevents.com Contact Us; 2006 Thomson Fina ncial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means Without the prior written consent ofThomson Financial. - US Operator Steve Lott, Aviation Daily. Steve Lott Aviation Daiiy? Media Wanted to ask, Doug, if you had any comments now that Airbus releaSed the new and improved A350. Any observations or comments after seeing the new design, not that you ever realty complained about the ?rst 3. But any thoughts on the new Doug Parker - US Airways - Chairman, CEO &President Weil, we're happy with whatwe?ve seen thus far. We still haven?t had detailed conversations abOut what it means for our current contract. Those will be coming up soon. But what we know so far, is it's a much better airplane, and We have a contract for a differentairplane. So we've got to figure out whatthat means for our contract now that they decided to build a different airpiane. But everything we?ve seen about the new design and aboutit?s operating capabilities are much'improved over-the prior-design, so we don't view this as anything but positive. The only negative of course, is they had to pushback the delivery schedule. That?s not a large issue for us, because we viewed these as replacement alrpianes for the most part anyway. They may end up being growth, but if they do, then that's a ways out. I mean these airplanes were coming before in 2010. So they show up in 201 1 or 2012 now, we don't believe that's an issue. - - Steve Lott ?Aviation Daiiy? Media Okay. And then on the 757 as you mentioned yoU're doing some mods to make more of those ETOPS capable. Howmany do you have now that do capability, and whatareyou targeting? Scott Kirby 'USAirways marketing and Sales We have 9 in the West network that are ETOPS capabie. beiieVe today we have 7 in the East that are E- ETOPS capable. We?re ultimately targeting a fleet, a long term fleet of18 to 20 ETOPS capable 7575 across the 2 networks. And some ofthe are iikely to be returned to iessors at the endof their life. Steve Lott - Aviation Daily - Media Okay. is that in the next year or 2, or is that more longer term? - Scott Kirby - US?Ain/vays Marketing'and Sales it?s a lit-tie longer term. Steve Lott Aviation Daily Media Okay. And finally if you couid give an update on you were doing some hiring in your cali centers because ofsome ofthe poor service you saw. Has that been completed? Orare you going to insource -- continue some of the call centers? Contact Us 3, 2006 Thomson Financral. Republished with permission. No part ofthis publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial. US CONFIDENTEAL ICLA arm e74 one Scott Kirby - US Airways EVP, Marketing and Sales We have continued to hire, and we continue to hire domesticaliy full speed. Our call volume is way, way up. The good news for us too -- so we actually are hiring everywhere. The good news for us is that the quality at some of our outsourced call centers has improved dramatically.What thinkwe found is US Airways, a little overa yearago, outsourced their cali centers very quickly. So over the course ofabout 30 days, outsourced the bulk of the calls overseas. And some of the quality issues weren?t cultural or language issues, but were experience and new hire issues. So as some of our outsourced call centers get more experience, and some of those employees have been on the job for a year or more, we've seen a big improvement in quality at those operations. We are still hiring aggressively onshore and inhouse, but we have also seen a huge improvement in our outsourced call centers. Steve Lott Aviation Daily - Media Okay. Thanks, guys. Operator Tom Olson, Tribune-Review. Tom Olson - Tribune?Review Media You may have anSWered this question indirectly eariier, but I?d like to ask you: Do you foresee any sizeable employee recalls this year, particularly in Pittsburgh? Scott Kirby US Aim/rays - EVP, Marketing and Sales ldidn't understand the question. Tom Olson - Tribune-Review - Media Do you foresee any sizeable employee recalls, recalling any em ployees, adding employees? Do any Parker U5 Ant/rays Chairman, CEO 8: President At this point, we still may. But if we do, it would be the tail end of this year. And it would be flight attendant/pilots for the most pa rt. And proba biy not in Pittsburgh, which we now have the right sized for crew bases. But Ijust don?t know exactly ifit happens in this caiendaryearor early next year, but at some pointwe're going to need to do more recalls of crew. Butl like i say, it?s either going to be the tail end of this year, or early next year. But it probably will not affect Pittsburgh. Tom Olson Tribune-Review Media Okay, thank you. Operator Chris Kahn, Associated Press. Contact Us 2006 Thomson Financiai. Republished with permission. No part ofthis publication may be reproduced or transmitted in any form or by any means without the prior written consent of ~l'homson Financial. US AIRWAYS I 960 - I .r a A i Chris Kahn ?Associated Press Me'o?ia Yes,just one real quick bookkeeping question. From yourreportyou were saying that the $3 million net iossilfrom last year is America West HoldingsCorporation. was actually just lookingat our archives. It looks like we reported a net income of$13.9 millionfor America West Holdings Corporation. Could you help me that? Derek Kerr - us Airways - CFO The difference is, ifyou recall, we made an accounting change for maintenance at the end of this year, which then reverberates back through all of last yea r. So it?s really an accounting change that we made last year that went back into the quarter, and now we reported, with that accounting change of maintenance put back into place. . . - Doug Parker - US Aimays - Chairman, CEO &'Presidenr it's merger?related. It?s disclosed in the Butjustagain, when we merged the 2 companies, wehad to getali ofthe accounting policies similar. 1 that was different that was large was maintenance accounting. America West being a smailerairline capitalized maintenance. US Airways expensed it currently. We changed America West to expense maintenance currentiy'. When we did so, we did it for the full year 2005 retroactively, and that took the 2005 second quarter from what was a very smaii pro?t to a very small loss. Chris Kahn -Associated Press Media million isthe atcurate?gureDoug Parker US Airways - Chairman, CEO &Presidenr That's the right number to use. it's a proper restated'number, yes. Qperator Andy Compa rt, Travel Weekly. Andy Cbmpatt Travel Weekly ?Medfa Had 2 questions,actually.1 had to do with the GDS segment fees. US Airways hasn't done anything on that yet. Ifmiwondering if you're still considering that or have you reached point where you?ve ruied_out,_and decided not to do that? Scott Kirby USAimays - EVP, Marketing and Saies We don't have any comment on that on a prospective pricing action untii such time as we do it. Andy Compart - Travel Weekly Media Would you have a comment if you decided not to do it? . contact Us . Lo 2006 Thomson Financiai. Repubiished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial. US AIRWAYS: I 1740(2-1 Scott Kirby US Airways - EVP, Marketing and Sales It would still be a prospective pricing, and wouid say not. Ourattorney is in here nodding and saying don?t say anything. Andy Compart Travel weekly Media On the caii center outsourcing, can you give me some idea of what the mix now will be? Has it changed from when you said you were going to go to more insourcing? Has any ofthat pian changed? What?s the mix of outsourcing versus insourcing going to be, and what's your total number ofinsourced personnel going to be? Scott Kirby US Airways EVP, Marketing and Sales The mix right now is about 65/35, and we do not have a target for that number. What we have a target for is to return to the same level of quality that we had historically. We do have a iot of metrics that we measure quaiity of our reservation centers, and our goal is to return to that levei. Whether we do it with more insourcing or by improving the quality at the outsourced operators, that is ultimately our goal. Andy Compart - Travel Weekly Media And 65 is which? Scott Kirby US Airways EVP, Marketing and Sales 65 is current. Andy Co mpart Travel Weekly Media is the insource Scott Kirby US Airways EVP, Marketing and Sales 65?is out, right now. Andy Compart - Travel Weekly - Media Okay, thanks. Operator Dawn Gilbertson, Arizona Republic. Dawn Gilbertson -Arizona Republic Media just have a question on the changeoverto the dividend miies and the new website. I heara fairamount of grumbling from a lot of your Frequent Flyers about how that was handled. And also that there seems to be a backlog of peopie getting back to them from US Airways. I mean, some have gone so far as to say they sense a callus attitude. Can someone address that? Contact US 2006 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial. US 371962 Scott Kirby US Ainzvays EVP, Marketing and safes Yes, we did -- we cut over the website, and the Frequent Fiyer system and we did have some problems and some bugs. ?t mostly worked well. We?ve been continuing to ?x the system issues as we've gone forward. We have a new reiease coming outAugust 3rd, actually,that will fix a lot of the remaining bugs, we think, that are in the system, or make it easier to navigate the site. Some of those aren't bugs. But the ?xes that we've already put in place have got the website i think functioning pretty effectively now. We'have? Set 2 records this weekfor record revenue on the website, so the bookings are strong, and have recovered nicely from a little dip that we tookat the beginning. - - There was some customer confusion. We did a poorjob, I think, of communicating some of the changes and of making it easy for our customers to know what had changed. And we got backlogged with both calls and e-mails in reservation center trying to deal with those cails. Once we converted the website, we expected our calis to go _up by about 50%.They actually went up by 200%, sowe overwhelmed. the caii center. We are now back to a more normalpace, in terms of asked that question. We isto answer every e-maii on the day it comes in. And then-to go to the? back of the queue and work through the backlog. So as of today, we are getting through about 2,000 e-ma'ils perday on the backiog, and hope to have it worked down to 0 shortly. I I Dawn Gilbertson -Arizona Repubiic Media Okay. Thank you. Operator I . .. And there are no further questions. At this time, i would Iike to turn the call back over to Mr. Parkerfor any additionai or closing remarks. - Doug Parker - US Airways - Chairman, CEO President Okay, weli, thanks. i don?t think i haVe much eise.'l'm sure we've stated everyone's time and questions. I would end with saying what a great day this is for US Airways. We?re very excited to report this leve?,of pro?t, and particuiarly to sharethat with our employees through the pro?t-sharing program. That has the effect of increasing our expenses in the gUidance Derek gave you, of course, but that's the kind of expense we iike to incur. it's driven oniy because profits are up. So it?s a good day for everybody here, and we're happy that you listened in. And ifyou have any further questions, piease give us a cali. Thanks a lot. Operator This does conclude today?s conference. Thank you for your participation. I I Contact Us I ?93 2056 Thomson Financial. Republished with Permission. No part ofth is pubiication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial. us AIRWAYS I nu My mam FINAL TRANSCRIPT an EamingsConfere Cal DISCLAIMER Thomson Financial reserves the right to make changes to documents, content, or other information on this web site without obligation to notify any person of such changes. In the conference calls upon which Event Transcripts are based, companies may make projections or other forward?looking statements regarding a variety of items. Such forward-looking statements are based upon current expectations and involve risksand uncertainties. Actual results may differ materially from those stated in any {onward-looking statement based on a number of important factors and risks, which are more specifically Identi?ed in the companies? most recent SEC filings. Although the companies may indicate and believe that the assumptions underlying the forward?looking statements are reasonable, any ofthe assumptions could prove inaccurate or incorrect and. therefore, there can be no assurance that the results contemplated in theforwarcl-Iooklng statements will be realized. THE INFORMATION CONTAINED IN EVENTTRANSCRIPTS IS ATEXTU AL REPRESENTATION OFTH APPLICABLE CONFERENCE CALL ANDWHILE EFFORTS ARE MADE TO PROVIDE AN ACCU RATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS. OR INACCU RACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS. IN NO WAY DOES THOMSON FINANCIAL OR THE APPLICABLE COMPANY ASSUM ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WES SITE OR IN ANY EVENT TRANSCRIPT. USERS ARE ADVISED TO REVIEWTHE APPLICABLE CONFERENCE CALL ITSELF ANDTHE APPLICABLE SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. ?2006, Thomson Financial. All Rights ReserVed. Contact US (.5: 2006 Thomson Financial. Republished with permission. No part ofthis publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial. US AIRWAYS CONFIDENTIAL 371964 US AIRWAYS CONFIQENTEAL Analysis of American Airl?nes Standalone: Plan ?svemre lhiziarivm' .n 3 US AIRWAYS CON FIDENTEAL $1.2 in Raven-ma initiatives Are t0 AMR Plan Faur d?'femni {anagram 05? revenue Esmerme highlights-d - Data?ed mo?ukwera rm: pr?widad in US Airways-to ua?datathanga A U?kthc ampm below and a ?30 minute Time pmiod for ques?am Revenue impact, Category ?escri?ption 5M k;an 3.3595335; m? Ermrsiz?mmning ?231%: ML $115 Agreem mm 11 C?d?sham out! iicsnm?c mM-itmv with iI?i?lm I 5220 Gm?? and Re?giun?l (?mm durum; whim omknized areProds?? ?mutt hapvwm ems in 13513?? axwii?nm- A En harlcermms $1,253: :q ?anbktam?zmcm In: US AIRWAYS initiatives Do Nut Address Network Structura! Deficiencies Only a Merger Bees I nawiiecf, maxim, JEA?sand wig-sharing don't AME {ass of marina: relevance in the Eastern US AA's undarlying network and in dcf?ciunc?en ramaiu unchanged in newbusine'ss pl?an ,1 x? 5 Modeifng Ara Revenue: mi-tiatiues Indepen?em and Additive "2 AMR {gym-ed an $1.25 in inureased ruuanua initiatives? cne initiative at a time - If in?iativezs are n54: independenttha revenue waive wek? bu: overiappingami in con?ict Mum?: 5.24m u: Ararwa Gin-V:- Srrgirn Ii U8 AIRWAYS CONFIDENTEAL #1 - ioint Easiness Agreements - AME $3 imacming in r?veniue vafus from ?01m Business Agreements "We expect to malim most cf this in 2-011" Ef?j?ma Earning Cm? . Umiear what bene?ts have beamc?iawad wiI?i be achieved No modalwm pr?vided - . AME an In case waning: aim to WM: 5 other 185% aim spoaiimg up in a zen: sum anvimzsmem may be: Inqmnienml gains . - - - Joint Bu?mss Agreaments-am in taintekpo?tsd to mmvibute $475 mTlFipn to Ma?a? lnclemwijalm the base wdevshaxa Via hie aimady achieves: . Mos-tibithe Vafue has bum aftribm?djn tins: mimonshn: w?h EA Mdngi - Sabine samwnm?omm Men? '1 Cguid a relatia?s?ip with BA Mali-y ?emm?ed $59316 $6336 m?l?m Enyaiu? peryoar . . . - kw-Yd; 21$ A: Mtg: wkim ?5-311 Ami: nmvx?ff ?5559' US AIRWAYS CONFIQENTIAL til mini: Business Agreements Structurai Mammy: Versus Team Nut Resolved in Stand-None Flam Large East coast gateways building a bridge to 83 than aw smaherm medium tn sized and not an e?m?v?e part of the network todayis a win fornneWa?'d and American and an?! mimnm pro?tability if (amazon-:1 whims?estanatmmiiom a'ml err nm served by B?f?sh Airways - served by British Airways m? Mm? m. USAERWAYS CONFIDENTIAL #2 - jetBEue Co?ashare AA Estimate - US Estimate 310 to million Value wili be n??f?cui: tn achieveand sustain I?:andnm banked ?ght sehn?aie V?uegwld er adv. We: Rm?isl noavuvellgm?w man kets as 1-1: [blue expands 0 Ammicahwouidhelefl?, srcm?aa? Americanamijed?ue as am to (wdlnutem?ldm, nevmue,or ?in?ating; - ?aming models mum ?vmuntfor "3 PK tanker axe 53mg :he? v?ue cf the mlaamashlp - Adjugted fur size, American?s forecast is 1-352: Maser than intumai pf its Unitg? . . US Airwaysjtinimdm?ines Amarica? Airiinasfjet?iue . . . . a . . (un?de nubg?amu r' . a US AIRWAYS CONFIDENTIAL US AERWAYS CONFIDENTEAL ?3 Gauge - US Airways Meihodolagy Future AMR Fieet Assignments With $720 in mvenutx gaugas dumng are mast Important AMR initiatives qu made?; details mm provided and Us Aimaysdamloped a "hast gum" antht: mew ?eet ass-{amateurs to 5255333 ovamll n?skn of achievame nt Whl??e them are munipie gamma: scenarins we concluded reaufts wad Emmi nv ?5 AMR Nanmz-Eod? Flea! Mi [5 - US .?i?sUzw?m on rivng Assigemlem 3:1 Kls?am mmved liq-uracil): rag-Jam?! ihe?ylng i :2 th as Large ummumwmm J. 53 mm, 1mm 1% Large 521: #8 With-6'6 M?wg?l?run?t?uhtr?fwm #3 2 494305339 upgaugedtu 13mm as Wxth. e3? cunziad for i1: #3 57 "?573 2mm: ehugms mamas)?: ?5 um 23 U?un??aunwd far in? to $6 Sinai! Ts ream: I .Xk-Kc? Mm", #760: 9:91.449: M551 us AIRWAYS CONFIDENTIAL #366139. US A?rways M?thndolagy C?icula?an of MarginaIIGrow?h RASM Umkumznding what Ram n?w ma rm: and capacity wiil meter the system at crit?cn? to vaii?ating the ma?a? - little: Mormu?on was pmvidad RMM . Max'gin?? RASMs am amudm he adduf at Eevafshalnw lhe Euwm'tlez: of ?ying tnday for in Tm) mmwusmams '1er ma ?rm, a; mm mng?wg #2 Midfii? 25% Dumevkt.? 90% 25% ?31 Damesth: 33 Adde Fiyi?g we arm 9am? Added ?ying? ?aam?w 5K wand Me?f?n?-w-s 31-25,; ,?Wmfw M13 25!! mm us?AA?oor'gozzi US AERWAYS CONFEDENTIAL #3 Gauge Structural Network Weakness May Undermine: Madeiing Natwork planning nmdnia were amazed to n?nw niriima management to m: nagz?he complexity of larga ?ight whedu?as - speci?caliy to a?aiyzo the attracting nemork of a. singis ?ight schedqu change Mariel; work My Invoking at the "q un?ty or? service an airlinr: affers? r313! Eve to ?Mr airiine and the true arigfn and destination 9f the pamagers. The modem consider the rhuusa of flight; o??dzrud airlines: amund the worl? AME use; its interns! RFS nafwork mudal this: mod-a! k2; examph: was used to measure the thousz; mi; of new connections created by a merger of U3 Always aw Amrimn. This mode! was not used to datarmina the i?mpikzaziom of regional aircraft A, manual modelwaa swam! to dezarminq the wine of aircraft upgra?es wing histoin examplaa. of of iargar raglcnaf fats its unclear if hlstoric cha ngos on averagtr in amtan represent what AMR to Emplamant 5??.ch Jun-m. 553.: ??amed ?mm in ihwb?r?arm'z?varw: us AIRWAYS CONFIDENTIAL ?33 Gauge Positive thanges -- Low Risk .. American Ea: ma it; ?ea-i ?9 aptimim airgta? and harm! match demand to capacity - Chang?s con?axsi?: with ind ustry practice ., Capacity ntgu?ql a Low risk Geared around repiacingovemm mainline Jam Inc! regionm is?; . I Asm Risk Prams? in, ?cwngaugz Mainime La rate Ni? Upgauge?wiaygw Regions-i Jew ijpgzeyga Larger Wtdebmiies 5-star. 2mm; x- 6492}. Sven-w: 13?- (Dr-Mum! Schindzn?hwmiowmhvavm m: US AERWAYS CONFIDENTIAL 33 Gauge But A large: ta Su?sm Want Solve Structural Network Problem American RASM tmiis United in Buffaln Chicago marknt- Larger plane: Wm nnEy widen the gap - Large N15 an average Mp AMR but wontwm natwork sirurtura? issues ?$1th I 51;: 5 Daiiy Fiigm's 26 Daii?y Rights 49 Daily Nights Syn-wk 76' 365- awwaxnv9$em - gamma mgwa: 31 lwm-fo? 12 US AIRWAYS CONFIDENTIAL #3 Gauge: AMRS Other Changes - High Risk Capacity Growth pian Idav?hms from industry {muting wish :2 M35 rats mtribumd w?h a need to maintain is share at current laws fur ?mlevance" More capacity, 20 percent by 2913? ml! be HASM d?u?a and industry destabiliaing 90w ngaugu to Sma?er ?armwhoc?m Domesticwarmwbodv inter?miom'f ?armwhadv?rowth irrtes'nationahwd?mdv Gmwih dam 899'.- 911.5%. Risk Frame PM Waste: :m?ammnluhisma #31- New ?eet mix In iota? will luwer RASMs by approxima?eiy n1 percent 5312017. 209'}; cf ca many Mil he} Mam? or Sr?zqunnaies Pian awumac aircraft options are exercised . We estimate: 1125? narrowbedwnd 28 wide-hwy Manes wi? be used {or growth verswz today i Distribution '91" ?neneme HASH Cummenl? :1 ?nchaugezi $53 M95 1.00% Ligrgauge? mm mm my; N55, (swanky \vi? diinm? mm by 5 Minn Bawwga um! ?ying 26.3 335;: (2 mm imam: women, we mum mm . minds :a ?aw Feequa-ucaus: 40.3 gem a 81% 20min! :94" hmimdl: ?3 Marker} I mum Wv am?/indumv f- new mm rm: mm. $5.9m- 3 With Wright mandmeht 9 5,99"; US CONFIDENTIAL US AIRWAYS CONFIDENTEAL #3 wnirbus A3195 are a high unit cast airpiane t'o cemyete in most markets is {Wasting 13,313; ??ii gs pa" in their ?ner pian Mast airlines have considered the economics of the and am ?than?ngg largar 32756683; DI. 3737h503, WN 2537800, US A321 U5 Aim'as's operates 265 three vamian 0mm Aszo ?amily - the @3945 1:332 fem efficient with the highest Brunkevcn Load ?acic2r~ US Airways has me: many A3195: in i'?s ?eet wdav - Wham" 'ENg?l gaugersanw?mkes lower {mammal Breskeven Awnaf: ??ipiu? Margiuamk?m - A3529 33% 31% (must-[unfr- wombnm Ivy-van: #3 - Growth Pian Reverse industry Capacity 'frenc?s Th5 ind ustry has mtinnalimd :apxiciwsinca 2.395, picm wi? disrupt that momanmm - Growth may be madm?a bulk up aga?nst companion km a. merger is a Tower risk shermim may react to AME: pians; with their own anhancad growth pians destablfizing Industry leganvASh/?lsgn E, Indusuymargers and capacitniiscipiine Mum?s plan haa' putative? i expand: margm ta disrupt the new ?ynamlc .9. i ?w Industry CAGR: mm AMR ?74RNA 21-14 :91: ms 29:: uthb-nub US CONFIDENTIAL US-AA-00790228 US AIRWAYS #4 Product Enhancements 5315M MAT: Amr-m aka-ne- if It [s not dear which apaeific product enhancements drive the aggwgam revenue increase We modei was pmvided for than initiativas; uncEear if revenue achfevable a: sustainabia as oehen wept anti change product attributes Pmaium: enhancement; maybe madad h) maintain existing revenue: and ha justi?ad in Hm manner Main Cabin Erma Exampie - We can datefmine that {he cha age win spili $400 in annmi revenue by reducing mn'cwbody ca pacitV?SE-?? parcenL We take no pasixion the econbmics benefits mam? tha expect that thwy wiK Em small 957332? 5335) mm SOY 2612? ?ir?r?f 132 195 $0 65!? Seats (imam! 5 1G is 3? Rwemies 5 pm 1213 22 0M MM 3 am Anmu? manna?? 2mg: 85K 588K ?rs: in km Rwuu ue pear Dept: 2mm $1120 $1825 $660 $670 Ctm??rnlle- whin?un ?armm AME Moda?ng: Domestic RASM Growth Achievability I Industry [mm factors nuw average 53 gercant laaukxg little roaminr incremental} passengars Legacy Dukiook: lner?eaaing aim of bu? no? overall numbn: of Manes AME Outinak: Decreasing size 0f pfxnas and axx?ngthe-auam? number RASM growth mow dl?icu?t bad factors thaf eximmfayand are further pressured by smalfer p?ama 737-9300;) mier P?w Year him! rtor Myriam-'hhinnw mnr?i??lm?KMrayMla: 75- Un?e??m Mirage: 10.554, WM 737-T??fo 73mm Jam-c. Mai? 18 day ?a mm: Rapvo Urdu/MW WP.er an)? :sxzumammv 3?92?1w :93: US AERWAYS CONFIDENTIAL US AERWAYSCONFIDENTIAL AMR Macro Results Are Aggressive - Dave Phahn, Dave Phahn 5w-Yo; .lavr?c-m ?was Emmy am if! US Airways Assessment cf Revenue ?n??atiues . The: 'vl an . cl+rep! acement amen Ms wuh new 539 gar ms also wit! Rely ha v2 vai In at much 1e$??an a dawugrade O?wwng WWMgaim-amgww?z?h?3- r? 4% an actount foe $0 samenwf 21117 . -- au?i?mlon?tamlmhefum appinidati was aw?: necessai alnmin mum hm may use! remit In MM immcum m3. Barnum: Leda-511mm? enhancer ELEM but a 8&ch of the MR ?mm ate based on GS .A. lw? t; ?X?Xpei?mwf?wv . . . . .. and Mei {admin me c'm?mof percen?mpmi?gmwm. Rea! media increase mm poims per gram In the (are of a of Y3 paewnt Airways ekpelissnte a I The use,oismatmmlaneswawym ?rmvc mug. ?4 um. immvl'rfs indqu trends, fuels an with (if umewin AMI: was, and makes Ram gravier harem achieve dwno his/h if load have; 3 8 have? vii/?53min; 1: 5m US US-AA400790232 ?ixx?. Analysis of American Airlines Standalone Plan Revenue Initiatives Confidential Subject to Non-Disclosu re Agreement 1 US CONFIDENTIAL . $1.2 Billionin Revenue-Initiatives Are Core to AMR Plan Four different categories of revenue bene?ts highlighted Detailed models were not provided to US Airways to va lidate change - only the output below and a 90 minute time period for questions - Revenue Impact, Category Description sm Joint Business FuilvimplementingJBAs with and JAL $115-- -. i; #1 Agreements Id. t? dh i'th'tBl S110 #2 Codeshare ECIpl'Dca omes IC CD as are Wl je Lie $720 3 Gauge and Regionai Gauge changes a New optimized fleet $315 a #4 Product I Product Improvements to improve urn-flight experience 8 Enhancements $1,260 Understanding the analytics behind these initiatives crucial to validating their value Source: American Airlines Busin 955 Plan AF US CONFIDENTIAL Initiatives Do Not Address Network Structural Deficiencies Onlya Merger Does - A new fleet, growth, product, .lBA?s and code-sharing don?t address loss of market. relevance in the Eastern US underlying network and its deficiencies remain unchanged in new business plan Confidential Subject to Non-Disclosu re Agreement \m . Low Share High Share Source: American Airlines Business Plan; YE 4011 Superset Domestic Passenger Revenue w-s mews USAIRWAYS .- 1 -US-AA-00499722 AMR Modeling Are Revenue Initiatives Independent and Additive AMR layered on $1.26 Bin increasedrevenue initiatives? one initiative at a time If Initiatives are not independent the revenue value could be overlapping and in conflict increase Passenger Displacement Costs increases Passenger Underlying Demand I Mainline Planes Downgraded Codeshare Main-Cabin Extra \g *Smaller i i Mainline Planes . Source: American Airlines Business Plan 4 More La rge v/ Growth Planes CodeShare JBAs Confidential Subject to Non-Disciosu re Agreement ITS: A ii RVVA VS US AIRWAYS - #1 - Joint Business Agreements: AMR is forecasting in incremental revenue value from Joint Business Agreements "We expect to realize most of this improvement in 2011"? - 7/21/2010 Earnings Call Unclear what benefits have been achieved or will be achieved No model was provided AMR also expecting $85 in cost savings due to the JBA - Unclear from what - With other also spooling up in-a-z'ero sum environment maybe no incremental gains Joint Business Agreements are in total expected to contribute $475 million to AMR - lncrementai to the base code-share value already achieved Most of the value has been attributed to the relationship with BA Confidential? Subject to Non~Disclosu re Agreement Could a relationship with BA reaiiy generated $500 to $600 million in value per year? Code-share? . -- . Validating either the historic benefit or remaining benefit from ls Impossible with the information provided Source: US Airways estimates of LHR reven me using pubiically available data 5 . . . [3-3 RVJAVS US AIRWAYS CONFIDENTIAL I - I #2 jetBlue Codeshare -- AA Estimate -.- US Estimate $10 to $20 million Value will be difficult to achieve and sustain - JFK will have longer elapsed times for connections driven by different terminal locations andnon . banked flight schedule . - Value could erode over time in non-overlapping markets as jetbiue expands American would be 1 of 17 jetBiue partners - access to jetBiue seats maybe limited 0 American and jetblue as competitors will not be able to coordinate pricing, revenue; or scheduling - Planning models cannot account for the factor" in accessing the value of the relationship 4* Adjusted for size, American's forecast is 45x larger than US Airways internal 'estimate'of its United relationship Confidential Subject to Non-Disclosu re Agreement US Airways United Airlines . AmericanAirIines /jetB ue Est. 2003 Est. 20.12 incremental Value-$80M- I I I incremental Value: Flights Per Day: 3,298 I Flights Per Day: 98 $66 Per Flight- - $3,014 Per-Flight - Source: US Airways internal estimates of United codeshare agreement, net of displacemen t; American Airlines estimate ofjetBlue codeshare value from Business Plan Model; Flights per Day from Dilo peak doy July schedule, flights exclude 36 overlap markets 6 US All US AIRWAYS CONFIDENTIAL - #3 Gauge US Airways AssessmentMethoClology . - With $720 in revenue gauge changes are the most-important AMR initiatives - Few model details were proVided and US Airways developed a "best guess? on the new fleet assignments to assess overall risks of achievement - - .AMR Fleet Facts - . . .- - . US Assumption :33" #1 120 Small R15 were removed 1 . '120 Large-RJS replaced the flying . #2 With 63 Large RJs unaccounted for in 1 63 replaced by Large R35 . #3 With 48 Mil?80s unaccovnted for in ii 2 48 NED-805 upgauged to 7313005 I #4 With 57 7385 unacmumed for in #3 67 757sdoanauged to-737-8005 #5 whale 757s unaccounted for. in #4 7 19 7575 dowhgaugedto A3215 #6 . .. Q17 A321Ts replace B767 Growth planes are left over 126 units Mix of A3195 and A3215 Source: American Airlines Business Plan; US estimated equivalent aircraft based on EOY counts 7 . . - us A imam US AIRWAYS CONFIDENTIAL #3 Gauge US Airways Assessment Methodology For Growth RASM Assessment of International Marginal RASM 2011 Forecdst. 10% worse than other Source: American Ain?in as Business Plan 8 %of I . index ASMs #1 Top Longwi-laul Markets 100% . 57% #2 Ali Other Long-Haul 80% 43% #3 Added Flying . 70% Understanding what RASM new markets and capacity enter the system at critical to . validating the model - little information wasprovided - - At a macro level more capacity or larger planes tend to dilute RASM 2011 Forecast - Assessment of Domestic Marginal RASM of . Index #1Top_5Q% Domestic 100%. .. #2 Middlei25% Domestic I 96% I #3 BottOm 25%-Domestic 79% #4 Added Flying A: . 70% 50% Confidential Subject to Non-Disciasu re Agreement 25% 25% A ll VS US AIRWAYS #3 Gauge - A larger RJ toBuffalo Wont Solve Structural Network Problem - - American RASM trails United in the Buffalo Chicago market? Large'planes will only widen the gap Large on average will help AMR but wont solve network structural issues Con?dential?Subjectto Non-DiscleehreAgr: :1 an: 5 Dai'y High? 26 Daily Flights 19 Daily '23 Daily Source: Diio Mi July 2012 Peak Day Schedule Southwest. jetBlue and others also provide competition in the marketplace 9 - . . [F's Al CONFJDENTIAL . I I #3 Gauge -- Structural Network Weakness MayUndermine Modeling 0 Network pianning models were created to allow airline management to manage the . complexity of large flight schedules - specifically to analyze the cascading network implications of a single flight schedule change Models work by looking at the ?quality of service an airline offers? relative to other airline and the true origin and destinatidn Of the passengers. The models consider the thousands Of flights offered by all airlines around the world AMR uses its internal IFS network model - this model for example was used to measure the thousands of new connections created by a merger of US Airways and American. This model was not'used to determine the implications of upgrading regional aircraft A manual model was created to determine the value of aircraft upgrades using historic exampies. GiVen the addition of hundredsof larger regional jets its unclear if historic changes on ayerage in anyway represent what AMR intends to implement Confidential Subject to Non?Disclosu re Agreement Determination ofthe incremental RASM of upgrading small R15 to large is a key capability of networking models Source: American Airlines Business Plan #3 Gauge AMRs Positive Changes - Low Risk with High Value Capacity neutral Low risk - American is making adjustments to its fieet to optimize aircraft deployments and better match demand to capacity -- Changes consistent with industry practice Geared around replacing oversize mainline jets and undersized regionai jets Confidential Su bject to Non?Disclosu reAgreement Source: American Airlin es Basin 855 Plan 11 ASMs Risk Profile Impact Downgauge Mam'me to ~48 Low Risk RASM Positive Large Ris Upgauge to Larger 38 Medium Risk CASM Posmve Regionaiiets RASM Negative CASM Positive Uggauge .to Larger 28 Medium Risk WidEbOdlES RASM Negative 18 Low to Medium Risk Initiatives That Produce Value ?Matched By industry Peers US RVVA VS US AIRWAYS CONFEDENTIAL #3 Gauge AMRs Negative Changes High Risk With Uncertain Value AM R?s plan deviates from industry practicewith a high assumed growth rate attributed with a need to maintain is share at current ieveis for ?relevance? More capacity, 20 percent by 2017 will be RASM dilute and industry destabilizing Risk Profile Source: American Airlines Business Plan 12 ASMs Impact 3 Downgauge to Smailer I I HigherUnit Costs Narrowbodies ?48 MEdmm RASM POSltiVe . as. Domest?c ?arr-OWbOd-V 178 High Risk RASM Dilutive - 2 Growth International Narrowbody Growth 78 High Risk RASM Dilutive 'ntemat'onalw'demdy 178 Medium Risk RASIVI Dilutive Growth . i . . - - High Risk Initiatives us? All RWAYS .US AERWAYS #3 New fleet mix in total will-lower RASMs by approximately 4 percent By 2017, 20% of AM R?s capacity will be new flying Markets or Frequencies Plan assumes aircraft options are exercised I We estimate 126 narrow?body and 28 wide?body planes will be used for growth versus today 5 ASMs Distribution Increase RASM Comments in ED Unchanged Flying 98.8 48% 100% . 2 Up?gauged Flying 38.5 19% 21% 94% New capacity will dilute RASM by 6 3 points Down?gauged Flying - 26.8 13% 107% Reduced capacity will increase RASM by - 7 points .D New Frequencies 40.2 20% 80% 20 point reduction in capacity 33 and Markets . consistent with forecast AMR/lndustry performance in new markets . Total 204.2 - 95.9% If; With Wright . . I i . Amendment Impact 95.0% Excluding the value of revenue initiatives, AM R?s-revenue gap to the industry is estimated to grow by 4 points if the current plan is impiemented -- Source: American Airlines Business Plan 13 - I 13-8 US AIRWAYS I 14 #3 Airbus A3195 are a high unit costairpianetocompete-in most markets AMR is inducting A3195 to ?fill gaps? in their fleet plan Most airlines have considered the economics of the and are choosing larger replacements - DL 7374300, UA 737-900, WN 737?800, US A321 US Airways operates all three version of the A320 Family the A319 is the least efficient with the highest Breakeven load factor US Airways has too many A3195 in its fleet today marginal RASM is 73%, breakeven for up?gauging to iarger gauge aircraft is much lower "incremental Breakeven Aircraft Trip Cost Marginal RASM A319 - A320 $768 23% A321 -- $1,864: - - 27% US Airways margins reflect the more efficient economics of larger gauge narrowbodies Confidential? Subject to Non-Disclosu re Agreement A319 A320 A321 Other than where thelonger range and take off power is required A3195 or similar BoeingAircra?ft no longer "make economic sense in the US ITS All USAIRWAYS CONFIGENTIAL #3 Growth Plan Will Reverse Industry CapaCity Trends Legacy ASMs, 320 a 800 730? ?60 134-0 -- 129 700 I Industry mergers and capacity discipline expand margins lnduStry I .. I I I - The industry has rationalized capacity since 2005, plan will disrupt that imo'mentum' growth plan has potential to disrupt the new dynamic CAGR: 4.2% -- Planned Growth, 333 Confidential? Subject to Non-Disclosure Agreement 680 2005 2006 2007 2008' 200?? I. 2010 Z?il ?2012 2013 2314 V- 2035? 2.016 23317 . capacity-discipline and put pressure .. - - Even-before any competitiveactions, growth will undue-much of the recent .15 RVVA US CONFIDENTIAL us?AA?oo499734 #4 - Product Enhancements - manner Main Cabin Extra Example incremental dollars per flight? :5 - MDSG - It is not clear which specific product enhancements drive the aggregate revenue increase - No model was provided for these initiatives, UnCIear if revenue is achievable or sustainable as others adopt and change product attributes Product enhancements maybe needed to maintain existing revenues and be justified in that - We can determine that the change'will spill off $400 in annual revenue by reducing narrowbody capacity 5% percent._To pay for the lost revenue AA must generate $670 Confid ential~ Subject to Non?Disclosu re Agreement B738 8757 Total EOY 2012 Aircraft 182 195 80 457 Seats Removed 5 i '10 6 7 Revenue Spill 120M 220M 60M 400M Annual Departures 289K 214K 85K 588K Breakeven Revenue per Departure $420 $1020 $660 $670 Source: American Airlines Business Plan 1 Us us AERWAYS AMR Modeling: Domestic RASM Growth Achievability Industry load factors now average 83 percent leaving little room for incremental passengers - Industry Outlook: . increasing size of planes but not overall number of planes AMR Outlook: Decreasing size of planes and increasing the overall number - RASM growth more difficult with high load factors US Airways RASM Growth by Historic Load Factor 7175 replacing small Ris 731-900 on order onorder - Confidential - Subject to Non-Disclosu re Agreement Prior Year Load Factor RASM A Over 80% . 8.7% - - . A321 replacing 8737s Under 80% 13.6% Avera?? I I I Switching orders-frOm 737-700 to 737-4300 Source: American Airlines Business Plan; A4A RASM Report; US Airways FPS system, YE June 2012 performance vs, YE June 2011 1 7 I I 11-3 RVVAVS US CONFIDENTJAL US Airways Assessment of Revenue Initiatives - Without AMR models to validate the input we can only consider the output, US Airways actual results from similar changes or standard industry practices - It remains unclear if the output of the model represents incrementai revenue or The down-grading of mainline flights to large regional jets inherently has the highest upside to AMR - Replacement of small RJs with new larger RJs also will likely have value but a manual model was used to determine value versus the internal scheduling model designed to manage this complexity Offsetting gains by addition of efficient large are growth ASMs. Profitability of growth could not be determined and account for 20 percent of capacity by 2017 growth plan appears designed to maintain its relative share of the market over the long term 0 AMR assumes industry capacity growth consistent with its growth plan these assumptions are incorrect and if implemented will result in negative results for all US airlines AMR models only looks at total results - it appears impossible to tease out the incremental profits of specific new aircraft added to the network to confirm its value Confidential? Subject to Non-Disclosu re Agreement Product and BA initiatives maybe necessary to maintain current RASMs but may not result in RASM improvements Domestic code-she re will enhance RASM but a fraction of the AMR estimate - The use of smaller planes on average will drive up unit costs versus others -- appears inconsistent with industry trends Source: American Airlin as Business Plan 18 US AIRWAYS US AIRWAYS CONFIDENTEAL Revenue qua?ty: ?Mcmg strategy dis-synergies CONFIDENTIAL CONFIDENTIAL Cei??nmiel Swain-Kim: Mascrial lor- unfined; nrouidee pursuan: and the we ufwhirii c: strives: sumac: m, the express team and commute ofthat cenain Monv?isd?suf? A?iceauer-s meted amfAu?ml '33. 231.1. between men cmmrarian and us Ainng smug. 1m, ramiug, the im?mmadon in wovidm by AMP. us Airways Group. inc. Executive summary revenue synergy estimates include an adjustment for pricing changes not captured by the modeiing exercise I Unlike all other domestic network carriers, US employs a unique pricing strategy designed to optimize revenue from its niche market position . US focuses on high connectivity across smaller locai market whiie other iegacy carriers operate in iarger markets and carry more local traf?c 4' pricing strategy cannot be scaled to a large legacy carrier When AA and US combine, DL and UA will target the $5.68 in AA domestic non-stop'markets to force pricing alignment - - *1 Adopting a more typical network carrier approach wouid reduce revenue of the merged carrier by creating a ~28% net revenue dis-synergy 1' lmpiicit in M's 10% revenue synergies "quality adjustment" is an aggressive assumption that the combined carrier would be able to deveiop new offsetting pricing strategies American Airlines CONFIDENTIAL barman AME cormraeinn and 95 Jimmy: Gram. Inn, MIME-Q, is th: Kaila provided by AMR an USAirwkavs Group. inc ciumestic network carriers Less restrictive Advance Purchase rules Lower abso?ute fares in some instances Con??nn?tial Evaiuadan Masada! {alrxm?iner? (Hm/ids": rims-49m and the MM which a shic?v ru?aviu: w] exprw. terms anti commons ohhal cumin Nan-Dis?mure ?gmeman? damc' a: cram: 33, 291:! approach to pricing on cementing traffic ciiffers significantly from the other US successfuliy targets higher yieiding traf?c "dose in" demand in other airiine?s non-stop markets by offering cheaper fares on its own one~5t0p itineraries ww-sm zm~$da3 ?51: - gm 2m; 3m? s-w Lower a 331.31%? 1m? 5?9. yaw?? Less anmlve ma MAP mg La? Rum$4481.38? ?ve APE $555 0.4% Fm $512 Lower at Walk Up 349-2 mm mm $566 32. $362 Lower Km W: 3333-? atwmx Up rem 52% $736 ZAP A?d?d? I m. ?03 we Lower 31 2MP farm as? use 24M 5546145? 5479 {Lesa Rasiric?ve APs urn 21.4.9 gm 2.3384 Low uzwmx Up 36-3-1; ?:78 I 9:31: Win? @5424 m? S358: @6163! No?e: Round-trip core base fang; AP advance purmnse requirement; BAP Icwes: wan: Am Tare American Airiines CONFIDENTIAL 22M: ma 34% mm: amp was: E-mi? "551? $3351 33% m2? 3m 2m? $3.93 55442: mm $5253 mm @153 mg} ?5223 2733 m? 3m. Fri. and! ?awimam aw Eeh??umfaliwduxdon Material (meuafimz?il nwuidw wry-dam mi and the um afwh'th sa?u?y vat-39:: erynn 1mm: {mi commons 01th? ?main twombiscimmc Agrremen! dated a: c? Aim-51 201;! Lemetn AME formulation am! 51mm, mm, relating tame: in bus aprovianc WAMR Carp-arm'me US (stamp. Inc. CA connE-cting service pricing structures are generaliy more aligned with GA non?stop 08d) market pricing Despite having a service disadvantage, both DI. and UA match AA Mote: Retina-Mp 06:9 hose ?351 A9 advanca paras-:53 requirement: MP Airlihes I AA-S CONFIDENTIAL Cannaar?ial animation Mnmr?aal de?ned) nrov?tda? pea-want tn: an? the we of wh?wh Sh?i??yzubje? nth: mans; mm; and cow?mms oftha: :1nnain Non-Dialmmr. Agrrenmn! datnd as omugmt 2m: bivwem and U5 Ahva Group, inn.J raining ?lm {a be movi?nd by AMR Carparai'wn to US Aim-W5 6mm. Inc. approach results in Indore Connecting-traffic cicser'te departure I To save space for Sate?arriving higherwyielding traf?c, lower?yieiding connecting traffic is greatly restricted far from departure How Beokings by AP in 2011 Q2 Percent 403% 35.0% bookings 30.0% 25.0% ?5 1AA 20.0% 15.0% mm UA 10.0% 5.0% RRD 0-6 RRD 7-13 RRD 14?20 RRD 21-44 RRD 45-59 RRD 60+ Days before departure Strqu Unauib?smd MIDT passanger domestic. makings Amarican Airlines CONFIDENTIAL Ean?damia! Evaiun?an Malaria! (is; ?nfinec?; would? mean: 10,. an? me vw. chh'wh rs ?may sumac: 13% 64mm 2mm and afghm; mnain Non-Disciamm {weenmm ?atnd as of?uguct 39. 301-! between WE [omta?cn and US Ainvays Grew Inn, taming tr: information not?. mavide? by AMP- Calpar?iionm Q5 ?aways Gnmp. Thisapproach, althoughciifferent from the {arge legacy carriers, optimizes revenueacmss the US network network reiies more heavily on connecting passengers: Carrier Revenue from Inca! traf?c UA 54% Manx-a w~w~ a In addition, US due; not partitipaite' in many of the top industry marketsby passengers: Served by AA news?op 13 2 Served by US nonnstop Top 25 markets Top 250 markets 76 . - 46 Scum: Share anneal traffic: (somatic $3 censoiiamu, FY2011 951157.106 Ton markei penetraum: Dim-nee American Ami-mes cun?dizmiral Ewina?on Masarial [m-isnfimc'} pruvidad pursuant so; am! in use a? whirh a wind-y soiling: 12>, rhi- expmu mm: and com-manna of that curtain Agreemanl limes: as of?ugmt '30, 2612 VIP-"fee" 155"? Corwva?nn 3N5 U5 6mm. Ina?. Icia?r? to 1h: Momma? in he: Movi?n? by AME Carparaz?mri 10 USAiniu-avs Group. [no a, As a remit, US is able t6. realiie significant higher yields than othei?s When- competing as a {tonnecting service carrier versus other carrier? 5 hon-stop flights Given its current network has smaller local markets and a high share of connecting traffic, US is uniquely positioned to execute and be successful with this strategy Connecting carrier hon-step carrier yield 09 connecti i AA 0E) non?stop carrier Scum: 7mm Wu. FY 2311. 08635 wilh fewer than 0.5 PPDEW swudad Dom?s?c only American Airlines - 5 AA-SR-OO397094 Con?nemial 'r?vniurxtirm Mamrial gru-ahzfimz?) pro-13:12:! pmwenr to: and the Hi: nhvh'n-h sanctiy whim: to, the ewe? cam-.4? and :om?smns ohhumnain Non-Bisdmun: ?guemem dated nac-?Auam 29!! haween ma (omma?rm and us Ainvays 6mm. Ina, winking; w. im?nmdon t-e. avovimd by AME Cowman-:er US Airways mung. kw. The migration from a niche connecting carrier to the largest US network carrier prevents the continuity of this strategy There is a significant overiap of pricing strategy and DI. and UA domestic non-stop markets As part of a mErged the AA network will provide 0A with new iarge nonstop markets to target with cross-market initiatives The revenue at risk from these market actions is much greater in the AA non?stop markets than in the US market overiapping DL and UA non-stop markets - AA currently has $5.68 in non?stop market revenue US curren?y has $1.38 in connecting traf?c overiapping and UA non~stop markets American Airiines I I I I 7 CONFIDENTIAL R-00397095 CONFIDENTIAL E'mivn?en Mnimial ?n?'hwdi mova pursuant mans the usa?: afwi?iz'ln I: strictly ?mares- {arms and :unczinam 01 Non-Disclosure Agreemms dated as afmlsun 30, 20$: lawman Eorgmraricn anti U5 Aim/w: Grow. Inn, relating tn thw- im?nrmasian In be pravidnd by AME Cnrparazivn to US Airways (Sump. inc, - We believe there are two effects an average yields as a result of the- alignment in pricing strategies Effect Dis?synergies US connecting yields on 08d) markets with DL or UA non-strips will decline Yield of connecting traf?c will decline to ievels in DLIUA nonvstop markets Yields from US connecting pm: in AA non-stop 08d} markets will improve S41M Passenger that flew on lower connecting fares now fly on non-stop fares in markets where AA is the only nion~stop carrier, 100% of this benefit is captured in markets where there is another legacy non-stop carrier in addition to AA, 50% of this benefit is captured American Airlines R-OOBQTOSB CONFIDENTEAL Con?mr?ial??vmuudan Material bur: defined) movidec pumuu? Lo, and the um of which is Si?tdv'sv'ujcci m. the cumin condition; oi'th?l ?main Non-Okda?il? Mrfam??i @165 85 '39" 3913 hem-even WE [orgaaraeinn am. US ?mun, mm, relating to thaw ireiuwne?an in be. (?evades by HM Cmpura?on to US ?19 Reduction in US connecting passenger yieids on (38ch with GA non?stops Pricing strategy aiignment resuits in reduction in US connecting passenger yields on Di. and UA non-stop 0&0 markets I Yield of US connecting traffic on these markets is expected to decline to ieveis when they compete as connecting carriers Metric Current New/implied Revemie deficit on connecting traffic vs DL 3: UA non?stop traffic 28.6% .1544 11.71 - Yield US connecting traffic vs Di. 8L UA non-stop traffic .Difference: American/Airtime- 3 . . CONFIDENTIAL (an?dumial Eveiusr?mn Malaria! de?ned) provider?: purvth m; and the we ohvh'la'h sr-irziy :ubieu 1-9, the ex;er tam-4 end :uwitmm of the: mmin Non-minimum Mreerm'mi minted as of?ngmt ?36, 2012 between me Eomamtian and Us Airways Gmun. tr, to wow-ind by LMR (imp-crazienzo ?35 Airways ?mup, Inc. imereved yields in AA non-step 08d) merkets 3 Passengers that ?ew on iOWer connecting fares new ?y on non~stop fares I In markets where AA is the only non-stop carrier, 100% of this bene?t is captured by the cembined a In markets where there is another legacy non-step carrier in addition to AA, 50% of this bene?t is captured by the combined Metric Markets where AA is the Markets where AA is 99]; oniy non-stop carrier the oniy non?smp carrier Revenue A connecting traf?c 13.87 - 13.20 Current yieid - US conneating traf?c Revenue impact Sum: Americar: Airlines 10 Maw 10 Ewilunrian Material gag. matinee) pro-Mm: pursue?! W: and the WW: slwh'n'h rs strives? subieex ml the Mama :Rn?m anti medium:- of thezmmin Non-Maximum Agreement: mind a: imEu? 3'3. me Comma?nn and USAEzwevi Gram. mime infowns?'on 1a are. provided by Commie" to US Airways Emu?? inc? The immediate revenue dis-synergies reduce the modeied synergies by 2.8% AA-US Revenue Synergies (S millions) Netwark connectivity Corporate share shift FF Partner Optimization Total modeled synergies US connection yield reduction Recapture on AA non?stop markets Net Revenue Synergies after immediate dis-syneries Compared to the modeled 28%, the assumption ofa 10% revenue dis?synergy adjustment is a very conservative estimate, making a very aggressive assumption that the combined AA-US will deveiop some additional pricing fevers to mitigate the fuli revenue dis-synergy American Airlines 11. ?ii CONFIDENTIAL (if? Revenue quafity; Pricmg strategy dis?synergies CONFIDENTIAL CONFIDENTIAL Con?neminl Mammal [cm de?ned; moulded misuaw to, and the use 5 smudy sumac: in, me expren terms rand nondiimns 0? thatumain Non-Disdr-sure Agreement enter; as unusual 3:3, 231:? imrveen WE and US Airways Gmun, inn, rah-axing ?12? information in be. ymvi?nd by 5MB Carpathian US Airways Group, inc. Executive summary 5 revenUe synergy estimates include an adjustment for pricing changes not captured. by the IFS modeiing exercise . . Unlike all other domestic network carriers, US employs a unique pricing strategy designed to optimize revenue from its niche market position US focuses on high connectivity across smaller local market while other legacy carriers operate in iarger markets and carry more local traf?c 1! US's pricing strategy cannot be scaled to a large legacy carrier When AA and US combine, DL and will target the $5.68 in AA domestic non-stop markets to force pricingalignment - ?1 Adopting a more typical network carrier approach would reduce revenue of ihe Merged carrier by creating a "28% net revenue dis-synergy implicit in M?s 10% revenue synergies ?quality adjustment" is an aggressive assumption that the combined carrier would be able t0 deveiop new offsetting pricing strategies American Airlines CONFIDENTIAL Con?mmia! Evaiuer'mn Maae?al (M. drzfima'jl map-11:12:: pursuant to: and the um n! whirh a srn'c?y simian: to, the (enemy: {mm and :om?mm Disks: nena'm Non-Diszlmum Agnes-nan! dated as ofAugmt 20, 2012 harem?" Aim! Cormlatian and USAiwreM Gwyn, int?, raia?tilwf. the ir?urmm'lan lute. mastidnd by JRMR Corparaxior-ta USNMEYS Gmup, hic- approach in pricing cm cementing traffic differs significantiy from the other domestic network carriers US successfully targets higher yie?ding traf?c "dose in? demand in Other airline?s non-stop markets by offering cheaper fares on its own one?stop itineraries Less restrictive Advance Purchase (AP) ru?es Lower absmute fares ?n some instances Luff-mam} 33:35 2M: ?g?l?wr ems war: 2:193 mar: szm- m5 my Rama. $3446 rive M25 we may am am am in? saw {2353: am. Luwer :11me Up Lower at 5 3-595: My; my "fuss $512 Lower at Waik Up seam mm m? 55%: MAP 530 Lower at 21m? 'sm 3m? ?3 $646 $4141" ?132?: {35 --Less Restrictive APs ma 2MP ?1 Wm 5364 Lower at Walk Up MAP $578 1 @738 11.19 55% as? ww- Nme.? Round?Mp sate base fare; AF r: advance purchase requiremsnt; BAP ?6 lawss: walk ?up fare - American Airlines mm. HIP/?vwwm?k CONFIDENTIAL gi?is?. 5222a; Zi?k-F mg mamas:- mg m? was m? $53-33 Mp I Mn?? Win $35538 gm? Ma Now-3:439; 53$. am? am Emmet-{jug 3mm 35%. H5 - 2MP arm :23 1MP $383 3m mass mm $532: mg? mm m9 mam?) was my} "2w ma?a my my ma 233% aw [on??nn?al Swain-Minn Mas-aria! (as Lim?jncc"; provided pursuanr m: and the um sf whith s: stride su?niec: m, :m (1432? mum and :ontaitmm of that canals Non-Disciaaum dated as o'??limi 30?? 3913 between AME [omra?sn and 1.55 Ainvays Gmun, hm, Matias. 1:1 xiv: irx?uwmniun in he wova by AME (talk-"MM 10 US MMWS Grml?- 0A connecting service pricing structures are generaily more aiigned with GA non?stop 0&0 market pr?cing Despite having a service disadvantage, both DL and UA match AA 1 biota: Hanna-trip ems base fare-.I ad's'anca pmcheas'requizer?snl: 9A9 ?iwesi'wu?m?g?n Airlines bl CONFIDENTIAL Can??rmfat Eveius?on Mnmrial defined? mou?muc mutuam? to; and the uxa :fwhirh I: :r?rziysubinm hum term; and wm?mm Agrcenmm ?atco' as c?'Augmt ?30, 31013, hameen AME ?orpnr'a?an am IJ?SAinveys 6mm. Int,? mlakin? tn the in be {Hovi?nd Ray AME to US Airways 65mm. Rnc. is?" approach resutts in more connecting traffic doses" to departure To save space for Bate-arriving higher-yieiding traf?c, lowerhyieiding connecting traffic is greatly restricted far from departure How Beokings by AP in 2011 (12 I) Percent 40?? 0?5 35.0% bookings 39.0% 275.0% Us mm 1AA 20.0% 10.0% 5.0% RRD 60+ RRD 0-5 RRD 7~13 RRD 1440 RRD 21-44 RRD 43-59 Days before departure Scarce Unadpsiad M407 passenger domestic naamgs American Air?ne? CONFIDENTIAL Cu-r?uamialivahmdan Material w: de?ned} provider: panuam to: and the un': whit!) r: with slit-33:: 1mm ?supreme rm anti conm?rmm 01?th cumin A?teem??i dated 05115154 '30. 3012 tatween man Corraawricn and US Airways (smug. Inn, halath tn the ?rm?nmz?nn :0 he provided by AME Enigma-Jon to US Airways Glenn. Inc- This approach, althaugh different from the large legacy carriers, optimizes _--revenue acrass the US network . US's network relies more heaviEy on connecting passengers: Carrier Revenue from Eocaf trafaddition, US does not participate in many of the top industry markets by passengers: Served by AA monastop Served by US nan-stop Top 25 markets . 13 . I 2 markets 76 46 Same: snare Miami] tr??lcz mama" 53 mn?sauaareu. FY2011 Top marks! ggnetrm?sn: Dram an American Airlines AA-S Cnn?anmiul Evalun?on Mamfml Larm?mdi provide-1 pursuant to. am: 132:: we anhS-rl?. r: siriudy'subinn: the any?; mm; and zoawmiam oy? that in?ain Agreeing?: rated as ofAngwl 39, 2912 between MR formw?rlan ant: US Airways Gmun. mlhziiv, to Illt- Moi-ma?a? to he provider: by Cmpora?en to US Airways Gunny. Incl As a result, US is able to'realize significant higher yields than others when competing as a connecting service carrier versus other carrier?s non-stop flights Given its current network has smaller local markets and a high share of connecting traffic, US is uniquely positioned to execute and be successful with this strategy Connecting carrier 311w; non?stop carrier yield OD connecti carrier AA BL (3 OD non-stop carrier source: eerie mam Dim. FY 251i. 0&Ds wili'l fewer than 0?5 PPUEW excluded Dcmeslic (?350) Only American Airlines 6 CONFIDENTIAL Euniue??n Magma] {m unfinch mavidm: pursuant to and the use of Whi?? windy suixjear the cxpmu (arm: and nomizsane 0! than innz'm Agraemnm iatod as 051th ?36, 29:: between mm tonnaxasian and U3 Aixwevs winking to my. Maw-Mimi In be wovitm! by AMR USAitw-evs Group. Inc- The migration from a niche connecting carrier to the largest US network carrier prevents the continuity of this strategy - I There is a significant ovariap of pricing strategy and Di. and UA domestic non-stop markets As part of a merged the AA network will provide 0A with new large non-stop markets to target with cross-market initiatives The revenue at risk from these market actions is much greater in the AA non?stop markets than in the US connecting market overlapping DL and UA nonstop markets AA currentiv has $5.68 in non-stop market revenue US currentiv has $1.33 in connecting traffic overlapping DL and UA nonjstoo markets American Airiines 7 CONFIDENTIAL CONFIDENTIAL Can?dnmlalivnlua?on Mnaerial {95 defined? moulded mums: L41 and the use anviwh sr?t?y mam: and :em?tmn; with?: renal? Non-Disclosure Agrcenmm ?nned off-mam! ?30. 29:2 hetween MR [.orfmla?nn and US Ainweys Group. relaxing we be Wayland by Camera?ell to us Airways (31mm, pug, 1 We believe there are two effects an (195 average yieldsas a result of the . alignment in pricing strategies Effect Dis-synergies US connecting pax yields on 0&0 markets with DL or UA non-stops will decline (S325M) Yield of connecting traf?c will decline to levels in non?stop markets ?elds from US connecting part in AA non?stop 08d) markets will improve S41M Passenger that flew on lower connecting fares now ?y on non~stop fares ln markets where AA is the only nonwstop carrier, 100% of this benefit is captured ln markets where there is another legacy non-stop carrier in to AA, 50% of this bene?t is captured American Airlines ,Nam? Cai?mmial Ev?iuu?un Mazedal 1:15 defined) movkior.? pursuant to, and the use or which :2 slricdysuhiect 1m amass ??rm gm: cmm?inam our.? cumin Non-Disciaahre Asrtemem as G?Aiigu? ?39, hetween AME Eorpara?rm mm UEMHWW Gram. relating, fa xiw. ir-fmrnadan la {33: mmidmd by AME Com-wetter! to US Aimays Gsaup, 5:1; Reduction in US connecting passenger yieids on with GA non?stops I Pricing strategy alignment resuits in reduction in US connecting passenger yields on and UA non?stop 0&0 markets I Yieid of US connecting traffic on these markets is expected to decline ta ievels when they compete as connecting carriers - Metric - - . - Current New/imptied Revenue de?cit 0A cohnecting traf?c vs DL 532 UA nan-stop traffic 28.5% - 15.44 Yi?ld - US connecting traf?c v5 DL 8: UA hon?stop traffic "Difference: 5325 Mt American Airlines I CONFIDENTIAL CONFIDENTIAL Ean??nmiel Evaluadon Masada) we defined; nrov?rdnd pursuant to, em: rhe um nf whm? satay subiec: Lu, the erp?esa term; and wm?mnx of that unnain Non-Discimmc Aye-canard dated as ammo-J '36. 21113 AMR [orualaticn and US Ahwavs 61mm. Y?hiiri, to 11m Newman 1x- pmvidna' by AME Corporation?s USAirweys Gum?, 1:ch [mp'toved yields in AA noh-Stop 0&1) markets I Paseengers that ?ew on iower connecting fares now ?y on non~stop fares I In markets where AA is the oniy non-stop carrier, 100% of this benefit is captured by the combined I in markets where there is another legacy non?stop carrier in additien to AA, 50% of this benefit is captured by the combined Markets where AA is the Markets where AA is Metric . . oniy non-stop carrier the oniy non?stop carrier Revenue US connecting traffic I I . . 13.37 . =313._2o. Current yEeid' US connecting traf?c Revenue impact Sum: S41M American Airiines 1O Con?n:umi:d Euninnr?mn Melt-trial {rm on?nnc?) ?wider; so: and the uni sfwhi'rh rs sf?udy Sui-inst w, the commas mum and nomi?ym ofthaicnrtaio Non?istimme dared as o-?Angu? 39. Hill?! between MR qumrefinn and USA'rnveys Gratin. Inc" re?ning to Kim infawnetiun 19. ?0956115 bY AME ?17 Gmug?b Pick The immediate revenue dis-synergies reduce the modeieci synergies by 28% Revenue Synergies (S Network connectivity Corporate share shift FF Partner Optimization Totai modeied synergies US connection yield reduction Recaoture on AA non?stop markets Net Revenue Synergies after immediate disesyneries Compared to the modeled 28%, the assumption ofe 10% reVenue dis?synergy adjustment is a very conservative estimate, making a very aggressive assumption that the combined AA-US will deveiop some additionai pricing ievers to mitigate the fuil revenue ois~synergy ii American Airlines 11 i?i CONFIDENTIAL ._.f25i\ STRICTLY PRIVATE AND H1GHLY WORKENG DRAFT PRELEMINARY TO REVISION FOR COMMITTEE EYES ONLY - RESTRICTED DISSEMFNATIDN ONLY Confidential STRICTLY PRIVATE AND HIGHLY CONFIDENTIAL WORKING DRAFT TO SUBSTANTIAL REVISION FOR EYES ONLY - RESTRICTED DISSEMINATIDN ONLY American Airlines 1 Confidentiai MCKOUOI 0589 Con?den?a! Executive summary STRICTLY PRNATE AND CONFIDENTBAL WORKING DRAFT SUBJECTTO SUBSTANTIAL REVISION FOR COMMITTEE EYES ONLY DISSEMINATION ONLY American Airlines 2 mam STRICTLY PRIVATE AND HIGHLY CONFIDENTIAL WORKING DRAFT PRELIMINARY - SUBJECT TO SUBSTANTFAL FOR COMMRTEE EYES ONLY - RESTRICTED DESEMINATION ONLY US Pricing Background I US Airways? approach to pricing differs greatly from the other legacy carriers I Higher-yielding traf?c booking close to departure in OA nonstop markets is targeted by offering cheaper fares on US one?stop itineraries Less restrictive Advance Purchase (AP) rules Lower absolute farea in some instances as well I To save space for this late?arriving traffic, loweruyieici'zng flow traffic is greatly restricted far from departure . As a result of this tradeoff, 'flow yields are often significantly higher for US than for the other legacy carriers American Airlines 3 Confidential MCK00010591 STRICTLY PRIVATE AND HIGHLY CONFIDENTIAL WORKING DRAFT PRELIMINARY -SUBJECT TO SUBSTANTIAL REVISION FOR COMMITTEE EYES ONLY - RESTRICTED DISSEMINATIDN ONLY US Cannecting Service Pricing Structure in OA Nan-Stan 0135 The following examples shows how US incorporates lower fares through both fare differences and less restrictive advance purchase requirements in OA nonstop ?ights to SJC AA US $40 Lower at 9.14 .us. $393 5398 7AP Less Resi?c?va APs $80 Lower at 21m: $448 14ma $498 $498 TAP $430 $553 MP $342 Lower at Walk Up ?43 $638 TAP $470 TAP Lass Rastn'ctive APS $658 7m: $520 57:33 7gp $530 21AP $738 TAP $560 TAP $574 wu3 $384 Lower at Walk Up UA Us 5634 14AP u" 0? $488 $40 Lower 31 MAP $733 MAP 28 21AP 8 $52 Less Res?rictiva APE $804 YAP 5598 TAP 5512 Lower a1 Walk $858 up 3808 TAP ?$932 GAP $1,068 7AP 78 UAP Nola! Round-trip core base fare; AP advance purchase requirement: BAP lowest waK?Hngafsn Airlines 4 Hanna con?dential STRICTLY PRIVATE AND HIGHLY WORKING DRAFT REVISION FOR COMMITTEE EYES ONLY ONLY >1 GA Connecting Service Pricing Structure in DA Non-Stop ODS Contrary 10 US, the other legacy carriers generally respect the pricing structure of the nonstop carrier when offering connecting service AA Non-Slop, DL and UA Connecting Service $348 $343 $348 $398 $393 14AP $398 $448 $448 1ama $498 . $568 $5 63 TAP $568 TAP $833 YAP $638 TAP $638 match $668 ma $668 TAP $668 $708 7AP $708 TAP $703 $?38 YAP $738 me $856 GAP $856 GAP $856 GAP Note: Round-trip core base AP ?3 advance requlremani: GAP IOWBFQ wa?mg?rgn Airlines . I 5 5 MCKOOG10593 STRICTLY 9RNATE AND HIGHLY CONFIDENTIAL WORKING 9RAFT PRELIMINARY - SUBJECT TO REVISION FOR COMMITTEE EYES ONLY - RESTRICTED GNLY US relies on late backings to g?ln yield premiums" 1mm?? To save space for late-arriving higher?yielding traf?c, lower?yielding connecting traf?c is greatly restricted far from departure RR: add booking curve examples American Airlines 5 far-"hm (inn-Eidnn?al PRIVATE AND HIGHLY CONFIDENTIAL WORKING DRAFT PRELIMINARY SUBJECT TO REVISION FOR COMMITTEE EYES ONLY- RESTRICTED DISSEMENATION As a result is able to realize significant higher yields than others when competing as a connecting service carrier versus other carrier? 5 non-stop flights a US Airways? yields as a connecting carrier are on average only 7% lower than the yields of nonstop carriers - I For the other majors, the yield gap between nonstop ant:I connect carriers is 41% Connecting carrier non-stop carriel? - Auefage (40.7) American Airlines . . . 7 Confidential MCK00010595 ?aniidnniin! in the current industry structure this pricing behaviour is sustainable STRICTLY PRIVATE AND CONFIDENTIAL WORKENG DRAFT .. PRELIMINARYMSUBJECT TO SUBSTANTEAL REVISION FOR RESTRECTED ONLY i . Legacy carriers wiil aggressiveiy defend the integrity of pricing structures in their hub non-stop markets I AA, DL, and UA are vulnerable in their own non-stop hub markets and avoid provoking defensive actions that would be triggered by undercutting 0A non?stop fares with connecting services I However, US is less vulnera bie and there can be a net benefit for US when undercutting 0A, even when considering aggressive defensive actions by GA - 1.) US carries a relatively low percentage of local traf?c compared to other Legacies - 2.) in US locai markets, relative markets si_zes_ are small The US business model is dependent on ?ow from other Legacy hubs. Therefore, US must ignore Legacy pricing action in their non-stops and continue undercutting. Fortunately for US, their current network is uniquely positioned to execute this strategy American Airlines 3 8 Hahn/nah?; fur-Inn STRICTLY PRIVATE AND HIGHLY CONFIDENTIAL WORKENG ORAFT PRELIMINARY SUB-J ECT T0 5U ESTANTIAL FOR COMMITTEE EYES ONLY - RESTRICTED ONLY >7 US islessexposeci toretaiiation actions by DA than the other legacy carriers Looking atlocal traffic across major domestic hubs and the pertentage of'total revenue generated by iocal traffic, US clearly ranks behind other Legacies US generates less than 40% of its revenue and less than l/Srd of its traf?c from local passengers With the majority of revenue and traffic generated through flow passengers, US is much less exposed to aggressive local pricing actions by other Legacies DOT Domestic Mainline Hub Flying - 4011 LIA 48.4% 55.6% AA 45.6% 51.2% DL 40.2% 47.8% us American Airlines . . . . 9 9 confidential MCK00010597 STRICTLY PRIVATE AND HIGHLY WORKING DRAFT PRELIMINARY SU BJECTTO SUBSTANTIAI. Similarly, a lower I'ocal traf?c share in its hubs makes US Airways fess vulnerabie m/ to retaliation actions US hubs also ranks behind other Legacies in local market size Placehoider for market size charts aware? and to sample keyspokes American AirIines 10 10 ?hnfir?nn?nl FOR COMMITTEE EYES ONLY DISSEMINATION ONLY 1' I- - - Con?den?ai PRIVATE AND HIGHLY CONFIDENTIAL WORKING DRAFT PRELIMENARY SUBJECT TO SUBSTANTIAL REVISION FOR EYES ONLY RESTRICTED DISSEMINATION ONLY unique pricing structure impacts 3 significant number of 0A non?stop mf markets, and is thus a key pain point for 0A5 pricing approach impacts 3 significant share of AA, DL, and networks As a result, AA, DL and UA have tried to change one?stop pricing behavior in the past through defensive pricing actions 3 In a combined AA-US, the impact to UA and Di. wiil remain and compei future attempts by DL and UA to defend its non?step pricing Insert overiap data chart American Airiines 11 11 0599 (Enn?ram?ni STRICTLY PRIVATE AND HIGHLY CONFIDENTIAL WORKING DRAFT PRELIMINARY - SUBJECT TO SUBSTANTIAL REVISION . 3 I EYES ONLY RESTRICTED DISSEMENATIDN ONLY While US has been able to defend its pricing approach for these reasons today, the Industry will not allow the same approach for a combined - ?2 Domestic iegaoy carriers frequently act to prevent other carriers from gaining a pricing advantage - Lower fares are introduced into GA nonstop markets in response to OA fares which undercut a carrier's own nonatops - The intended effect is to cause the removal of the lower fares or risk bookaway in their own important markets American Airlines .12 12 nenn Con?dentiai STRICTLY PRIVATE AND HIGHLY CONFIDENTIAL WORKING DRAFT PRELIMINARY -SUBJECTTD SUBSTANTIAL REVISION FOR COMMITTEE EYES RESTRICTED DISSEMINATIDN ONLY . . . ind ustry Response successful defense today is a result of its unique local position AA. DL. and UA can?t drive enough revenue away from US nonstop markets to Chane pricin strategy - The AA network wiil provide 0A with nonstop markets to target which are not so uniquely positioned and have greater local revenue at risk - As a result, a one-stop pricing strategy is not sustainable over time for a combined Merged carriers are treated as one carrier immediately . Foliowing mergers, other carriers immediately began introducing fares in former NW markets toprevent DL pricing advantages and in former CO markets to prevent UA pricing advantages - A hybrid pricing strategy is not sustainable either American Airlines 13 ?13 STRICTLY PRWATE AND HIGHLY WORKING DRAFT FOR COMMITTEE EYES ONLY - RESTRICTED ONLY Summary AA and US empioy different pricing strategies today, each one very rationale for its own network - Differences in relative capacity and local demand result in dissimilar pricing and yield management approaches US undercuts pricing on industry nonstops to gain an advantage on nigh?yielding traf?c The industry will not allow to employ the current US one?stop strategy - use current strategy has signi?cant overlap with the DL and UA networks 0 Di. and UA have been unable to prevent US one?stop pricing because of market traits unique to US - A combined AAIUS would not enjoy the same protections The AA approach would need to be employed for a combined network As a result, the current US network would be sub-optimized American Airiines 14 14 Con?dential 411mm? T0 SUBSTANTIAL REVISION 71? Confidential m/ We currently operate two distinct busin STRICTLY PRIVATE AND HIGHLY CONFIDENTIAL WORKING DRAFT SUBSTANTIAL REVISION FOR COMMITTEE EYES ONLY RESTRICTED DISSEMINATION ONLY ess models, both of which we believe are fairly optimal for the corresponding network Dimension AA US vs local share Higher local share High connecting share Connecting yieids Lower Higher, clue to close to departLire bookings Behavior when competing as, Does not underprice GA due to exposure Underprices 0A, and does suffer less carrier in OA nonstop to potential on retaiiation clue market retaiation to lower local demand in hubs Aircraft density Lower Higher American Airlines 15 STRICTLY PRIVATE AND HIGHLY CONFIDENTIAL WORKING DRAFT TO SUBSTANTIAL REVISION FOR COMMITTEE EYES ONLY ONLY A combination of the two carriers will require alignment to a common pricing strategy Taking the US pricing approach on the combined network is not feasibie due to competitor retaliation - Key AA hubs have higher local demand Downside from competitor retaliation wili outweigh bene?ts from approach I A hybrid approach is not feasible either, for the same reasons Competitors wili consider the combined carrier as a single entity . We cannot pick and choose our approach by DD, and expect our competitors to retaliate only within that segregation I Therefore it is assumed that the AA approach is taken for combined carrier American Airiines 16 ,e a, Confidential If 0A5 retahate It hurt PRIVATE AND HIGHLY CONFIDENTIAL WORKING DRAFT PREUMINARY- 5U BJECT TD SUBSTANTEAL FOR COMMITTEE EYES ONLY - RESTRICIED DISSEMENATION ONLY Show our exposure ahd examples where retaliation happened in AA netowrk Higher iocal share etc American Airlines 17 MCKOGMOSOS Confidential m1 STRICTLY PRIVATE AND CONFIDENTIAL WORKING DRAFT SUBJECTTO REVISION FOR COMMITTEE EYES RESTRICTED DISSEMINATION ONLY We believe there are two opposite effects en average yields as a resin?: of the alignment in pricing strategies Effect impact on synergies I Reduction in US connecting pax yieids on ODS with GA non-stops We will not be undercutting GA close to departure any more due to fear of retaliation - Share of close to departure, higher yield connecting bookings will decline - Shift to more local passengers Why? ?1 AA gets bump Why? American Airlines RR: Nee source What yo Where What's What do 18 {Mo??i MCK00010606 Confidential 1) STRICFLY PRIVATE AND HIGHLY WORKING DRAFT PRELIMINARY TO SUBSTANHAL REVISION FOR COMMITTEE EYES ONLY RESTRICTED DFSSEMINATIDN ONLY We have sized both the impacts of the connecting yield Anaiysis estimates the yield degradation from an alignment of AA and US pricing strategies postwmerger on ODS where US offers connecting service and Di. or UA offer nonstop service Approach Compute U5 percent yield gap to non-stop carrier in ODS where US offers connecting service and DL or UA offer nonstop service Compute AA, DL, and UA percent yield gap to non-stop carrier in ODS where US offers connecting service and DL or UA offer nonstop service The difference between the two yield gaps is the expected yield degradation for connecting passengers in network The degradation is applied to gain the dis?synergy of aligning the pricing strategy American Airlines 19 MC K0001 0607 STRICTLY PRIVATE AND HIGHLY CONFIDENTIAL WORKING DRAFT .4 Pf- . PRELIMINARY-SUBJECFTO SUESTANTIAL REVISION FOR COMMITTEE EYES ONLY RESTRICTED DESSEMINATION ONLY - \r and the shift towards more local passengers - Approach 1) Ameri?an Airlines 20 Confidential 0608 STRICTLY PRIVATE AND HIGHLY CONFIDENTIAL WORKING DRAFT PRELIMINARY - SUBJECT TO SUBSTANTIAL REVISION FOR EYES ONLY RESTRICTED ONLY These dissynergies o. abei I Netwcir'k Corporate FF Farther DptimizatidmbeI US yieldJS iocaI connectivitshare Shift degradatioqnax share AmericanAirIines . . . . . 21 Confidential r?nnl?rgnn?inl We have sized PRWATE AND HIGHLY CONFIDENTIAL WORKING DRAFT PRELIMINARY- SUBJECT TO SUSSTANTIAL FOR EYES ONLY DISSEMSNATIDN ONLY Type of OD US AA Current behaviioe'r Impact of merger pricing UA i alignment Rational market behaviour none . i . INS NS US undercuts main-line US CNXyieid is reduced . i carriers . . ?US ocalshar_eEncreases US gains high yield CNX passengers close to departure NS NS Rationai market behaviour none American Airiines 22 A Confidentia! $479 $530 21AP $448 MAP $574 MAP $634 MAP We MAP $738 $304 ma $858 3AP $962 GAP $470 21AP $530 21AP $448 14AP $574 $634 $678 $?38 $804 $85 AP - 962 GAP DL Nnnusmp, BA and AA Connecting Service. $470 $530 21AP $443 MAP $574 MAP $534 14 $57 4AP $738 MAP $804 TAP $858 $952 GAP STRICTLY PRIVATE AND HIGHLY CONFIDENTIAL WORKING PRELIMINARY - SUBJECTTO SUBSTANTIAL REVISION FOR COMMITTEE EYES ONLY - RESTRICIED DISSEMINA ONLY m} US Pric?ng Structure in QA Non-Steps And AA would respond according in both and IAH UA Nan-Stop, DL a Connec?ng Service $808 $1,008 $1,27?8 RA. 9L- $528 2MP $523 2m: $593 $598 MAP $308 7AP $808 TAP $1,663 TAP $1 ,008 $1,273 DAP $1,278 :Round-Irip core base fare; AP advance purchase requireniem: GAP Iowem wa?mm?n A1 Hines 23 23 R, STRICTLY PRIVATE AND HIGHLY CONFIDENTIAL WORKING DRAFT PRELIMINARY -- SUSIECT TO SUBSTANTEAL REVISION FOR COMMITTEE EYES ONLY RESTRICTED DISSEMINATION ONLY Immediate revenue dIe-?swergies due aIIgnmem 0f business moee?s CONFIDENTIAL STRICTLY PRIVATE AND HIGHLY CONFIDENTIAL WORKING DRAFT PRELIMINARY SUBJECT TO SUBSTANTIAL REVISION FOR COMMITTEE EYES ONLY RESTRICTED DISSEMINATION ONLY Two factors impact the amount-of modeled synergies we believe we can capture Focus of this document - Dis~synergles clue to combination of twe different business "models currently optimized for eachnetwork impact within days to weeks from merger I . American Airlines 1 CONFIDENTIAL SYRICTLY PRNATE AND HIGHLY DRAFT PRELIMINARY SUBJECT TO SUBSTANTIAL REVISION FOR COMMITTEE EYES ONLY RESTRICTED ONLY Introduction I AA initially assumed a 10% immediate reduction in revenue synergies for difference in business models that we believed drive a difference in unit revenue After our initial discussions and understanding your perspective, we have further studied the differences in our business modeis, and our pricing strategies in particular I We have found that AA and US employ different pricing strategies today, each one very rationale for its own network We believe that a combined will have to employ a common pricing strategy, which will be inefficient for parts of the network, and thus create a significant revenue dis~synergy I in this document, we explain our understanding of the difference in pricing model, and estimate the revenue dis?synergies resulting from adopting a common pricing strategy I The estimated dis-synergies are larger than the 10% initially assumed American Airlines 2 CONFIDENTIAL PRIVATE AND CONFIDENTIAL WORKING DRAFT PRELIMINARY SUBJECT TO SUBSTANTEAL FOR COMMITTEE EYES ONLY RESTRICTED ONLY Executive summary I AA and US employ different pricing strategies today, each one very rationale for its own network Differences in relative capacity and local demand result in dissimilar pricing and yield management approaches -- US undercuts pricing on industry non?stops to gain an advantage on high?yielding traffic I The industry will not allow to employ the current US one~stop strategy current strategy has significant overlap with the D2. and UA networks DL and UA have been unable to prevent US one~stop pricing because of market traits unique to US A combined would not enjoy the same protections I The AA approach would need to be employed for a combined network As a result, the current US network would be sub?optimized The US network would no longer produce significantly higher connecting traffic yields than 0A I These net revenue dis?synergies are estimated at or 28% of modelled synergies American Airlines 3 STRICTLY AND HIGHLY CON WORKING DRAFT - SUBJECT TO SUBSTANTEAL FOR COMMHTEE EYES ONLY - RESTRICTED US Pricing Background II US Airways? approach to pricing differs greatly from the Other legacy Carriers Higher?yielding traffic booking close t0 departure in OA non?stop markets is targeted by offering cheaper fares on US one-stop itineraries Less restrictive Advance Purchase (AP) tales - Lower absolute fares in some instances as well I To save space for this late?arriving traffic, lower-yielding flow traffic is greatly restricted far departure As a result of this tradeoff, flow yields are often significantly higher for US than for the other legacy carriers . American Airlines 4 STRICTLY PRIVATE AND HIGHLY CONFIDENTIAL WORKING DRAFT PRELIMINARY -- SUBJECT TO SUBSTANTIAL REVISION FOR EYES ONLY RESTRICTED DISSEMINATION ONLY I US Connecting Service Pricing in OA Non?Stop ODs )9 The following examples shows how US incorporates iower fares through both fare differences and less rastr?ctive advance purchase requirements in GA non-stop fiights to 830 ?33 . . . 333% - $40 Lower at 21m: ?nk $341?? egg an 33% mag $80 Lower at 21AP man 323% MP Less Restrictive APs wag $33 wan mag ma $3533 Mi? aw - -- $342 Lower at Walk Up man .- aasa ma i?w Less Restrictive APs m? am 212%? W653 753%? W38 ma ?ap $558 nan mm was? . Era-3J6} I am mks? $384LoweratWalk Up @355. ama- 35% ?g Mike? ?ag $40 Lower at 21AP $523 wan} . - - mg Less Restrictive AF's 353% Wig? Wk? -- $353 $512 Lower at Waik Up - - . Note: Round?trip core base fang; AP advance nurchase requirement; GAP iaweat wakwli?fgn Aimnes CONFIDENTIAL 0A Connecting Service Pricing Structure i Contrary to US, the other legacy carriers generally respe connecting service mwagm STRICTLY PREVATE AND HIGHLY WORKING DRAFT PRELIMINARY - SUBIECT TO SUBSTANTIAL 5M w?m??wi 53L am ?353; ?33anng gamma $3453 MW wag mw mag: m? 352mg ??gg Sigma ?g 3% mgr: mm aw 233% mags ism? w?ga ms? mm my mg W33 mg? 533% gig; ?g?a 2w? wm WW gagam 143%,? g?ga $55338 mg yw wag mg? 33% m? $33 mi? 533% gm?" Despite having a service disadvantage, both and UA match AA Note: Round-trip core base fare; AP 2 advance purchase requirement; GAP Fewest wa??wgf?fgn Airhn es FOR COMMHTEE EYES ONLY ONLY :1 0A Non-Stop ODS at the pricing structure of the non-stop carrier when offering {351: STRICTLY PRIVATE AND HIGHLY CONFIDENTIAL WORKING DRAFT PRELIMINARY - SUBJECT TO SUBSTANTIAL REVISION FOR COMMITTEE EYES ONLY RESTRICTED DESSEMINATION ONLY I US relies-on late bookings to gain yieldpremiums To save space for late-arriving higher?yielding traffic, lower-yielding connecting traffic is greatly restricted far from departure - .- - American Airlines 7 CONFIDENTIAL STRICTLY PRIVATE AND HIGHLY CONFIDENTIAL WORKING DRAFT PRELIMINARY SUBJECT TO REVISION FOR EYES ONLY RESTRICTED DISSEMINATION 0 As a result US is able to realize significant higher yields than others when competing as a connecting service carrier versus other carrier?s non-stop flights I US Alrways?- yields as a connecting carrier are on average only 7% lower than the yields of non?stop carriers For the other majors, the yield gap between non?stop and connect carriers is 41% I Given its current network that relies on flow from CA hubs, US is uniquely positioned to execute and be successful with this strategy Average (40.7) American'Airlines 8 CONFEDENTIAL STRICTLY PRIVATE AND HIGHLY WORKING DRAFT PRELIMINARY SUBJECT TO SUBSTANTIAL FOR COMMITTEE EYES ONLY RESTRICTED DISSEMINATION ONLY In the current industry structure this pricing behaviour is sustainable I Legacy carriers will aggressively defend the integrity of pricing structures in their hub non?stop markets If AA, DL, and UA are vulnerable in their own non?stop hub markets and avoid provoking defensive actions that would be triggered by undercutting 0A nonstop fares with connecting services I However, US is less vulnerable and there can be a net benefit for US when undercutting 0A, even when considering aggressive defensive actions by DA US carries a relatively low percentage of local traffic compared to other Legacies in US local markets, relative markets sizes are small I AA, DL, and UA can?t drive enough revenue away from US non-?stop markets to change pricing strategy American Airlines 9 CONFIDENTIAL PRIVATE AND HIGHLY CONFIDENTIAL WORKING DRAFT PRELIMINARY - T0 SUBSTANTIAL FOR EYES ONLY RESTRICTED ONLY by local traffic, US clearly ranks behind other Legacies US is less exposed to 0A defensive actions than the other legacy carriers I Looking at local traffic across major domestic hubs and the percentage of total revenue generated US generates less than 40% of its revenue and less than 1/3rd of its traffic from local passengers the majority of revenue and traffic generated through flow passengers, US is much less exposed to aggressive local pricing actions by other Legacies twigs re?t ?355; ?estteette teats Wyittg a? east is eat meat Waf?e seats a?x??t seats 323% as rat? ?es tsetse stif?iifa ig??iffa CONFIDENTIAL American Airlines 10 941 77 STRICTLY PRIVATE AND HIGHLY CONFIDENTIAL WORKING DRAFT PRELIMINARY - SUBJECT TO SUBSTANTIAL REVISION FOR COMMITTEE EYES ONLY RESTRICTED DISSEMINATION ONLY . SimilarIy, a lower local traffic share in its hubs makes USAirways less vulnerable to 0A defensive actions - . .- .. - . . . 3? US hubs aiso ranks behind other Legacies in Iona? market size - PIacehoIderfor market size charts were? and to sample key spokes American AlrIines 11 CONFIDENTIAL 941 78 AND HIGHLY CONFIDENTIAL WORKING DRAFT PRELIMINARY SUBJECT TO SUBSTANTIAL REVISION FOR COMMITTEE EYES ONLY RESTRICTED DISSEMINATION ONLY unique pricing StructUre impacts a significant number of 0A non-step markets, and is thus a key pain point for OAS - - . - It pricing approach impacts a significant share of AA, DL, and networks I As a result, AA, DL and UA have tried to change one?stop pricing behavior in the past through defensive pricing actions I in a combined the impact to UA and DL will remain and compel future attempts by DL and UA to defend its non?stop pricing insert overlap data chart American Airlines 12 men?00194179 STRICTLY PRIVATE AND HEGHLY CONFIDENTIAL WORKING DRAFT PRELIMINARY - SUBJECT TO SUBSTANTIAL REVISION FOR COMMITTEE EYES ONLY RESTRICTED DISSEMINATION ONLY For a combined AA-US the current US pricing behaviour is not sustainable I Taking the US pricing approach on the combined network is not feasible due to competitor defensive actions Industry will not allow to take this approach and will react with aggressive defensive actions The AA network will provide 0A with non?stop markets to target 'which are not as uniquely positioned as those of US and have greater local revenue at risk Current AA hubs have larger non-stop share and are more vulnerable to OA defensive action than hubs The downside from competitor defensive action across the combined network will outweigh benefits from US pricing approach I A hybrid approach is not feasible either, for the same reasons - Competitors will consider the combined carrier as a single entity immediately Following mergers, OA immediately began introducing fares in former NW markets to prevent DL pricing advantages and in former CO markets to prevent UA pricing advantages -- We cannot pick and choose our approach by OD, and expect our competitors to restrict their defensive actions on the part of the network where we undercut them I Therefore it is assumed that the AA approach is taken for the combined carrier American Airiines 13 CONFIDENTIAL STRICTLY PRIVATE AND HIGHLY CONFIDENWAL WORKWG DRAFT PREUMINARY SUBJECT TO SUBSTANTIAL FOR COMMITTEE EYES ONLY RESTRICTED ONLY If 0A5 target AA network with defensive actions it will hurt - x? I Show our exposure to defensive actions American'Air?line?s 14 CONFIDENTJAL STRICTLY PRWATE AND HIGHLY CONFIDENTIAL WORKING DRAFT PRELIMINARY - SUBIECT TO SUBSTANTEAL alignment in pricing strategies Effect I Reduction in US connecting pax yields on ODS with GA non-stops - We will not be undercutting OA close to departure any more Share of close to departure, higher yield connecting bookings will dec?ne I Recapture of some of the loss on AA non~stop markets -- Yields will improve on AA non?stop markets that currently suffer from USS pricing strategy (both with and without DL, UA competition) However, yields will also improve for DL and UA on their non-stop markets I Elimination of impact of Delta?s current defensive pricing action - Delta will likely no longer employ defensive pricing against US non?stop ODS - US non?stop yields in these markets should increase as a result FOR EYES ONLY DISSEMINATION ONLY We believe there are three effects on average yields as a result of the Impact on synergies Not quantified due to small size of markets and questionable effectiveness of defensive actions American Airlines 15 PRIVATE AND HIGRLY WORKING DRAFT PRELIMINARY - SUBJECT TO SUBSTANTIAL REVISION FOR COMMITTEE EYES ONLY RESTRICTED DISSEMINATION ONLY we have sized the impacts of the connecting yield reduction fer US and the partial recapture on AA non-stops - - - . .- Analysis estimates the yield degradation from an alignment of AA and US pricing strategies post?merger on ODS where US offers connecting service and DL or UA offer non?stop service I Approach 1) Compute US i ?stop carrier in ODS where US offers connecting service and DL rvice' 2) Compute AA, gap to non~Stop carrier in CBS where US offers connecting ser hen-stop service 3) The difference between the two yield gaps is the expected yield degradation for connecting passengers in network 4) The degradation is applied to gain the dis~sVnergylof aligning the pricing Strategy American Airlines 16 CONFIDENTIAL STRICTLY PRIVATE AND HIGHLY CONFIDENTIAL WORKING DRAFT PRELIMINARY - SUBJECT TO SUBSTANTIAL REVISION FOR COMMITTEE EYES ONLY RESTRICTED DISSEMINATION ONLY The immediate-reyenue dis?Synergies reduce the modeled synergies by 28% Network connectivity Corporate share shift FF Partner Optimization Total modelled synergies US yield! reduction AA non?stop yield improvement Total modelled synergies American Airlines 17 CONFIDENTIAL STRICTLY PRNAYE AND CONFIDENWAL WORKING DRAFT PRELIMINARY - SU8JECT T0 SUBSTANTIAL REWSEON FOR COMMITTEE EYES ONLY DISSEMINA US Pricing Structure in OA Non-Stops ??cmw?mg, am?? 5% {Sa?nec??mg 2'5 $?Mv MW $?33 3M3 igi??i? g? Mm 42%? 33%} mm M433 35m ?azm WW ?am mg? 53%3 3% gm mi} ma?a may WW ?gm my $3538 35%? 35%? And AA would respond according in both ATL-SJC and WE Nag'v?mgn a? mm; $5533 fig {3&3 i??w?w mag 353?? $533 ?Ea?g? wa?? {3&9 31% {Emma Earv?w ?g g?ii?? Em 33%?33 3% $3523 ?$.23ng {$53 CONFIDENTIAL. Round-trip core base fare; AP a?vanoe purchase requirement; OAP lowest Airlines 18 CONFIDENTIAL US Prieing Backgreund ?e US Airways? approach to pricing differs greatiy from other legacy carriers 3% Higher?yielding traf?c in OA nonstop markets is targeted by offering cheaper fares on US one~stop itineraries . - Lees restrictive Advance Purchase (AP) ruies - LoWer abseiute fares in some instances as welt- ?e To save space for this Fate-?arriving traf?c, iower?yieiding fiewtraf?c is greatly restricted far from departure - As a result of this tradeoff, ?ow yieids are often signi?caeriy higher for US than R-OD72481 8 2, CONFIDENTIAL US Pricing Structure in GA NewStOpS ie The foiiowing example shows how US incorporates Eower fares through both fare differences and fees restrictive advance purchase requirements in CA nonstep ?ights to SJC $40 at21AP 33413 $3213?? 143%? Lass Res trict'ive APs MILE 55:19.5 $438 Fi?" $15-38 ii - $31.62 Lowm' at Walk Up 363?: Tile?- Me 33 time $41255 fill-,5" 15588 $538 Hi? $8953 me $15509: 540 Lower at21AP r; a A Lees RestricnveAPs 3512 Lower at New Up Nafe; Round?Dip cam bass iare, AP advance purchase yequtmm (ZAP fewest walk ?i3p 1m:- 5398 21% $0333 Mifo 3543 $39 580 Lowe: at Less Restrictive APs 55531! 5539 21m? $5366 $574 5384 Lower at Walk Up SAWS W238 3365; $5555 7 US Pracmg Structure In 0A Non-Stops in markets where one Legacy carrier is a non?stop, for example AA in '3th 53.10; other Legacy carriers'generaBy respect the pricing of the non?stop carrier eewxem A?s Manatee}, m. we W. Semae ?53 we 21%? 3343 2m? $348 zme $393 24M) ?game we MM $448 we? I was game We 14m 3493 52428 ., . Despite having a service . we we sees me we we disadvanmg?rbom DL and 3% me was me 5533 me AA steam we was me We tier? ems me "me me 371181 me was we ease {me $356: the? $358 we Nate: Rnund-tz'rp com base fats. AP advance purwase requirement; GAP lax-asst waik,?up fare? I CONFIDENTIAL - US Pricing Structure in OA-NonsStaps And AA wou?d respend according in both ATL-SJC and 131%.: $528 my; 14M ??3638 Gk? mama sag-mm ?31, won-stag), 33;: and Ma Gmmaming; Sieamw 1% Hammer}: and Cantu-mung Seawim ?52 ?563 23;: 95?: 2m? saw mm 2m? $523 $523 $533: $533 $533 $533 saw? 1m?? ?rm 5445: MM was $395; WE ma- $574 13:33 my 33am mm} gasa: MW $934 ma mm 3% $5753 3mg saws was MAP 5mg 3:332? Sam MAP was mp $534 my: $393 MP mag Haw $552: 35%? $258 :st $932 era-aw (my $952 (new Nata: Round-trip care hse tare, AP advancs. pumass reqwr?emeni?. West walks-Hap fare 9 CONFIDENTIAL US Approach to Local Markets 3? Legacy carriers will aggressiireiy defend the integrity of local pricing structures in their hub nan-stop markets With that said, pricing strategy to undercut Legacy locai pricing in strong hubs is more similar to a iow~cost carrier strategyr - With AA, DL, and UA generally respecting the locai pricing dynamic, how does US continue to separate themselves and maintain their strategy? 1.) US carries a relatively few percentage of locai The us business model is dependenton ?ow other Legacy hubs. Therefore, US must ignore Legacy pricing action in their non-stops and continue undercutting. Fortunatelyfor Us, their current network is uniquely positioned to execute this strategy traf?c compared to other Legacies 2.) in US local markets, relative markets sizes are emaii CONFIDENTIAL US Local Market Structure Looking at traf?c across major domestic hubs and the percentage of iota] revenue generated by traffic, US clearly ranks behind other Legacies - US geherates less than 40% of its revenue and iess than 1/3rd of its traf?c from iocai passengers With the majority of {evenue and traf?c generated through flow passehgers, US is much less exposed to aggressive pricing actions by other Legacies i353? Elememis Ma?nims ?ab Figti?g - $92? ?24; of Emmi Rafi-in ?fai; of Rev from Loss? he?io 3% 45.6% 2% Di. so 2% 418% R-00724821 US Local Market Size US limbs ranks behind other Legacies in local market size Placeholder for market size charts an overall and to sample key spokes US Pricing Over?ap The impact of pricing approach has signi?cant overtap with and networks . . . - AA, Di. and UA have tried to charge one?step pricing in the paai The amount of US overEap wilE compel future attempts and UA insert overlap data chart CONFIDENTIAL Industry Response While US has been able to defend its pricing approach for 1these reasons today, the industry will not anew the same approach for a combined MUS Domestic iegaoy carriers frequently act to prevent other carriers from gaining a pricing advantage Lower fares are introduced into 0A nonstop Markets in reSponse to 0A fares which undercut a carrier?s own nonstops The intended effect is to cause the removed of the tower fares or risk bookaway in their own important markets AA-S industry Response successfui defense today is a result of its unique focal position AA, DL, and UA can?t drive enough revenue away from US nonstop markets to change pricing strategy The AA network provide 0A with nonstop markets to target which are not so uniquely positioned and have greater revenue at risk As a resuit, a one-stop pricing strategy is not sustainabie over time for a combined - - Merged carriers are treated as one'oerrier immediately - - Foiiowing mergers, other carriers" immediateiy began introducing fares in former NW markets to prevent Di. pricing advantages and in former 00 markets to prevent UA pricing advantages - - . - - A hybrid Direct/indirect pricing strategy is not sustainable either 10 AA-S Ru00724825 CONFIDENTIAL Summary AA and Us employ different pricing strategies today, each one very rationale for its own network - -. . - Differences in reiative capacity and local demand result in dissimilar pricing and yield management approaches . US undercuts pricing on industry nonstops to gain an advantage on high? yielding traf?c . ?a The industry wit? not allow AAIUS ta current US oneetop strategy I use current strategy has signi?cant overlap with the DL and UA networks DL and UA have been unable to preirent US one-stop pricing because of markettraits uaique to US - . A combined wouid not enjoy the same protections? The AA approach would need to be employed for a combined network As a result, the current US network would be sub?optimized ,rw'x . ll ?Manama MIN From: Long, Scott [Soott.l..ong@aa.oom] Sent: Sunday, October 07, 2012 8:38 AM To: Butler, Jim Subject: Re: Wednesday I?ll be on the call this afternoon. May be a minute or two late as we will be leaving church. Scott Sent. from my iPhone On Oct 6, 20m, at 8:49 PM. "Butler, Jim? wrote: I may need to take my brother to the airport at that time but could try to multitask. Otherwise, noon oeetral would be better or I can try to join periodically. Sent from my iPhone On Oct 6, 2012, at 8:33 PM, wrote: Jim, Son, team: Agree this makes a tot of sense. We will own the presentation. 4 agree with Jim's comments or} CLT, we may not want to cross the tine of insinuating contraction until we have a fut! story and network ptanning agreement. But if we can, in the context of the quality or durebitity sections, point out that CLT (or has a particularly acute issue relattve to flow pricing, then I think we plant the seed and then come back with the full analysis tater. - As for timing tomorrow, anytime other than 10 AM CT works for us. What about 1'1 . noon I will send an invite late tonight after get con?rmation or: the timing. Let me know. i Thanks, Seth Seth Walton Mobile: 404-824~0248 Of?ce; 404635-3751 Fax: 404-335-3752 From: ?Butter, Jim? To: "Casey, Don" Cc: "Long, Scott" , "Jiede. Tom? "Joe Sohottland@mckinseg.com" Date: tome/2012 06:49 PM Subject: RE: Wednesday CON Fl DENTIAL AA-S R-OO706727 .r?f-rwaK: Don, lthink this makes very good sense. i do have a few thoughts below based on what we are ?nding in the data and what we have suggested previously. i do think the CLT argument is one that needs to be had at some point but, at the very least, we need to'make sure that is very heavily involvad as some prior thoughts on all aspects of the US network work was done a few months ago and we need to make sure they are consistent with the thoughts heiow. ?l agree With your assessment but I don?t know that We'have looked at it enough'to size it yet. 'We also need to make sure that the argument, when we make it, includes thoughts on all aspects rather than just ins?nuate that the only opportunity is just for example). That being said, i think it would be safe to say-that, at the very least, there is some level of opportunity to adjust. - As for the timing of the CLT argument, i wonder if this is the time or if it is after we get agreement or final positions on Quality and ?urability and ?nd out from LCC whether they are going to add more revanue synergies to their original position (A330 opportunity for example). On the Quality assessment, based on what We'are finding in the data, I would suggest we present a refined number. __Among other things, it shows the UCC that we were responsive to their suggestion in the meeting that we look into the counter value. i would then vote to have the response to their one pager as cribs to be prepared to discuss. The reason i lean towards that is that we have not seen the supporting pages that they will be presenting and cribbing it allows us to tailor the responses to their presentation better. i think the date we are finding might lean us in that direction anyway (especially in like nonJStops). i am fine with a call tomorrow morning or at some point. Does 19am work for all or would early afternoon he better? i Jim From: Casey, Don i Sent: Saturday, October 66, 201-2 5:05 PM To: Butler, Jim (So: Long, Scott; Jiede, Tom; Joe Schottland?mckinsev.com; Seth Irvin, Candice - Subject: RE: Wednesday Importance: High Jim, at al, I copied in a few others. in my discussion with Candice, it was clear that we want- to put together a response to 095 latest submission. We will present this to the UCC advisers on Tuesday at 3:00. i think this is a good opportunity to make our case one on one to the UCC advisers and not just the rebuttal. Then present to US on Wednesday. would like someone from McKinsey to put together a short deck for the Quality and Durability issues that recaps our ?ndings and then address what US sent in response. For revenue Quality, something like this: 1. AA presented a fact base that demonstrates that some of the quality of the current US revenue'base will be impaired as a direct-consequence of a merger [2-35lides] a. US has a different revenue model for domestic markets than b. The revenue models em pioyed maximiZe revenue for each respective network and market structure i. have large local markets and less connect 2 CONFIDENTIAL R-00706728 CONFIDENTIAL traffic ii. US has small locai markets and a high 0/6 of connect traffic c. The industry will force aiignment to a single approach one that aligns with the large iegacy carriers as it is revenue maximizing d. This outcome will result a some sub?optimization within the current US network e. We estimated this impact at . . i. Do we want to say we have taken another iook based on the feedback from the last meeting and reduced the number to {once we compiete the local market ciavv back in iocai markets} . . . 2. US has provided a singie page in response which does not in any way dispute our assertion or estimated impact - - Although the US data is not relevant to the AA quaiity assessment, we will explain outcome that US has observed (or do ere-just take the position that it is not reievant and have the expianations as cribsasserts that it has a higher fare in like 0&D?s - - . - a. When decomposing the data in to like to like markets, the data demonstrates that [just . guessing for now] i. . Overlap'markets are a smaiisubset of overall revenue . ii. US reVenue advantage is due to its unique niche network pricing approach . - - 1. This is the exact source of the revenue that had been identi?ed 4 US shows that-they have a higher average fare than AA in nonstop overlaps - - a. The primary reason for this outcome is us having the ability to operate moreregional jets - This is the exact benefit that AAwili be abie to achieve in its standalone plan I Something similar for. 1. We demonstrated that Airline mergers do not achieve the synergy benefits a. To ensure that the results were robust we analytically examined - Xmergers . - ii. Across different timeframes - . . . . Across multiple grouping to defined ?industry? b. response is to find one and oniy one benchmark compared to one and only one- merger. That comparison benchmarked the merger vs American i. This comparison is completeiy inappropriate 1. performance iagged every other carrier for the reasons it has filed for bankruptcy to address Another big; dis-synergy is CLT. Do we want to acme this now? 1? The CLT hub significantly over serves the iocal market? We seen a page on this at As a consequence CLT is highly dependent on connect traffic i have seen this too i. Maybe rank connecting by huh and show on bottom . CLT wili be disproportionately impacted by the revenue dis-synergies CLT is a candidate for LCC entry Five east coast hubs is too many for the merged airiine . . . High connect dependent hubs have been reduced/eliminated by the other airlines Cincinnati - Memphis St. Louis Pittsburgh The necessary rationalization at CLT will have significant consequences for the merged carrier - a. List This has the added bene?t of attacking the US standalone plan. lthink this wouid be bene?cial, AA-S Do you want to discuss tomorrow morning? Monday at 8:30? (may be too late if we want to tackle Don {Son Casey i Vice President Revenue Management I American Airlines? I From: Butler, Jim - Sent: Saturday, October 06, 2012 4:03 PM To: Casey, Don Subject: Wednesday Don, i am assuming you got a caii on the plan for Wednesday. We will obviously continue to prepare for this. On the quaiity analysis, we have been crunching the numbers and i think it is fair to say that we don't have anything as clear as we had hoped but wili find the story to tell. We will continue to work but we should likely get together Monday morning to discuss. jim Jim W. Butler Managing Director - Commercial Planning Pertorm'ance Tel: +1 81? 967 1143 3 Fax: +1 81? 931 4334 jim.butler@aa.eom AmericanAiriines?D 4333 Amen Carter Blvd, MD 551?, Ft. Worth, TX ?6155 NOTECE: Thisemail and any attachments are for the exclusive and confidential use of the intended recipient(si. if you are not an intended recipient, please do not read, distribute, or take action in reliance upon this message. if you have received this in error, piease notify me immediately by return email and delete this message and its attachments from your computer. This email is confidential and may be privileged. if you have received it in error, please notify us immediately and then delete it. Please do not copy it, disclose its contents or use it for any purpose. CONFIDENTIAL 5 U-S AI ng wit/pg; US AIRWAYS US-AA-00914004 Overview The Airline Industry 0 About US Airways 0 US Airways and Your Future 0 . Corporate Cultur? Benefits US AIRWAYS CONFEDENTIAL US-AA-OOQMODS The Airline Industry US AERWAYS I US-AA-OOQMOOG Fun Facts Round trip ticket prices from what year? Philadelphia?Seattle $115? Baltimore-New Orleans $50 I Boston-Les Angeles I $125 Atlanta-San Francisco; $105 New York-Miami $57 New York?London $375 US CONFIDENTIAL - - The Airline Industry is Highly Competitive (Hyena, 1946 Philadelphia-Seattle $115 Baltimore?New Orleans $50 Boston?L05 Angeles $125 Atlanta-San Francisco $105 New York?Miami $57 New York-London $375 US AIRWAYS CONFIDENTIAL Deregulation Created Challenges for-Airlines 1 Passenger Yield and unit Cost over Time la In I I. _u 81;. 3300[f '1 41' 3 '7 1200 31.100Vr? -- I I Ii..i' 'ff'se 20.041 2005' .2093,. '2010 1978 1979 1980 1981 1983 1984 1985 1985 :91 8 . 1990 . 1991 1993 1994 1995 1995 1998 1999 2000 _2001_ 32006 Bowman'R?isi'vi?idt . :i US AIRWAYS CONFFDENTIAL . Lost Decade: Industry Re?SUlted US AIRWAYS CONFIDENTEAL I Deregulation: Profits Had Been Elusive US CONFIDENTIAL - - Industry Consoiidation hasChanged the Dynamic I I airlineslhave Iconsovlidatedto5_._from 91'since2005 I I I @?mmwf - -- Aims? - C(mtipcmtah?wk - ?Mr?nes . I i I, . - US AIRWAYS CONFIDENTIAL Industry is Producing Financial Returns 2008?2012 North American Industry Proft vs. Crude Price 2008 2009 2010 201.1. 2012- Industry Pro?t Brent Crude $/Barrel E. $6.0 $140.00 3 $3.8 $120.00 $80.00 I 0? $60.00'93ng 0pm; 11lan US AERWAYS Consoiidation: Fewer-and Larger Competitors 2005 Revenue Market Share 2011 Revenue Market Share . 710/0 53% x. 20.2%: . I 25%. 17.1% 15.3% 18% 11.4% 10.0% -- - I. 7109?6 1.7% 1.5% 7 1,43; Eln?tcd ?9 (?life-3m? ?mm? mi Cuu?mptai .wsr- SW?me US AIRWAYS 5 Competitive Landscape -- US #4 Network Carrier YE Q2 2012 Headcount Revenue (bu) (HE 0005) Headquarters Cities Chicago, Denver, $37.5 82.9 Chicago Washington. (Dulles), Houston, Newark, Cleveland Atlanta, Minneapolis, $36.4 79.4 Atlanta Detroit, Sait Lake City, Cincinnati, New York (JFK) ail: $24.9 63.8 Dallas Dallas, Chicago, Miami AIRWAYSW F?v wot/v Philadelphia, Charlotte, $13.6 31.4 Tempe Phoenix Total $112.4 268.8 US CONFEDENTIAL . Competitive Landscape -- Other Successful Airlines Total Q2 2012 Headcount . . . Revenue FTE (0005) Headquarters Hubs/Major Cuties Phoenix, Chicago (Midway), 1x $171) 45.7 Dallas Las Vegas, Atlanta, Orlando, SOUTHWEST Baltimore New York (JFK), Boston, RWAYE: $4.8 11?8 New York Long Beach yy?y??z $4.5 11.9 Seattle Seattle, Portland, Anchorage $26.3 69.4 US AIRWAYS CONFIDENTIAL All US Airways US AIRWAYS CONFIDENTEAL - - . bums-and data-?tar?s-iw?vax US-AA400914018 US Airways North American Route Map . um?; .. my 1 luau mlww? 'fig vuw-Mu-?n-?waw; A rm mm: gram *1 Karissa ma?a?, 5 mm? mme mag-?w . may . 4: 4335mm ?mam 'Iha? hm hm mum in; I ammsm mm. US AIRWAYS CONFIDENTIAL . . US Airways International Route Map" A Transatlantic r. walnuumh hm . . #?ww?ww . Mam wwh?u" ?Mmb . . . 4 Destinations Served . 4; Rant?. g? wean}. t? i . . if grew-WM A gyms; . Hunted A 1 MW . ,3 Airlines; #2 g3?? . migw ?3 A 3f? mm 7 I we?- - #4 . Wham ?mfw ?ma-WA? -. we 3?1? 2,4, . Sign?: :54? ??sngak I I I k?XV?f- 5 A n" - ?enemas Mui\?mH it 1 WWM i ?rm; ?smug: US AIRWAYS CONFSDENTIAL I Star Alliance Participation Expands Reach .M?mmr-w?m> ?L?gxh A mom? p. 8% .2). am we. any?A 13$? A aaNtJ ?summh 15-11? trim =11 2 n1:- .9131? urns-sans:rmquma ,M-n .ahoot'z? Va: 1. in. mg.? H. a a? rag-3," metre-mun amt-4- a can?: ~1 2 i' '9 gnaw Mrauvim-u nu Ilfirtyx: Wk. flame-a: um.? A. . swxs?; a - Tau? .mw-?Jaa?n, -. 'm 11.14%; I: ?w m' m? lJK'efi .IN.I. yaw railwriis?gixge E24136: ?:?wmm an. U8 AIRWAYS CONFIDENTIAL Star Alliance Impact Percent of Passengers Connecting Beyond the Hub Connecting Traffic l: . - Mi? KW STAR A LLI 3 as? US Airways flies to 7 Star Alliance han - ASMs flownito Europe touch one of the Star Alliance hubs 44.6% of all" 201 Over 15% of US European --traf?c connects to partner airlines. US CONFIDENTEAL is 1 ?1 Q2 Performance Set Company Records 02 DOT Departure Performance Q2 DOT Arrival Performance 85.0% -- 95.0% 7 15.6% 76~4% 87.4% 35 7% 75.00/ 9 on 66.8% 59 8/ 350% 304% 79.1% 65.0% 633% 54.3% 75.0% 55.0% 0 45.0% 40.5% 65?? 35.0% I I 55-10%) . 2006 2007 2008 2009 2010 2011 2012 2006 2007 2003 2009 2010 2011 2012 Q2 DOT Completion Factor Q2 DOT Baggage Handling 0 100.0/o 993% 99.4% 995% 10.00 as? 99.0% 99.0% 987% 8?00 5.40 6.00 98.0% 4.24 4.00 2.88 2.82 97.0% 2-29 2.03 2.00 96.0% 1 2006 2007 2008 2009 2010 2011 201 2 2006 2007 2008 2009 2010 201 1 2012 US AIRWAYS CONFIDENTIAL Outstanding Operational Performance Rank On-Time Perf. Rank Baggage Handling DL 87.4% -- Us 2.10 US 87.3% DL .g 2.11 AA 81.81% AA 2.77 UA 78.6% UA -. 3.75 A-oozm an Rank Completion Factor Rank Departure Perf. us 75.5% .DL. 72.9% AA 66.4% .149.5% 1 DL :99. 7% 2 us 99.4% 3 UA - 99.1% - i; 3% US AIRWAYS CONFIDENTIAL . Consolidated Passenger RASM Growth Despite more difficult YOY comps, the Company continues generate solid revenue gains 2012 YOY Change in PRASM 8.5% 3.7% . - 2.9% . . i I- {mired RWAYS U8 AIRWAYS CONFIDENTIAL .. Mainline CASM PerformanCe Outstanding cost control helped US Airways maintain its CASM advantage . - 201 2 YOY Change in Mainline CASM (Excluding Fuel and Special Charges) 7.1% 5.6% 4.3% 'jetatue A Hammers; . US ASRIWAYS CONFIDENTIAL - Pretax Margin Expansion US Airways is among the best in pretax margin and margin I tam: . lemme .A u-memzs U9 A Aiming . . SOUTHWEST mnw?avs U8 AIRWAYS 2012 Outlook - The industry continues to reap the benefits of major structural changes [ConSOIidationa-5. I I I I PiaCiWI-z'Ele-Cti-ms 3 a Ancillary revenues .. 'With Weak eCOnomy-and Volatile spriC?S} .?-AiFWays' has 'oUtperformed fRecord_fopaatmg . 0 US Airways is weil positioned for remainder of 2012 and beyond US AERWAYS 4028 us Airways US AJRWAYS CONFEDENTEAL - -- Career Track 155:. Senior iyet retiooe i 1 Manager Opportunities 'Div'i's'ion'Fihance I operations 1 Director Managing'Director Opportunities 1 Officer Level Opportunities US AIRWAYS CONFIGENTIAL - Career Progression -. Diversity of Experience 0 Departmental Movement 0 Majority of managers developed internally, many from the MBA program - - - Significant exp05ure to senior executives US AIRWAYS CONFEDENTSAL . - Track Record for Successful Career Development Many of our executives began their careers in the industry throug MBA recruiting channels Current Position Began Career Doug Parker CEO 1986 Robert IsOm coo 1991 Derek Kerr CFO . 1991 Keith Bush SVP Finance 7 1995 Devon May VP 2000 Kerry Hester SVP 1996 Tom Trenga SVP Revenue 1996 Dion Flannery President, 1993 US AIRWAYS MBA Opportunities in Finance a Financial Planning and Analysis Fleet acquisition, replacement, and renewal - Route profitability studies - Capital project analysis. - . - -- Business planning and performance tracking Financial'forecasts Benchmarking and competitive poSition Labor contract negotiation Mergers and Acquisition US AIRWAYS CONFIDENTEAL - MBA Opportunities in Operations - 0 Operations Planning Analysis - Maintenance (work flow optimization) Flight/InFlight (scheduling optimization analysis) Onboard products (logistics, pricing, sales - analysisReservations (process optimization, manpower; - planning and metrics) Airport infrastructure US AIRWAYS CONFSDENTIAL BA 1 Professionals US AIRWAYS CONFIDENTIAL - - . US AIRWAYS CONFIDENTIAL Corporate Culture . US CONFSDENTIAL . Travel Privileges - Free and unlimited space available travel anywhere on the US Airways system -- Spouse or registered guest and eligible dependents included - Parents travel for a nominal fee Guest pa'ssesSignificant discounts on almost all domestic and international carriers 0 Hotel, car rental, and vacation package discounts US AIRWAYS - Life in Arizona 00914039 AA- US US AJRWAYS CONFIDENTIAL In Summary is well positioned for success track recordof promoting MBAtaient .Greatplacetoworkandlive! .. .. - US Airways ?Save the Date? Schedule - . i Interviews - (Phone Screen) :1 is nt at Corporate Headquarters 7:15am -- 5:00pm US AIRWAYS CONFIDENTIAL . Internship Opportunities Internship Opportunities in Financial Planning& Analysis airways.-.com I I Contact Information Cathy Oshann, CorpOrate Recruiter, HR MBA Recruitment 480?693-8622 I CONFIDENTEAL US Airways Recruiting Folder Please refer to the US Airways Recruiting Folder where you will ?nd the following information: How to apply for a Senior Analyst position -- Benefits Overview Job Description Details about US Airways culture of diversity You belong with US U8 CONFIDENTIAL mggwooila?a . .. Jihzmoizoo m3 Appendix I US AIRWAYS CONFIDENTEAL - - Record Revenue Has Offset Voiatile Fue! 2010:38296 2Q12 YTD: 485% $450h4 - $40054 - $350hi - $360ki - $250h4 - $200h4 - $15034 $10034 . $50k? $axn $?0m YOY Revenue and Fuel Increase gun-lull: 2011:8596 Qua Q210 c2310 Q111 Q211 Q3121 Q411 (2112 (2212 Revenue Increase a can?: YOY Fuel Expense Intrease U8 AIRWAYS CONFIQENTIAL Republic Slots at Washington Reagan National Airport (DCA) Privileged, and Confidential Contains Legal Advice US AIRWAYS CONFIDENTIAL Finance Committee July 2812 Republic Slots at Washington Reagan National Airport (DCA) Page 1 of 6 Background in Washington airional Airport (DCA) is US Airways (US) 4th largest city with 237 daily flights to 74 destinations DCA is a slot restricted. airport. Slots are FAA imposed limits on the number of flights at the airport, with each round trip requiring two slots 0 The primary way for US to increase flight activity at DCA is via the acquisition of slots from other airlines. However, siots are not regularly offered for sale 0 Profit margins at DCA are regularly in excess of those in Philadelphia and Phoenix Hub/Foe L15 Cities of ASMS Profit Margin CLT 35% 8% PHL 34% 0% PHX 24% Other 2% Total 100% Source: FPS for twelve months ending June 2012 Privileged and Confidential Contains Legal Advice US AIRWAYS - Republic Slots at Washington Reagan National Airport (DCA) Page 2 of 6 Current Situation .- Repu blic has indicated a willingness to sell six pairs of slots slots (12 individual slots) are at the following times: . . - Egg}; of Slots 600 1 700 1 1000 2 1100 1 1200 l. 800 1 1900 1 21 00 3 2.299 1 Total 12 0 These slots are air carrier rather than. commuter slots. Air carrier slots are more valuable because they do not restrict aircraft size Proposal 0 Acquire ?12 slots (six pairs) from Republic for $18.5 million or $11.5 million. per slot. Management and Republic agreed to this price subject to board approval for each company Privileged and Con?dential Contains Legal Advice US CONFIDENTIAL Republic Slots at Washington Reagan National Airport (DCA) Page 3 of 6 lustification The purchase price of $1.5 million per slot is below recent market transactions and an October 201] appraisal Proposed Delta Citibank Term Loan (5 in im'lifmis) Transaction Divestiture? DCA Collateral Pool Date fol-12 Dec-?11 Oct-1} Value $18.5 $40.0 Slot Times 600 - 2200 700 - 211.00 600 - 2300 Avg. Value per Slot $1.5 $2.5 $2.2 ofSlots a I 12 -. 229 Higthemand Time Slots '"-2311 Low Demand Time Slots?- - - . JetBloe acquired. the ?16 DCA slots that the DOT required Delta to divest as part of the Randolph transaction is in October 2011 SHiitE provided an appraisal value for 221 DCA slots to be used as collateral, in the Company '5 Citibank term loan. The appraise} valued slots only between 600 and 2100. However, in March 2012 the 2200 slot was determined to be high demand by the FAA. Six of the eight low demand siots are 2200 slots and. are now expected. to be ad tied to the pool at the average slot value during the next appraisal in October 2012 The six incremental slot pairs Will be used. to add. six new round-trips from DCA, starting in October, taking our total departure coont on a peak day from 237 to 243. management anticipates that aircraft utilization wiil be increased to accommodate the additional. DCA flying. The estimated marginal system profitability of the ?ights is $9.1 million or a margin of 24.9 percent (see Appendix A). he net present vaiue of this inves tment is approximately $46.8 miliion (see Appendix B) I I I If the increased utilization to fund the additional flying is not achievable, aircraft will he reallocated to DCA. To the extent the opportunity cost of redeploying these planes to DCA becomes material it is likely to result in the need. to add two larger regional jets to the long range plan. Management is reviewing its express fleet counts and tong term needs and will present to the Board a revised. plan. later in 201.2 0 .The available DCA gate-infrastructure is suf?cient and the additional flying is not expected to cause operational issues in. DCA Privileged and. Con?dential Contains Legal Advice US Republic Slots at Washington Reagan National Airport (DCA) Page 4 of 6 frank Recommendation - I Mdna??fnen?t recommends the Board approve the acquisition Of the 12 siofs from Republic Privileged and Con?dentiai Contains Legal Advice US AIRWAYS CONFIDENTIAL Republic Slots at Washington Reagan National Airport (DCA) Page 5 of 6 Appendix A DCA Marginal Profitability Marginal Profitability DCA Profitability per Deparkure" 2,087 Annuai Pro?tability for 6 DCA Round?Trips 9,140,565 Ma rgin 241- .9 93 This is the average return for the year?ending May 2012 for the bottom 33% of Express ?ying in DCA (excluding new Randolph routes, weekend only routes and hub to huh ?ights) Assumes is increased to fund the additional ?ying Privileged and Con?dential Contains Legal Advico US AIRWAYS Republic Slots at Washington Reagan National Airport (DCA) Page 6 of 6 Appendix - Net Present Value Analysis - PV Analysis (E. in millionst Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 3 Year 9 Year 10 Year 11 Yyar12 Year 13 Year '14 Year 1 5 Year 16 Year 'l 7 Year-18 Year 1 9 Year 20 um? 12 [)Cm Slots {19) Total Investment (193 - - - - - - - - - - Va] UP of 6 DCA Round-Trips'1227 Expense? Ill-L1). Bantam 206 Resicl ua] Gain onSalc of AssetsIncome'raxesmm 11:1; 1a 15.1 a :22) Ben :4 it (excludes Investment'34 169 Not Present Value 10% 4&3 ?ene?is and Fair Market Valup of slots have been adjusted annually using Che following longterm inflmion rams: 14% ?r?nax?i thru Year 4; 25% Year 5 thru Yexar; and 2.0% bayond Year 8. Forecum per 2Q 2012 Federal Reserve Bank of Philadelpth survey of foracastsam $12 milliun per 5101. is the fair market value assumed in the analysis, and 55 based on the October 3'11 201] valuation reporl used to deletmihe slot value for collateral runways, This; value has bet-n adjusted annually using the above mentioned in?atiun rates u/me Privileged and Con?dential Contains Legal Advice US AIRWAYS CONFIDENTEAL US AIRWAYS CONFIDENTIAL 6' From: Johnson, Stephen To: Zuckman Sent: 7/23/2012 6:45:34 PM Subject: RE: Chicago Tribune UK will think about it overnight. From: Zuckman Sent: Monday, July 23, 2012 5:44 PM To: Johnson, Stephen Subject: RE: Chicago Tribune We can make edits it?s not running tomorrow. From: Johnson, Stephen Sent: Monday, July 23, 2012 8:40 PM To: Jill Zuckrnan Subiect: RE: Chicago Tribune We should discuss the text. There is no; question about AM R?s ability to survive on a standalone basis. Am worried that Roy will be laughed at for an on ed based on worries about survival. From: Jill Zuckman Sent: Monday, July 23, 2012 5:35 PM To: Johnson, Stephen Subject: RE: Chicago Tribune here you go: Flying Too Close To the Ground By Roy Kienitz There?s a. joke people tell in aviation circles: how do you make a small fortune in the airline business? Start with a large fortunei Today's case in point. is American Airlines, which tiled for bankruptcy last November. Americans plight is not unique all the major carriers have gone through bankruptcy at some point. And no wonder: if you added up all the pro?ts and losses from every U. S. airline for the last 100 years the industry has never made a cent. Of course in today's world bankruptcy rarely means actually going out of business. I hope American stays around, if only for the catastrophic effect a, shutdown would have on its nearly 70,000 workers. But if it survives it should not do so in a form that either stifles competition or perpetuates the cycle of bankruptcies. Unfortunately, both of these outcomes are possible. One result of the industry's bleak ?nances has been mergers. Delta merged with Northwest and United with Continental; even the scrappy Southwest put aside its go-it-alone tradition and bought its low-fare competitor AirTran. The result today is an industry dominated by ?ve major domestic carriers. United, Delta and Southwest each has over 15 percent. market share._ American is 4th, with around 12 percent and US Airways is 5th with around 10 percent. Four of these five are pro?table all but American. It lost $2 billion in 2011 and $1.7 billion In the ?rst quarter of 2012. US AIRWAYS CONFIDENTIAL So, can American survive? American?s management hopes to bring the company out of bankruptcy as a pro?table, stand-alone entity. tempting as this may sound, most experts do not think this is possible. American has no realistic plan to be 'f ?rofitable in a standalone form. Its management. argues that its high labor and pension costs are the problem, but this is less than half the story, Americans core problem is its crippling lack of revenue. In their bankruptcy court ?ling just last week, American revealed it has lost $10 billion since 2001. Its strategy dominate five hub cities while neglecting dozens of others simply does not capture profitable traf?c. For example, three of its biggest footprints are in New York, Los Angeles and Miami good markets by themselves but not well located to serve connecting traf?c. They're just not on the way to other places The result is itineraries that are inconvenient, time-consuming and expensive. Even if it reduces employee wages and ?res thousands of people, this fundamental network: flaw means American still cannot grow its revenue base over the long term. This path will inevitably lead back to bankruptcy. There is another option. American could fix its revenue problem by joining forces with one of the medium-sized airlines, one whose network is complimentary rather than overlapping. The obvious candidate is US Airways. US Airways? CEO, Doug Parker has been clear that he thinks it would be a good move for both companies, The combined airline would be large enough to compete with the Big Three United, Delta and Southwest but not so big that it would dominate the market or raise antitrust concerns. The Big Three would become the Big Four, and when it comes to competition, four is better than three. Whatever happens, aviation needs to grow up as an industry. That means managing its affairs according to the unforgiving laws of the market rather than the romance of the skies. Warren Buffett said it best: ?7718 ?war-19f sort _3 of business is one that grows repair}, requires Signi?cant capital to engender the growth, and their ear-7255:1173 or no aim-icy. This has been the history of the airline industry, but it doesn?t have to be the future. Roy .Krfenirzwas Under Secretaryfor Policy at the US .Departmer-zt of .Yi?arzsporration??om 2009 to 20.1.1 and is now an adviser to US Airways. From: Johnson, Stephen Sent: Monday, July 23, 2012 8:32 PM To: Jill Zuckma'n; eliseeberweln; Subject: RE: Chicago Tribune Sweet. What is he going to say? From: Jill Zuckman Sent: Monday, July 23, 2012 5:25 PM To: Eben/vein, Elise; Johnson, Stephen; Subgect: Chicago Tribune .. Great news! The Chicago Tribune has agreed to publish Roy Kienttz?s op?ed. Iwilt keep you posted on timing, as I get that .lnformation. Best, US CONFIDENTIAL 6.. En - WVILNEIG 9179601700?! Guerview The new American will be strong and much progress has been made Hubs in the right places and well positioned partners In Performance improvement is strong relative to competitors Operational performance at all time highs Quickly and effectively restructuring The Plan for Success positions?American for leadership Addresses structural issues and increases revenue r. Builds network on points of strength Fleet piancreates better operating economics . Major investments in products and services The rightmerger under the right conditions could build on Americans a - a Merging may makesenseurherethereis strategic alignment, operational fit, reasonable deal terms; and-the execute USAinways?husinessmodelis notsustainable Amerger needsto drivej-ualuefm American-?speople and stakeholders Hostile take-over would harm American andits people at Merger would limit career growth Opportunities - a Integration of labor groups will be disruptive Combined company would be weaker and riskier 9?7960?5?00?8 9W 15 Em: .31 nomaonm >3383? 308 ?Eo3mzomsum ?3393 mA WVILNEGHNOO 6496017008 Sama? waiida?ed Capacity in years; faiiowi?g merger Annual indaxed at 190 1 year befere dosing Spread 110 'vs13a/0 '100 2065 33 g0 I i 4 Year 83039 Year +2 Years +3 Years Merged carrier other US-based carriers innovate: schedule data 35 WVHNEGHNOO mw" The Gamma:Hawk: Ra?emiimd- I Departures per day per minim; Connect population Huh! focus airport Departures East'Coast hubs and per day? focus cities 433. . -520 388 ~65; 21%. 707 2M CLT Aiitww?: ~350 MIA 345 1 incsudes AAInnovata 2312 schedule, US Census Bureau (2011 est), US Department of Transportation (0018) 36 Ug . ayg? Shawg 9 Upgide twmtuni?y for Empmyeeg 3? US Airways.has_consistentlyernk_ itsmainl-ine fleet over the past fix/g years Maimine aircraft count at year end1 400 1.359- 300- 250 _7.50WVILNEGHNOO zeseovooe_as-W integrating Seniority Liets People FACT IMPACT The McCaskill~Bond statute governs seniority integration betWeeh employees of merged carriers An arbitrator typicaliy considers the relative economic position of each carrier and the career "expectations of its employees A carrier in. bankruptcy is characterized as a ?failed carrier? Empleyees of the ?failed carrier? are placed at a disadvantage on the combined seniority list because their career expectations are uncertain and their carriers financial strength is in ques?on 38 Precedaat Famrasaaiarity int'egratim of thaNcn- .Jaitkrupt Airline n?u-ugl a ww?m?mwi?I-unn-I? a u_m-uu_munn_nuwwumnn' The marriage of American and APA emphasize ?C..if the America West piiots argued TWA was deemednota seniority integration process that US Airways was a failed "marriage of equdl?ij?f'itirtder- mix/d not allow the healthier . carrier'_ the fair and equit??bl?le??dardfa union to protect its as TWA was labelledjdfailedj{_ tramp/oysters overthose of the i accepted failed carrier; then mergers I. 51*; i -7 this and issued a 3 carrier . . . We uld be far more likely to list fail? 3 -- pilotsiat America West over higher?seniority pilots at US Airways Based on this rationale: APAhas-impiicitly accepted the fact that the US Airways piiots? union, should. as a "failed carrier? US Airways pilots should recaive special treatment or seniority integration rights .yis-a-vis American. piicts 3% 1?78 960170 0?8 Amemea?a?e P?en-Wwidee .S?gm?mh?y I me Oppemm?iy for Adveneemem 5? Undemmerica..n?s plan, there will-bebver .1 jobs While over 1,200 new firstof?cer- roles open? - - New Piiot Jobs by 20?? 2,555 iAA/us ANUS scen?r'io assizm piione: M?USmerger in Jan2m 4- I i US scenario assumes 10% immediate reduction of capacizy and then at 50% ?fth-e growth rate projected in the AMR Busihess Plan Capacity is removed from narrowbody aircraft 40 iategratiea implications US Aim/aye has a poor record with post-?merger integration is The main objective for the US Airways unions is to protect the jobs of their members a GiVen the labor issues and lack of integration at US Airways, it seems uniikely that post-merger integration will be campieted as easiiy as promised 41 be'Feaker The immlm? i U3 ays The new carrier would have a dif?cult road ahead 1Q 2012 Unrestricted Cash as Last Twelve Month 20125 Adjusted Net Debt 1? 2013 Revenue 4.2.x 2m 2.5x AWan M- Alaska JetBlue Southwest] United] American as Aimays US Airways JetBlue American Delta! United! Southwest! Alaska Alrtran Continental Northwest Northwest Continental Airtran 2911 a Len th Ad'us Mainline RASM - . 5t .9 9 3 2013E EBITDAR Margm (cents) 14Delta! American US Always Ma?a Jetmue Saumwesu Alaska JetBlue American United! Southwest 1 Delta 1' US Airways Continental Northwest Alrtran . Continental Aim-an Northwest SLA RASM using AA methodology Wall Street research, company ?lings, Capital IQ, E3le 42 he plan for succegs positions American-for long-term growth and sustained profitability,benefitting our custamers, our peep?e, ecommic stakehoiders and the cemmunities that we serve 40 2.151 . . OOZE CONFIDENTIAL Overview The new American will be strong and much progress has been made 5 Hubs in the right places and well positioned partners Performance improvement is strong relative to competitors Operational performance at all time highs Quickly and effectively restructuring The Plan for Success posi'tion?sAmeriCan for leadership at Addresses structural issues and increases revenue Builds network on points of strength Fleet plan Creates?better operatingeconornics Major investments in products and services a The right merger under therightconditions could build on Americans at Mergingmay 'makesensevfrhere there is strategic alignment, operational fit, - -- .s US AirwayS?business 'model?is not .suStainable- A merger needs to drivevaiuetor American?speople and Stakeholders It Hostile take?over would harm American" and its people *5 Merger would limit career growth opportunities It integration of labor groups will be disruptive '3 Combined company would be weaker and riskier CONFIDENTIAL RED-409983 Overview - The Plan for Success positions American for more improvement The right merger under the right conditions could build on American?s Hostilelake?over'woiild harm American and its people CONFIDENTIAL Amarican?s Hum are $.0de ?'34 ?Tammi-?an P?p?lation mamas-- Fortune 500 - . - Corporatims 8.9 Chicago Dallas US Census, 2010, Fortune 2012 CONFIDENTIAL Hg bs ars 'Fositiarisclis Cagp?mra?p {Traffic 1* 'oneworld is strong isms-most lucrative markets in the world, with hubs in four of the ten 7 largest premium mamas-:3; - Markets international Pre'mi-LimEassengers Per Day Each Way ?4,200 2,300 2,300 I I LHR HKG SIN NRT CDG JFK ICN FRA PVG BKK MIDT International Premium Passenger Bookings CONFIDENTIAL American and onewerid ere Strem memes: impe?em markets Americah and?its Oneworld pertnere expeeted corpere'te 'Eeikemie' share in the biggest markets Revenuesham; Expected Cetpmew *Revenqeshare Top 50 wmmgum 39.8% 1? 37.696 . 13.0% 81% United American Dalia. Other Star .SkyTeam Unaiigned Aimays mm.? 201 1 Quaiity of Service index weighted for PRISM company travel. Air companies in PRISM were used forthe 2011 industry revenue (contractedlnon~conirected, domesticaEly/internationally based). CONFIDENTIAL 1 2 American?g Revenue Trajecto Mammy Change in Censoiidated Unit Revenue? ?2 April 2012 Changein'Consoiidated Unit'Revenue1 Q1 2011..to.-.Q1 2012 huw?exu- A United US Airways American Delta Am'?ric'an PRASM excluding special items Industry inciudes ATA carriers: UA, UL, US, E36, WN, AS. Carrier speci?c data is not availabie CONFIDENTIAL mamas-ed? 30% with-impfowme?ts {3 Domestic. unit revenue '31llRiemat-iofnalperformance- -- - Cents - .2 (22,2012, .. . . Domestic Atlantic Paci?c 1 PRASM excluding specia: items lied i0 . . . I mg 0m} Excaiiem Gmmi 'e are an t? the rest-metal,? Dear) CONFIDENTIAL AA-SR-OO409989 CONFIDENTIAL are Making gimme sees eh Resimemriaa ?f Reached teh'tative agreements to restructure the soohomics associated}? with almost 200 aircraft, with savings exceeding $1.3 biil?on over six years a Unsecured Creditors Com'haittes SUp-ported iour labor savings proposals 9 Targeted. Significantisavi-ngsoversix years in sapptier concessions I Reached ssh-sshsua-l I {New ma fepressnted . labor-grasp nearly pea'piefahd saVi-hg_-approximately 1300 jobs CONFIDENTIAL vew??ew will be strong and much progress has been made- merger' underith eif righ 3 {conditions COU-Id-bu-EldOn American 3 womd harm American and Kits p?edple 1O 11 We seek a compe? i-ve advantage through a combination our strategic assets, restructured caste and a refocused strategy Have Deveieped a Simeg Pier: fer CONFIDENTIAL CONFIDENTIAL The Plan Paamana A ariaan with a Campa?ma Cam trauma,? 2011Mainlina$tage Length Adjusted unit Cost Exn-Fuei" America?- United: :3 baa New USA-mys- American (201-7) 1 CASM excluding speCiaI items. AA Stage length 'methodolagy. New American inclUdes Steady State'labor and rion?iabc'a'r cost reductions, does not include interest savings and revenue enhancements. SEC Filings, GAG, US DOT Form 41, Company Data 12 CONFIDENTIAL a . M?Emw ww?m?mim. m3ng . a . ?mammamznm. ma?a.an 8 ?m?5m . .. .. mag? H. . Umamsa 438cm: ngumm?mz m?nE??m . m?hm? 3? . Am 14 ,m-ma Four Core Principles of American?s Network Plan aw ?etwmk um?zeg Ameriaan?a' mm 0% Siren CONFIDENTIAL CONFIDENTIAL 0409996 merimn?s Gm .sh E3 Wimari am im am Our grc?wth is fobused on a?d i?'bf?ddm'i?a?tly Inih?' wars AMR ASM-Growth Indexed to 2011 2012 ,-_2o14 20157? 12018199. 52017 a?omestic mintemational 15 CONFIDENTIAL American?e Aircraft - 3' Our large order book allows us to renew our fl to the next generation of aircraft B737 Family 8737 Family MAX BT77 Family B787 Family Total Boeing A320 Family A320 Family NEO Total Airbus Firm Orders 133 100 16 42 291 130 130 280 ill Eaevelarlenlze Fleet eat with the associated financing to bridge 58 85 280 365 Fleet count as of and of Q1 2012 Portions of order remain subject to an agreement on terms and conditions with Boeing 16 CONFIDENTIAL Aircm? was Cream Fieximmy {m 'ap-Eammem Wu?em ?a to renewi??ef 1 - . - . and Growth Potential; YE 201?: Retirements Firm Orders Options Max 2019 Retirements depicted are potential 17 18 Lie-Flat Busms'? Class Lead mg Main cabigj-Exitra 5033?? ES Ame-i" CONFI CONFIDENTIAL Overview 5 new American Wiil be strong and much progress has been made e-Plan for Success 'pOSItions American for more improvement 5 Hostile takeover by US Airways is bad forAme-rioan 8 people 19 CONFIDENTIAL a aerger May Selected key elements Strategic strength in most important markets a High Value Customer focus 5 Appropriate given industry dynamics and likely competitive response 3' Labor stability and opportunityfor careergrowth we Fleet commonality - Similar technology "platforms I: ferimrestors 'andcreditors a Does not jeopardizeongoing operations or plan toemerge I Fully realizes costredUCtio-n?opportunities. process a Sensible View of integration and likelycomplexities Ability to integrate groups a Incorporates anti?trust considerations is Allocates value appropriately a Addresses change of control provisions or other unique constraints a Achievable financial requirements at Merged entity has strong capital structure liquidity, leverage) 20 CONFIDENTIAL Unauata?aama implications 5% Revenue disadvantage due to network structure will persist a Cost advantage will likely disappear when open contracts are reset to industry rates 21 CONFIDENTIAL Ms?" an ?ewnw Pe?m?mame adjusted "mainline Unit-ir?venue?. 15.0? 14.'0? 13.05:- 12.092 11.o? 39? ?vmr an -- 13.2 m? United Deita American US Airways 2009 '20102611" 2012 3 1 i I DUNW, and data combined throughout. AA stage-length adjustment methodoiogy. 1 PRASM from SEC Filings 22 CONFIDENTIAL United states T'Eaf?eMix wage?seem: (Ape: adjusted er stage'mngl'th) Percent ofirevenues passenger miliesf; 533*? {Lumieemei A Aifiinee Cement Locai . 1 American Airlines April 2012 results (domestic US oniy) US Department of Transportatien (0018), Company data 23 CONFIDENTIAL innovate; ayg Hag me Smai est ntema?am ice 0f the Legmy Camer? E. US AirWaysl?lyinlgL-is domestically and relies on a United 7 code-share. agreement to prop .mp- its network 3* has no pr'esehCe in the Pacific 201zgep'graphic' . . - PercentofiASM?s' I, 100% ?lnt?m'a'tmna! .- New AmeriCan (2017) 24 . US Airways . American 4mm CONFIDENTIAL AA-S 0006 US Aihrvays? Casi Admmage is N??e?g?ot?a?msi are CG 2011 Mainline Stage Length Adjusted Labor Unit Coast1 magma? ham {m Un?m American Unite-d Labor..er ,,Unicn, 1213112011 New (2017.) Ali major labor groups have o'p'ehagreeme'nts Piiots and ?ight merger Lack cf integrated and updated costbelc'JW market! but this wiilibhange as scion? ash-em; deals 'are'r?aChi'ed - 1 CASM exciuding special items. AA stage length methodofogy SEC Filings, DAG, US DOT Form 41, Company Data, US Aimays 10K 25 CONFIDENTIAL ma mpam Us US AirWays? 2011 Operating Inmfm?z ACt'nal AtMarket Margin I 3.5% 1 Labo? gab estimated at 0.61 Cents (vs; average- 6f Delia and United per AA methnd) 2 Consolidated operating income excluding special items Company ??ngs, DAG, US DOT Form 41 26 aw. Mm. CONFIDENTIAL Hignee leet Leye in eduetty US At. High leverage ratio make US Airways more susceptible to future industry shocks Lack of fuel hedges further exposes company to economic volatility Few, if any, unencumbetediassetSfremiain to borrow against 2m 2E Adjusted net debti lEeiTnAet 4.JetBlue American Delta United Southwest Alaska Airways Airtran 1Adjusted Net Debt Total Debt (exciuding Pensions) Cap Op Leases at 7X - Unrestricted Cash 27 Wall Street research, Capital 19: CONFIDENTIAL Signi?cant Dem {mm-2393.331 C?ming Yeam 5 a US Airways Additional borrowing 'eyerj greater iiquidity consem's has over $417 billion in d?ebt'coming due, with a large-amount payable ?ys? Igpci?ming Capital leases I I I $~Lsmm Thereafter" 2012 2013 2014 2015- 1 22616 US Airways 2011 10K . - 28 P/?va?u- CONFIDENTIAL 001 L53 iho Como wi?th 'og?giog'mom? Groom Annuai impact of labor dis-synergy US reported labor dis-synergy Full impact of proposed dealo Cost of US Airways Total labor dis?synergy change of control provisions (snap backs) 29 CONFIDENTIAL 1 US Airwaye .ndereie?ee the Other Cee?e with erger Category Liker cost Description Minimizied if pilots managed as separate groups (but iaber productivity gains) Facility closure costs, advisory fees, etc. Change eon rot leads to impairment of net operating Ides? which would have reduced future taxes CONFIDENTIAL 001 2 A mm Vania fm? mer??m??g mm 5' American is signi?cantly iarger and brings more va?ue mm the transaation American Higher I (Lower) than US Airways Revenue bi?iom) 24.0 13.1 85% Cash billions) 5.6 2.6 115% Capacity (Billion ASMs) 172 89 93% Domestic 107 . 69 55% 3 international! >65 20 225% Destinations served 26'? 206 1% Domestic . 175 159 10% international 92 47 95% Total Mainline Fleet 604 340 Narrowbody 484 314 54% a Widebody I 120 26 362% 201?! SEC Filings, Diio CONFIDENTIAL 001 3 Nevember 2006: U8 Aimeys makes offer to merge with Delta while Delta is in Ch. 11 This is US ays? {eerie atiernetie merge With a larger-earner {as the America "est integra?en seniineesi Am: 2003: Reperts of US Airways and United in advanced merger discussions April 2010: US Airways and United were reported to be in merger talks. Negotiations were being driven by cost savings initiatives. America WeSi' integratien December 2006: Delta rejects US Airways propose! claiming anti?trust issues, overstated significant one time integration costs synergies-and:_ - .- . announced a merger agreement, creating," at the time, the largest airlinein the world Delia and Nerthwest - May 2010: v' United and Continental sign merger agreement, creating the werld?s Largest airline as: meeSUred by revenue passenger miles 32 CONFIDENTIAL ummew The new American wi be sireng and much progress has been made i! The Plan for Success positicns American for more improvement The right merger under the right conditions could build an American 3 33 CONFIDENTIAL 001E ,ergem Higtmica Cm Sammy Consolidated Capacity in years following merger AnnuaiASMS' indexed at 100 1 year before closing I Spread 2005 At Ciose +1 Year +2 Years +3 Years Merged carrier AH other US-based carriers 34 CONFIDENTIAL 6 The Combined Neiwmk [Quid aeseadi Ratiamiized per day per East Coast hubs am Hub] . Departurea WISA million Connect focus cities focus airport per day? pcpula?on persons traffic 4 Wm" wh. w~I Mn. ?heaven-hwy aw.? WV wu mg?m??~350 . ., 345 ~60 41% :?meacan?m?nes 1 includes AA[nnovata 2012 schedule, US Census Bureau (2011 est), US Department of Transportation (0018) 35 CONFIDENTIAL US Airway? Heat Mm 331an Lime Upgi?e A mgmyaea US Aimays has fl?ethver five years Mainline aircraft count at year end? 490., 360 "3555 . 348 342 340 350 - 300 250 - 36 [Kwhv .. CONFIDENTIAL tnteg rating Seniority Hort Ameneenfe _?Peo;pte FACT IMPACT The McCaskilt~Bond statute governs seniority integration between employees of merged carriers An arbitrator typically considers the relative economic position of each carrier and the career expectations of its employees A carrier in bankruptcy. is characterized as a ?failed carrier? of the ?faiied carrier? are ptacedet adisedvantage on the combinedseniority ?st because their career expectations are uncertain and their carriers financi'ai strength is in question 37 CONFIDENTIAL The marriage of American and TWA was deemed not a ?marriage of equals? under the fair and equitable standard as - TWA was labeled or failed . APA emphasize the seniority integration process could not oliow the healthier carrier?s union to protect its employees over those of the failed carrier, their mergers would be for more likely to foil? carrier combined seoiority list Airways Based on this rationale: 9 so APA has implicitly accepted the fact that the US Airways piiots onion, USAPA, should designate American Airiines in bankruptcy as a "failed carrier? I - I ?it USAirwoys pilots should receive specie! treatment or seniority integration rights yis?a?vis American pilots America West pilots argued that US Airways was a failed Arbitrator partially accepted this argument and issuedo bene?ting lo wer~seniority pilots at America West over highernseniority pilots at US CONFIDENTIAL wememem ?merioee?e Mari igni?cem eermeiry for a Under American?e pian, there be over 1,300 new captain jobs while over ?i200 new first officer roles open New Pilot Jobs by 2017 Captain First Of?cer ANUS scenario assum prions: AA-US merger in Jan 2014 US scenario assumes 10% immediate reduction of capacity and then growth at 50% of the growth rate projected in the AMR Business Plan Capacity is removed from narrowbody aircraft 39 CONFIDENTIAL A US Airways tntegretterr mpiicetterae 3? US Airways has a poor record with ipost-merger integ ration (Themein objective for the us V'Ainvays'unions is to protect the jobs oftheir members Given the labor issues and lack of integration at US Airways, it seems uniikeiy that postmerger integration wit! be cempteted as easily as promised 4O CONFIDENTIAL a The new carrier wOuid have a dif?cultroad ahead 1Q 2912 Unrestricted Cash as Last ?waive Month Revenue 209/0 . Alaska JetBlue Southwest! United} 'American'I'US Airways ?elt'a'l Airtran Continentai_ .Northwest 2012f. A?justed Net ?39th 2013 EBITDAR 4.2x Jet'BIue' American US AEMays- . United] Southwest it Alaska - - Northwest Continental Airtran 2011 Stage Length Adjusted Mainline RASM {cents} 14.6 13.0 11.3 I Continental Northwest Airtran United! Deltaf American US Airways Alaska JetBiue Southwest} Margin 14% . 14% 14% 13% 7 AlaSka - JetBEue American Unitedf Southwest! Deital US Airways Continentai Air-Eran Northwest SLA RASM using AA methodology Walt Street research, campany ?iings, Capitai IQ, BPM 4?1 CONFIDENTIAL .v :9 The plan for success positions Amer?can for [long?t?rm growth and sustained profitability, bene?an our custcmers, our peeple, economic stakeholders and the cammunities that we serve 5144?? v? zw WK 40 Presentation to AFA May 2, 2012 US CONFIDENTIAL 3501 A Last Decade: Airline Index -- 2008-2009: Recession drives largest (i YOY revenue decline since 9/112001: 9/ 11 creates demand shock; 2007': 0" begins to ?56 Sigm?cant mdus'try capaC'w CUES i Gov?t offers ?nanciai assistance to toward 2008. Mumbai 180 industry but ultimately many ?le readied 7/2003 terror?ist attack for bankruptcy protection - i =0 2008: Madoff . .0 . .33. a: 2008. Bear Stems, AIG, .. . utua co 2: so . 2005: Hurricane Katrina; 140 2002: US Airways enters ?rst oil spike 2009: bankruptcy 5_ . unemployment rate 2011: American tgrg??ygoat?rpgr; reaches highest level Airlines enters . 120 - on liquids prohibited Since 1983 ankruPtCy 2002-2003; SARS 2006: Subprime I 2009: mm epidemic I 100 . oumreak begins; mortgage crisrs 2001: {Dot Com recession slows travel explodes 2009; Afghanistan surge weakens. industry trends demand, mainly 80 .. .- in Asia markets 2007; Iraq 2009: Delta airplane -. - surge ?crotch bomber? arrested 2010: United and 2001:_Afghan War'begins .r . . Contrean merge 200'5:'A'rhe'rica West - 200.2,; UrgtecliAlri?nes. and US-Ajrwaygmefge: 2010: Southwest 20 en ers :anrup . . . acquires AErTran 2003; Iraq War begins 2005: Delta and Northwest 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201.0 - . US AIRWAYS Lost Decade: Oil Prices Cripple Industry 160 140 120 100 $per bb.i-Spurce; v.5. "Departmentof Energy Highest crude prices ever Us AIRWAYS CONFIDENTIAL 3 Lost Decade: Airline Revenue Plummets 20% -v v- 10% 0% 40% 420% -- 30% -- Deregulation OPEC Oil Crisis Stag?ation AIRWAYS CONFIDENTIAL 1.98Tl.~1983: Iranian led oil crisis monetary policy 1980 1982 1984 3.986 1988' Gulf War I '1 992 1994 1996 Gulf-War II housing bubble dotcom bubble 911 terrorist 1998 YOY Change in GDP Change in Industry Revenue attacks 2000 2009 Recession 2004 2002 2006 2008 3040% 450% LostDecade: Bailouts and Bankruptcies Merger Abandoned :urmep'munes Bailed out by ATS B. in 2002 Bankruptcy in 2002 and 2004 Bankruptcy in 2002 'u?'we?munes eme?cammims Restructuring in 2003 Bankruptcy in 2005 Bankruptcy in 2005 US AIRWAYS CONFIDENTEAL Last Decade: US Airways His?ier?ml Pretax Encame (L033) Excluding Spec?ai 00mg $1,000 535 444 $500 - $0 1 ($500} (6?2 ($200002 ($1,500) . - 315M . (12004:: . Merge-r {$2,000} - 2001 2002 2003 2004 2005 2006 2007 2003 2009 is pro forma (USDAirwa America West) US AIRWAYS CONFIDENTIAL A Last Decade: Three Close Calls for US Airways 2005: Legacy US Airways avoided liquidation and America West Airlines avoided bankruptcy by merger 2008: US Airways narrowly avoided oil spike induced bankruptcy by ?Friends and Family" liquidity program .- 2009: US Airways narrowly avoided recession induced bankruptcy by second ?Friends and Family? liquidity program -. Very important to recognize that US Airways would not have survived without the concessions made by employees in the bankruptcies . . -. 0 However it is equally important to understand and acknowledge the converse: at no time during the lastdecade could US Airwayshave offered richer labor contracts. Even with these concessions, the. Company lost more than $5 billion between 2001 and 2009 -- US - I A Last Decade: Shareholders Also Paid Steep Price Aug 2008 secondary stock offering i - Raised $179 million Diluted shareholders by more than 20 percent Oct 2008 secured $950 in ?nancing and liquidity commitments Transaction added nearly $400 million of Incremental debt to balance sheet Liquidity largely provided by US Airways business partners All new debt senior to interests of shareholders May 2009 secondary stock and convertible senior notes offering Raised $234 miliion But combined transaction diluted sharehoiders by 48 percent in Sep 2009 secondary stock offerin - Raised $137 miilion - - - _y ?ut offering diluted shareholders by a pp'roXimately 17 percent - Nov 2009 7 Aircraft delivery deferrals Deferred delivery of S?n?iew aircraft deliveries Postponed international growth: Intotaizt? -. Increased debt by more than $400 million, largely/provided by business partners Deferredapproximately $9.6 billion in sales by Airbus and engine manufacturers Diluted shareholders by approximately 112% US CONFIDENTEAL - 3508 A Lost Decade: US Airways Left in Weak Liquidity Position 409/0 - 350/0 309/0 250/0 - 209/0 159/0 10%) 50/0 - Unrestricted Cash as a of LTM Revenues as of 12/ 31/09 35.1%) 34.8%) 22.796 22.19% 18.6%: 16.70fo 14.40/0 ALK JBLU LUV I CAL AMR DAL I I Form 10K US AIRWAYS CONFIDENTIAL New Order: Fragmentation Reduced Percentage of Total ASMS Fiown by US Carriers 1 983 1988 1998 2003 2010 Carrier :29 Carrier 1% Carrier 1/9 Carrier Carrier 29 4 Eastern 10% Contmental 10% Northwest 10% Northwest 1 1% Southwest" 14% 5 Pan Am 10% Northwest 9% Continental 9% Airways -- 10% U3 Aimaye Atmeye 7% Continentat- . 10% - Jet Blue 4% 7 Northwest 6% Eastern 7% Southwest 5% Southwest; - . .'-Alaska 3% 8 Atlantic 4% Pan Am 7% TWA 4% ?meriea West: 3% 3' 1% 9 Western 4% are airways 4% ?ameriea West 3% . Alaska 3% 10 Continental 3% Piedmont 3% Alaska 2% vet Blue 2% Big Three 36% Big Three 42% Big Three 55% . Big Three 50% Big Three 68% Low Cost 0% Low Cost 0% "Lays/Cost - 5% Low Cost 10%. Low Cost 19% 24% 9 4% 5-39 24Market Share 0% US Market Share 4% USMarket Share 10% . .1U5 Market Share 13% US Market Share 8% . .__*_Includ_es AirTran US CONFEDENTIAL USAirways: Size Matters 2011 Revenue Market Share 71%. .- r" . . "27.50/0 . 26.10/21 1180/0 1230/0 Source: SEC Filings and Company Reports US AIRWAYS CONFSDENTJAL 3511 US Airways: Assets Matter ?If you are not first, you are last? - Ricky Bobby, Talladega Nights Assets EWR, IAH, 0RD, Pacific, Europe, STAR leadership, ATI ATL, New York, MSP, DTW, Pacific, Europe, Sky Team leadership, DFW, 0RD, MIA. and Latin America, LHR, Oneworld leadership, ATI PHL, CLT, DCA, Shuttle, PHX, STAR membership, no US AJRWAYS 3512 USAirwayg International Matters International 47.2%: 45.2% Source: US DOT Form 41 - 2010 data US AIRWAYS CONFIDENTIAL USAirwayst Revenue DisadVantage Q3 2011 LTM Stage Adjusted ConSolidated PRASM 16.14 14.07. aways" US AIRWAYS CONFISENTEAL . -- 3514 State of the Industry: US Airways -- Significant Revenue Disadvantage - . LTM Q3i2011 Stage .AdjustedTRASM 15.95? 13.1% disadvantage US Network; Stage Adjusted to US Airways LTM average stage length of 988 miles; Network includes United, Delta and American US AERWAY-S CONFIDENTIAL - 351 5 State of the Industry: US Airways Cost Advantage LTM Q3 2011 Stage Adjusted TRASM . .LTM Q3 2011 Stage Adjusted CASM (excluding fuel and special items) 16.95? 9.79? 17.2% advantage 13.1% disadvantage Network Network us Stage Adjusted to US Airways LTM average stage length of 988 miles; Network includes United, Delta and American US AERWAYS CONFIDENTIAL - - . USAirways Comparable Profitability #ku FY10 Pretax Margin "(excluding special items) 4.8% i 4.5% {m U3-AA-00413517 US AIRWAYS CONFIDENTIAL A Lost Decade: US Airways Left in Weak Liquidity Positicn Unrestricted Cash as a of LTM Revenues as of 3/ 31/ 12 30.0%) 25.0% 22.3% 19.0%; 20.0%: 15.0%: 7 10.0013: 0.0% AMR um. DAL Source; SEC For-m IQQ US AIRWAYS CONFEDENTIAL I - - US Airways Today: Who We Are 0 Network, Hub-and-Spoke Airline; but yen/different than new United, new Deita and American . - . - Lower unit revenue generating capabilities than Big Three Cost advantage versus Big Three Competitive margins and ability to survive so long as cost advantage-is maintained Advantage is sustainable so long as We agree to affordable labor contracts - While margins are as strong as competitors, we are vulnerable to a downturn-Is: . I I .I I Weakerassets largely due weaker hub network and lack of internatiOnal exposure - Weaker balancesheet as'a' ofihistorical losses I Cannot count on additional -loS_ses US - New Orden New Holy Grail Industry Consolidation major airlines have consolidated to 5 from 9 since 2005 m- ahmrdan' W- ?as. Immnv 131$ - luvska ?yarn-AIRWAYS 3 - New 01116:: Industry Consolidation 2005 Revenue Market Share 53?16 20.20/0 17.10/0 15.3% 11.4% 10.0% 7.80/0 2.90/0 1.70/0 'SnurC?z' SEC: Filing?and. Company Reports US AIRWAYS CONFIDENTIAL magma. wgmm-??ig 2011 Revenue Market Share 7.19/0 27.5%: 26.1%) 1180/0 12.30/41 9.70/0 3.29/0 3.3010 75% . Us-AA-oo413521 New Order: Capacity Reductions Total industry reduction Industry 1'3?3 A - ASM change calculated using expected ASM changes between and "some US.??4ifwa?? research l' I I US AIRWAYS CONFIDENTIAL New 01119:: Ancillary Revenues 81) 10 61) 54) 41) 31) 21) IHO Billion 2008 2009 2010 US 1 Industry'* *Industry; includes MA gamers (AA, 867,. argq us -- - us?AA?oo413523 New Order: Revenue Skyrockets 30% Deregulation 20% Gulf Warll 20% housing bubble 0% 0% . - . Gl?fWar'l r1515 . . -- I - i 9 "10% Slag?ation . I. 10%: 1981:1983: Iranian led oil. Light monetary policy D2093 dotcom bubble/ _20% 911 terrorist - . attacks 2009R?cessi0n 40% - I $036 1-1 YOY Change in GDP YOY Change in Indust?xy Revenue US AIRWAYS New Order. US Airways Returns to Profitability Hiaimma! Pmtax Encama (Lam) Excluding ?paaial Rama $500-" $0 .030 -7 $2,000 - 2001 2e02 2a03 2004 U8 AIRWAYS CONFEDENTIAL 53.5 444 44? 103 3523; us .- AWA Merger 2035 2:306 200? 2003 2009 201a 2611 Morgan - 301?2004 is pro forma (US Airways America West) i 2 USAimays Oil Prices Remain a Threat 120 -- 100 -- be?? .39 e? ?9?25 +9 "Qurce' Bioomberg historicai WT: and Brent$ per bbi Highest crude prices ever A Second highest crude prices ever US AIRWAYS CONFIDENTIAL {Sana From: Eberwein, Elise To: Parker, Doug Sent: 3/27/2012 9:18:46 PM Re: US Airways CEO Talks Merits of Consoiidaiion Just. saw it. Going to settle in with popcorn to View the video. On the positive is you are smiling. Te negative is you are borderline "I'm a crazy airline merger maniac" you pull it out with the one ?sided dimple. The Fit attns will love it. Pilots, probably neutral because you're non threatening to their manhood with that dimple thing going on (sorry). And thankfully, you aren?t dressed like you are going to a star trek convention (ala dave oush according ti holly). Mechanics? Well, let's just say stay away from the ?at head screwdrivers. Couple of them may want to take you home with that ooltish "hi" look you have. Going on. Yes that. was on purpose. Sent from my iPad On Mar 27, 2012, at 18:55, "Parker, Doug" wrote: The on: oniine has me looking like a gooibali but i guess i didn't give them roach to work with. Better than the content sounding like a goofhall. From: Eberwein, Elise Sent: Tuesday, March 27, 2012 06:14 PM To: Parker, Doug Subject: RE: US Airways CEO Talks Merits of Consolidation This is greati i am not thrilled about the dumbwsoundirtg "if we have more assets we can do more things? or whatever it is .- you said. i can?t wait to see it in print. Torn Horton is on the AP in Tulsa Worid holding up the bird and another ?nger on his cheek, and you?re in the WSJ. iust praying you iook haifway decent. i?iaha. How?s that for a kick in the shin, i never want to disappoint. i?m actualiy thrilied with You did a fantastic job! From: Parker, Doug Sent: Tuesday, March 27, 2012 6:02 PM To: Eberwein, Elise - Subject: Re: US Airways CEO Talks Merits of Consolidation This is OK, huh?i iike the empioyees getting whipsawed one. From: Eberwein, Elise Sent: Tuesday, March 27, 2012 05:24 PM To: Anthony Richmond (tonv.richmond@lw.com) Benjamin Metzger (beniamin.metzaer@barcan.com) 'Brad Meyer? Bush, Keith; Cravens, Daniei; David Rubinstein (david.rubinstein@barcao.com) Derek Kelier (derek.keller@barcaacorn) DJ Baker (DJ.Baker@lw.com) Eberwein, Elise; 'Edelman ?T'etris 'Fraser Woodford? Gaileberg, Paul; ?Gary Sultao? 'Gilad Lorch? ; 'Howard Wolf? Isom, Robert; ?Jean Paul? ?Jerry Glass' ?Jim Miilstein' 'John Kallaugher' Johnson, Stephen; Jones, Paul (Legal Dept); Josh Connor (iosh.connor@barcao.com) Kass, Howard; Kerr, Derek; Kirby, Scott; Knickerbocker Tetris ?Kristin Heaiy? 'Larry Hamdan' ?Mark israel' ?Mark Pa ustenbach? ?Mark Shapiro? McDonald, John; Nocelia, Andrew; Parker, Doug; 'Paul Denis' 'Paul Harner' Pavan Hardasani (oavan.hardasani@barcao.com) Peter Kerman (peter.kerman@lw.com) ?Remy Greeno? US AERWAYS . . . more viable industry. To the extent that we helped compel the mergers of Delta and Northwest and United and Continental, it made us stronger. WSJ: Why is American interesting to US Airways as a potential partner? Mr. Parker: There may be tacticai opportunities that arise. When there are, we explore them. The American bankruptcy might provide opportunities for us. If we could get our hands on better assets, we could do more things. - WSI: Your 2006 hostile bid for Delta was repeiled by Delta's management, employees and creditors. What did you learn from that experience? Mr. Parker: You need to have allies, particularly the employees. You need labor to be excited about the transactions. in, other businesses, value wins. That's certainly not the casein this business. WSJ: Your rivals sometimes discredit US Airways as a potential merger partner because your pilots aren't yet integrated seven years after your merger. Why the delay? - Mr. Parker: We unfortunately still do not have our pilots on a joint contract. Until. the two pilot groups give us a joint seniority iist, we can't get to a joint contract. The process is in court. We're unhappy about it, but we?re managing it. WSJ: our operationai and ?nancial turnaround hasn't received much attention in the past couple of years. Why does perception lag reality? Mr. Parker: I think it is being appreciated and understood, certainly by our customers. Wedid things we needed to do. We focusedour ?ying on places where we have a competitive advantage. We've done a reaily nice job of improving operating'reliability. We've kept costs down'At the same time the industry is doing better, our relative perfcirmance has gotten much better. WSJ: What has surprised you the most about this industry in your 1 1. years as Mr. Parker: How hard?Working the employees are and how much they care about customer service, the airlines they work. for and the people they work with. I think they feel this disconnect between how hard they work and the perception about what they do. If you're an airline employee working like crazy and doing an exceptional job, but your management team, is out there growing places they shouldn?t grow or caring more about. fighting another airline than caring about making sure they're profitable, it has a huge impact on those hard?working employees. The employees get whipsawed by this. So we Work very hard to make the right decisions for our company. WSJ: Has the industry finaily started behaving like a business focused on pro?tability rather than grabbing market share? Mr. Parker: We?ve made a lot of progress, but it's been fairly recent. You can't help but worry that it's temporary. For so long, people believed it was OK to not have an adequate return on capital. And. somehow we would just be able to continue to do what we had done in the past. it was never sustainable. We have a model now that works. The results of 201 l. prove that. can?t stress enough that while theindustiy's pro?ts fell in 201 l, at least there were profits. US Airways fuel price was exactly the same as it was in 2008 a few pennies off. The economy wasn?t dramatically different. US Airways lost $800 million in 2008. We made $100 million in 2011. That is a bellwether event, and one that has us really optimistic about the future. Scan to watch a video with. Mr. ark or about airline mergers. US AERWAYS CONFIDENTIAL 'Rick Rule? ?Rob Johnson' Robert (Bob) Alan Siege! (rsieoel@omm.com) 'Robert Klymao' ?Todd Wilson' Subject: FW: US Airways CEO Taiks Merits of Consolidation A clip of the 0,8411% with Doug that will run in print tomorrow. um KW?vwi?v?'momma? From: PR Newswire Complimentary Monitoring lmailtozcomolimentary monitorino@omewswire.com] Sent: Tuesday,r March 27, 2012 4:07 PM To: Eberwein, Elise Subject: US Airways CEO Talks Merits or Consoiidetion Courtesy ofPR Newswire Complimentary Monitoring Editor Notes: NONE US Airways CEO Talks Merits of Consolidation [27?March-2012] By Susan Carey (From THE WALL STREET JOURNAL) SCOTTSDALE, Arie. Doug Parker is the longest-serving current ehiet?executive of a U. S. airline, having steppedinto the post at America West Airlines just days before. the Sept. 11 terrorist attacks. In. 2005, he engineered a merger with US Airways Group inc, acciuiring that old?line East Coast carrier as it emerged from its second bankruptcy reorganization. The combined carrier, called US Airways and now the nation?s fifth largest by traf?c, has been trying to get bigger through another merger but has been outmaneuvered by Air Lines Inc. repelled a hostile takeover bid from US Airways. United Airlines twice had talks with the company but ended up combining with Continental. -.- - - - Now Mr. Parker, 50 years old and a 26?year veteran of the airline industry, has set his sights on AMR Corp.?s American Airlines, which entered bankruptcy protection four months ago. US Airways disclosed in January that it had hired advisers to help it assess a bid for American, despite M's goal of emerging from Chapter 11 solo. I I In an interview with The Wall Street Journal, Mr. Parker declined to discuss the particulars of his interest in American. But he did lay out. his thesis on the merits of consolidation. Edited excerpts: WSJ: You?re a longtime advocate of consolidation. Why? Mr. Parker: In 2005, there were 12 airlines indie US. with at least 1% market share. Now there are seven. I don't know that seven is the right number, but I know 12 is too many. That fragmentation resulted in an irrational buSiness model thathad too many airlines chasing the same customers, leading to terrible ioss years. With fewer airiines, there are fewer of us trying to get the same number of customers. WSJ: Why do you think US Airways lost out in past. merger attempts? Mr. Parker: ldon't think we lost out. Consolidation was necessary, and it was a strategic imperative to get the industry well. As I iook back over the past ?ve, six years, consolidation has helped us have a US AIRWAYS (END) Dow Jones Newswires 03?27?12 1907ET Copyright 2012 Dow Jones Company, Inc. Cal/ripen); Codes: NYSELCC 010711 03/27/2012 19:07 EDT You are receiving this Complimentary Monitoring transmission at no charges as a benefit of your organization's membership with PR If you would like to stop receiving Complimentary Monitoring transmissions, please reply to this email with your request. Are you interested in learning more about reporting and other aspects of your PR 'Newswire services? Check out our online calendar at and Sign up for an upcoming interactive webinar. PR Newswire Association LLC, Distribution Services Department, 350 Hudson Street, New York, NY 10014 US AIRWAYS bled: The Transatlantic fee change we have done before and shouldn't be too large of an effort. From: Andersen, Melody To: Hester, Kerry; Athen, Blake Sent: 2/29/2012 11:32:03 AM Re: Bag fee upgrade I am good with either time. I can?t really do anything today but you can meet it that works better. Original Message From: Hester, Kerry Sent: Wednesday, February 29, To: Athen, Blake Cc: Andersen, Melody Subject: RE: Bag fee upgrade 2012 09:25 AM Or should we tie it in w/ your l/l tomorrow, Melody? I can extend the time in either direction if you're available. Or today at 1p or 4p would be good too. Thanks. KH ~MM~~Original From: Athen, Blake Sent: Wednesday, February 29, To: Hester, Kerry Cc: Andersen, Melody Subject: RE: Bag fee upgrade 2012 9:22 AM At first we thought we should wait, but assuming we'll see the same proportional behavior change as the last Transatlantic fee increase, it would be hard to not make the change at Sin annual revenue. My biggest concern of having a higher bag fee is further adding to an area Where we will be out of compliance with the DOT on applying 0A bag fees. Agreed the Mex/Caribbean seems like a no?brainer. Would you like me to put a meeting on your calendar to review later today? From: Hester, Kerry Sent: Wednesday, February 29, To: Athen, Blake Cc: Andersen, Melody Subject: RE: Bag fee upgrade 2012 9zll AM Sounds good. Thanks. Wow $100 is a lot for second bag. I would think there?s big passenger gag reflex associated with thatshould charge it. Do you think we should wait for UA or AA to move first, though? Any concerns with being out of w/ UA for Star purposes? The Mex/Caribbean increase seems like a no~brainer. KH ?~?w?0riginal From: Athen, Blake Sent: Wednesday, February 29, To: Hester, Kerry Cc: Andersen, Melody Subject: RE: Bag fee upgrade 20l2 9:07 AM Based on the potential revenue, I think we should move forward with both fee increases. I'm not for sure how long the Caribbean/CA/MX fee change will take as it will depend on how each application defines their baggage fee regions and if any changes are required. US AIRWAYS I?ll try to get a better understanding of the implementation timeline today. Regards, Blake From: Hester, Kerry Sent: Wednesday, February 29, 2012 8:52 AM To: Athen, Blake Cc: Andersen, Melody Subject: RE: Bag fee upgrade This is a great summary thanks for the quick response. What?s your recommendation? If you're recommending a change, what would be the process/timeline for implementation? KH ?w?w~0riginal Messagew~e?~ From: Athen, Blake Sent: Wednesday, February 29, 2012 8:46 AM To: Hester, Kerry Cc: Andersen, Melody Subject: RE: Bag fee upgrade Yes, from what we are able to tell only 0L changed their international 2nd bag fee. AA changed their 2nd bag fee to the Caribbean/Central America/Mexico around the same time We have a deck prepared that I can schedule a meeting to review today, but below are the highlights. Transatlantic: - DL increased fee for 2nd bags from $60 (online) and $75 (at the airport) to $80 (online) and $100 (at the airport) 2nd bag fee is $70, AA is $60 Caribbean/Central America/Mexico: - AA increased 2nd bag fee from $$35, all of the other major Uswbased carriers are $40 Preliminary Revenue Opportunity Estimates (pending Joubine?s final approval): IncreaSing the Transatlantic 2nd bag fee from $70 to $100 would generate an estimated annually - Historical data revealed that an online discount did not stimulate the required demand to offset the discount Increasing the Caribbean/Central America/Mexico 2nd bag fee from $35 to $40 would generate an estimated annually Regards, Blake MessageHee?e From: Hester, Kerry Sent: Wednesday, February 29, 2012 8:41 AM To: Athen, Blake Cc: Andersen, Melody Subject: RE: Bag fee upgrade Is this about matching the AA and DL International second bag fee increase that we learned about on 17Feb? Have we made a decision? We need to be nimble on opportunities like this. I?m available if you'd like to discuss today. Please provide an update in any case. Thanks. KH From: Athen, Blake Sent: Wednesday, February 29, 2012 8:37 AM US AIRWAYS 063729 To: Motaharian, Joubine Cc: Renteria, Pedro; Hester, Kerry Subject: RE: Bag fee upgrade From a competitive perspective, we would want to exclude Canada from the fee increase as the other majors all treat Canada the same as domestic That being said, we haven?t submitted a BTR yet and although the applications are all table driven, I'm not for sure if all of the applications have Canada separated as a different region. I'm following up with the applications and will let you know. Regards, Blake Message~?~?~ From: Motaharian, Joubine Sent: Tuesday, February 28, 2012 9:05 PM To: Athen, Blake Cc: Renteria, Pedro; Hester, Kerry Subject: Bag fee upgrade Blake, do you also want us to look at the impact of increasing the Canadian fee up like_the Caribbean, or is the proposal uniquely TA and Caribbean? Thanks. From: Renteria, Pedro Sent: Tuesday, February 28, 2012 3:43 PM To: Motaharian, Joubine; Shaw, Carlo Subject: RE: Not that we are aware. We only looked at Caribbean and TA 2nd bag. From: Motaharian, Joubine Sent: Tuesday, February_28, 2012 2:52 PM To: Renteria, Pedro; Shaw, Carlo . - - Subject: Is the bag fee upgrade analysis also looking at Canada? US AIRWAYS CONFIDENTIAL . {f \methW - W, From: Leasure, Nicholas A. To: Alex Heckler; Andrew Forman; Nocelia, Andrew; Benjamin Nietzger Brad Meyer; Christopher.harris@lw.com; D. Jan Baker David Rubinstein Deanna Tallon; Kerr, Derek; Derek Keller Eberwein, Elise; Fernandez, Fernand; Gary Sultan Gilad Lorch Kass, Howard; Howard Wolf; Kirby, Scott; jeanpaul.poilras@lw.com; Jim Millstein John Kaliaugher McDonald, John; Johnson, Stephen; Josh Connor Bush, Keith; Kristin Heaiy Lawrence Hamdan Marcelo Llorente; Mark lsrael; Mark Paustenbach; Mark Shapiro matthew.premus@barclays.com; Mohr, Michelle; Paui Denis; Galleberg, Paui; Paul Hamer Jones. Paul (Legal Dept); Peter F. Kerman rick.rule@cwt.com; rob@johnsonstrategies.com; isom, Robert; Robert Kiyman Robert Siegel Todd \Mlson tony.richmond@iw.com; Cravens, Daniel; Parker, Doug; McGlashen, Witliam CC: Tetris-JF Sent: 7/25/2012 1:48:54 PM Subject: Tetris: Bioomberg and Dow Jones on LCC Ali/1R Below please find two recent artistes pertaining to US Airways and AMR which just posted. Bloomberg US Airways Seeks ?Fuil,? ?Fair? AMR Review of Merger Options By Mary Schlangenstein July 25, 2012 '7 I US Airways Group Inc. Chief Executive Of?cer Doug Parker said he expects American Airlines parent AMR. Con). to set up a fair, transparent process to evaluate merger options against its own bankruptcy plan. US Airways should get documents from American soon that will lay out the procedure and let. the carriers examine each other?s ?nancial records. Parker said today on a conference call. His Tempe, Arizona-based company has been pushing for a merger with its larger competitor since January. ?If, after reviewing the non-disclosure agreement, it turns out this is not the start of the full and fair process we hope for, we will evaluate our options to make sure the real parties of interest -- AMR employees and creditors get the chance to evaluate the merits of an Airways merger," Parker said. He declined to comment on actions US Airways might take in that event. US Airways has been iobbying AMR creditors and bondholders to build support for a combination, after signing tentative iabor agreements with the or: Worth, Texas ?based Americans unions in April. The merger would create the world?s largest airline, surpassing United Continental Holdings Inc. AMIR. has said it prefers to remain a stand-alone carrier. US Always would be concerned with a process that puts potential merger partners at a disadvantage or slows the review to the point that alternatives aren?t fuily vetted, Parker said today. ?Given What we?ve seen and heard to date, we?re looking at this somewhat skeptically, but really hopeful that we?re wrong and the process is fair and balanced,? Parker said. He declined to comment on whether US Aim-rays will Sign an agreement with a standstill provision that would delay or stop movement toward a merger. Dow Jones US Airways CEO Skeptical of AMR Merger Exploration By Jack Nicas US AIRWAYS July 25, 2012 The head of US Airways Group inc. (LCC) on Wednesday expressed reservations about the strategic review being conducted by AMR Corp. (AA MRQ) and said he could go directly to its rivals creditors in a bid to cement a merger. AMR is examining ?ve potential partners after pressure from its creditors forced the American Airlines? parent to consider more options alongside its existing plan to emerge from bankruptcy as a stand-alone carrier. Doug Parker, US Airways' chief executive, said on a post?earnings call that he could turn to creditors if AMR's pledge to explore a combination is not a "full and fair process,? US Aim-aye recently revealed it had become an AMR creditor after buying around $600,000 in company debt. AMR has said it will soon send nondisclosure agreements, or NDAS, to ?ve rivals, allowing them to share financial information and evaluate the potential for a merger with the thirdmlargest U. S. carrier by traffic. Mr. Parker said US Airways had yet to receive an NBA, but was "looking at this [process] somewhat skeptically but really hopeful that. we?re wrong. He said that one potential problem would be if the review deliberately slowed scrutiny of any merger, so AMR can catch up with its stand?alone plan. "The debtor says to the creditors, 'Gee, that [merger] may have been a really good idea, but we're ready to go with this one,? Mr. Parker said. "That's not a fair process, for example." Tom Horton, chief executive, has said the merger exploration is "going to be a ?air and disciplined process because that?s what my job is, that?s what my board?s duty is and that?s what the creditors? committee is keen on." Mr Parker said if the NDA includes terms that "put us at a disadvantage, we obviously won't sign it.? He added that if American?s exploration is not the "full and fair process we hoped for, we'll have to evaluate the options to ensure that AMR employees and creditors get the chance to evaluate the merits of an Airways merger." Airways' stock is up 124% so far this year, far outstripping gains elsewhere in the industry, and Mr Horton has said this in part reflects a lift from expectations of a combination with AMR, Mr. Parker hit back Wednesday, "As evidenced by our record second quarter quite clear that US Airways has a great business model that works and certainly don't need to merge with another airline," he said. "However, we do believe the combination of US Airways and Al?le is in the best interest of both? airlines. US Airways on Wednesday reported a record quarterly profit, with earnings rising to $306 miliion from $.92 million a year earlier. Penshare earnings rose to $1.54 from $0.49 a share. Excluding one?time items, the Tempe, Ariz., company reported a second?quarter pro?t of $321 million, or $1.61 a share. The airline bene?ted from the recent decrease in ?iel costs because it doesn?t hedge its fuel. For the rest of 2012, US Airways said it expects to increase its mainline capacity by loo to while reducing its regional capacity. The airiine said it expects its unit revenue to be flat or up by as much. as 2% through September based on a "modest slowdown? in future bookings and a dif?cult previouswyear comparison. Nicholas A. ?teasers $013.1}; FRANK, WILKENSGN iililMMliR KATCHER 622 Third Avenue, 36th Floor New York, NY 71001.7 Phone: Jessie Frank, W?ilkinson Brimrner Katelaer Financial Public Relations 1 investor Relations Crisis Communications Mergers and Acquisitions Restructurings I Bankruptcies Litigation. Support Shareholder Activism US AIRWAYS CONFIDENTEAL CONFIDENTIALITY NOTICE This email and the attachments acco mpanyi ng it may contain an nfidential info E'matio belonging to the sender which is protected by the attorney [client privilege or other privileges. The informatio is intended oniy for de] War}; to the individual or entity named above. If you are not the intended recipient, you are hereby notified that any disclosure, copying, distribution, or the taking of any action inmliance on the contents of this email is strictly prohibited. If you have received this emaii in error, please immediately foxward it back to the Sande and. delete ?it. US AIRWAYS CONFIDENTEAL Dear As Americans chief commerciai officer, with responsibility for the marketing and planning organizations, wooid like to share with you my perspective on our business pian to restore American to industry leadership, profitability and growth, Our business plan makes clear that American is navigating through a very different kind of restructuring than our competitors. Oor restructuring is about renewal and growth. It is also about ieveraging the operational and financial flexibility of an improved cost structure and a healthier balance sheet to create the premier airiine for high~vaioe customers, who choose airlines based on network, alliances, products and services. A Strong Foundation As you know, we have been working hard to establish a strong foundation to build a successful airtine that attracts high?vaiue customers. We have been building the best network, focused on the four largest US. cities and Miami, the gateway to Latin America; fortitying and expanding our partnerships across the globe, both within oneworid and via bilateral partnerships; and selectively investing in leading customer products and services to provide a modern and refreshing experience. These building blocks were established with great effort as our competitors toys-raged their own restructurings to become more competitive in every aspect of their business. Now, we have a onioue opportunity to capitalize on this strong foundation and use the restructuring process to create a successful future for American. As you know, an important part of our business pier: is the generation of $18 in incrementai revenue, which will come about as we expand upon our building biocks and remove structural barriers that have constrained our revenue growth relative to our competitors. Severeii?of you have been asking me how we pian to achieve this objective. in short, our competitive costs will enable more profitabie growth, our contractual flexibility will create expanded network opportunities, and our new cost structure and stronger baiance sheet will enable us to reinvest in customer products and services to continue to improve revenues Network and Alliances With a competitive cost structure, we plan to build the scale of our network and alliances. We wilt grow our departures significantly at all of our big hubs over the next five years, and we will do that in a way that both capitalizes on and helps speed our world-ciass alliance partnerships. And, of course, we are going to be diversifying and disproportionately growing our international flying as part of this plan. We will aiso complete the impiementation of our Joint Business agreements across the Atlantic with British Airways and iberia and across the Pacific with Japan Airiines and Qantas to create a more integrated global network. We have aiready seen much progress in this area as we have successfully acquired and retained corporate customers, who are attracted to our giobal network. CONFIDENTIAL park?, And on the domestic front, with additional contractual flexibility, we will be abie to enter into new, and expand tudher,? existing codeshare agreements, which will give us more domestic teed than we have today to be abie to support our aspirations for a larger international presence, as well . as a iarger domestic network to compete with our target" competitors.-- . - - - - We attribute almost a third of our incremental $18 revenue to the additional benefits generated- by our Joint Business and domestic codeshare agreements. Fieet Renewal and ResGauging Our recent aircraft agreements with Boeing and Airbus create unprecedented ability to renew and rte?gauge our fleet and create growth under the right economic circumstances. That means moving forward aggressiveiy with this summer?s groundbreaking airplane order such that in just a few short years we will have the youngest ?eet in the industry. The renewal is instrumental to our plan because it means more protitabie flying with much more cost efficient pianes that have tower maintenance and operating costs. And, the new airplanes will offer best in class products for our customers. Today, we oniy ity 47? lets with capacity between 51 and 140 seats, timiting our ability to match suppty with demand. This restriction puts considerable downward pressure on our unit revenue performance. This challenge is evident in our Chicago hub, where our competitor has the ability to match supply with demand by time of day, day of week and season. With the relaxation of our scope clause, and capitaiizing on the new small narrowbody ?eet and additionai regional flying, we be able to replace our current aircraft with one whose size better matches the demand in our network. Righbgauging our fieet will result in a significant increase in our unit revenue and and will generate aimost two?thirds of our $1 in incrementai revenue. grand Modernization As part of our business pian, we are committing to refreshing and modernizing our brand and customer products and services by investing several hundred mitiion dollars annuaiiy with the overarching objective of making American the premier airline for highwalue customers. Our disadvantaged cost structure and baiance sheet had limited our abitity to invest in ptodocts or match our competitors? actions in some cases. At the same time, our competitors used their profit advantage to invest in winning high-value customers. For example, both Betta and United are insteliing lie?flat international business class seats, and adding premium economy offerings and upgraded inflight entertainment. With improved financiai performance, we will have the to invest in more competitive, and in some cases, indestry-ieading product offerings. For example, we recently announced that for our 777600 fieet, we will offer an enhanced seat in our first class cabin, improve the business class offering by adding fully lie-flat seats, introduce an ?enhanced main cabin product?, as well as improved inflight entertainment and initight WiF-?i connectivity for all cabins. [insert new news about the main cabin seat product] 90716 in summary, our pian is to be the prefer-red airline for high~velue customers by building the scale of our network, strengthening further our eliiance partnerships, renewing and rengauging our ?eet, and modernizing our products and services.- Each of us has a contribution tomake to this effort as we continue to deliver the experience our customers expect from us. Many of them have voiced their recognition of the teegh road ahead, but offered their con?dence and support I I I 7 i thank all of you for your commitment and dedication to securing a bright future for American, and for doing a great iob for our customers, 5 I Best, Viraeb Vahidi CONFIDENTIAL 90717 (If: CONFIDENTIAL <1me 29:12 AA-S ban Cravens US Airways Group Inc: Director?? Doug Parker US Airways Group Inc Chairman, CEO Derek Kerr US Airways Group Inc CFO Scott Kirby US Airways Group Inc President Stephen Johnson USAimfays Group Inc - EVP HELL Mike Linenberg 80734 Merrill -Analyst Jamie Baker JPMorgan Chase 8: CD. Analyst William Greene Morgan StanieynAnaIyst Hunter Keay Wolfe Trairan (Ea Company Analyst Daniel McKenzie Hudson Securities ~Analy5t Gary Chase Barclays Capital Analyst Kevin Crissey U35 -Ana1y5t Helane Becker Dahlman Rose (70. Analyst Raymond Neidi Calyon Securities Inc; Analyst GEenh Eng-e! Bank ofAm?rim Analyst Jeff Kauffrnan Sreme,A9ee& Leach - Analyst Mark Betta; - Media Ted Reid Media Mary Schlangenstein Bloomberg - Media PRESENTATEGN Operator Good day and welcome to the US Airways fourth quarter earnings conference cail.Today's conference is being recorded At this time, all lines are in a listen~only mode. Following the presentation, we will cand act a question-and-answer session. {Qpemtor instructions) And new I wouid like to tum the conference over to your moderatm, Director oflnvestor Relations Mr. {Daniel Cravens.You may begin. ?an (ravens US Airways Group Inc Director/R Thank you, Andrea,and welcome eyerybody to-the US Airways 2011 earning conference call. in the room with us today in Phoenix are Doug Parker, our Chairman and Scott Kirby, our President; Derek Kerr our Chief Financial OfficerAlso in the room for our (MA session are Robert isam,our ChiefOperating Of?cer?teye iohnson,our EVP 0f Corporate:and Eiise Eberwein, our EVP of People and Communications. Like we typically do, we're going to start the cali with Do Ligand he will provide an ayerview of our fourth quarter ?na nciai results. Derek wiil then walk us through the details on the qu?rter, inciudlng'our costs, liquidityand provide some color on our 2012 guidance. Scott will then follow with . . c'nl?? .l .1. y. I l~i0i=sibijrl l-luil Eli :3 wring-z: {.erif,,a. Us iff?'ii? l: - . commentary on revenue environment and our operational performance. And then after we hear from those comments, we will open the call to questions and answers, and lastly questions from the media. Before we begin, we must state that today?s call does contain forward-looking statements, including statements concerning future events, our future revenues, and fuel prices. These statements represent our predictions and expectations as to future events, but numerous risks and uncertainties could cause actual results to differ materially from those proiected. information about some of these risks and uncertainties can he found in our earnings press release issued this morning,our Form i0~Q from the quarter~ended September 30, 2011, and our 20i0 Form 104?; in addition, we will be discussing certain non?(3AA? financial measures this morning, such as net loss and CASM excluding unusual items. The reconciliation of those numbers to the GAAP financial measures is included in the earnings release, and that can be found on our website at under the Company information investor Relations Section.A webcast of this call is also available on our websiteand will be archived for one month.The information that we are giving you on the call is as of today?s date, and we undertake no obiigation to update the information subsequently. Thanks again forjoining us, and at this point i would like to turn the call over to our Chairman and CEO Doug Parker. Doug Pa rker - US Airways Group Inc Chairman, CEO Thank you, Dan. First off, i would like to congratulate Dan. Dan was named institutional investor?s top lR Director, which he definiteiy deserves. Thank you for all you did to be named that, Dani/Va are certainly proud of him, and our program was named best investor relations program thanks to Dani think it?s because of how well you read that thing, Dan. Anyway, let?s get started with our caii.We posted our earnings this morning, a fourth?quarter profit of $21 million, a full?year pro?t of $1 11 million. Now,that's down from the full-year 2010 profit of $447 million, but considering where fuel prices are, we are extremely pleased with these results. indeedas we noted in the release, had average fuel prices just remained where they were in 2010, our 20H fuel expense would have been $1.2 billion lower. 50, fuel expense was up $1.2 billion, but our profits were only $330 million lower.That?s due to some very strong revenue growth and some impressive control of our non~fuei costs,and Scott and Derek will talk more about that in a moment. Before they do that though, i do want to take a moment and thank the hard working team of 32,000 employees here at US. AirWays that made these results possible.Team did a phenomenal job in the fourth quarter. We produced our best ever fourth quarter on?time performance, our highest completion factor, our lowest mishandled baggage ratio, and they did all ofthat while we had record high load factors.So,ali in altwe are extremely happy with how we ended 2011,and 2012 is off to great start.We are encouraged by the continued strength of demand for our product, and we believe we are very well positioned for the future. I I With that said, i will turn it over to Derek to take you through some more detail on the numbers. Derek Kerr US Airways Group Inc CFO Thanks, {Doug/is announced in our press release earlier this morning, as Doug saidwe recorded a fourth quarter net profit of $18 million or 50.1 per diluted sharelhis compares to a net profit of $28 million or 7 per diluted share a year ago. When you exclude the special items, the Company?s net profit for the fourth quarter was $21 million or $0.13 per diluted share versus a net profit of $28 million or $0.37 per share in the fourth quarter of last year. For the tull~year 201i,the Company recorded a net pro?t excluding special items of $1 11 million or $0.68 per diluted share versus a net pro?t excluding special items of $447 million or $2.34 per diluted share in 2010. We are very pleased to report our second consecutive pro?table year,and this is particularly impressive in the context of fuel costs having risen by almost $13 billion versus 2010. Please refer to the tables included in our press release for the details on the special items. For the remainder of this cail,l will exclude the impact of special items for more accurate reflection of our performance for the quarterffotal capacity for the quarter was 20.8 billion ASMS, down 1.3% il-KDME-i?ilti STREETEVENW i arenas?reareventscoln Corners Us a seclusion. arias-ens: from 201 0. Our main line capacity for the quarter was 37.4 billion ABMs, flat from a year ago. Express capacity was down 7.2% from 2010 to 3.3 billion ASMs, due primarily to the completion of the Express first product on our large RJ fleet reducing seats on each aircraft. - We ended the year with 3% main line aircraft in our fleet, and we plan to reduce the fleet count by 3 in 2012, returning 15 older 737 leased aircraft and adding 12 new A321 aircraft?ur entire 737-300 fleet will be retired by the end of 201 2.The 12 A321 aircraft are scheduled to be delivered in the third and fourth quarters,6 in the third and 6 in the all aircraft have backstop financing availablewe plan to use market ?nancing sources similar 201 1.We expect Express fleet count will be reduced by 1 aircraft as Sky West begins flying aircraft out of Phoenix in place of Mesa's CRJZOO and {Dash 8 flying. - - Total operating revenues for the quarter were $3.16 billion, up from the same period of 201 O.Main line passenger revenues were $2.05 billion, up by higher yields as a result of the strong pricing environment and industry capacity discipline. Cargo revenues improved to $43 million, as domestic mail revenue increases offset lower international cargo deliveries driven by the condition of the European economy. Other operating revenues were flat in the fourth quarter of 2011 versus 2010. Versus the fourthouarter 2010, total RASM. passenger RASM was up 11.1% in 2011 to 390.1349. For the same period. combined yields increased and our combined load factor was 81.9%, an all?time fourth quarter recordTotal RASM in the fourth quarter was up 9.9% versus 2010, and Scott will talk in more detail about our strong revenue performance and the robust demand environment we continue to see in early 2012. The airlines operating expenses for the fourth quarter were $3.04 billion, up 8.8% as compared to a year ago, due mainly to 513232 million increase in consolidated fuel expenses. Main line operating cost per ABM excluding special items was 30.1316, up 9.5% year-over?year, driven by a 29.2% increase in fuel prices. Our average main line fuel price including taxes for the fourth quarter of 2011 was $3.10 per gallon, versus $2.40 per gallon in the fourth quarter of 2010,which drove $183 million increase in year-overeyear main line fuel costs. - - A strong pricing environment. the ability to keep our costs in check through outstanding operational reliability. and continued cost diligence allowed the Company to offset the higher fuel -prices.The'team did a terrific job managing our expenses, which is especially noteworthy in an environment'where we reduce ca pacity.Excluding special items, fuel,and profit sharingour mainline costper ASM was $0.849 in the fourth quarter of 201 1,an increase of1.1% versus 201 0. Express operating cost per ASM excluding special items and fuel was $0.1494 for the quarter,'which was 8.2% higher than 2010,due to the previously announced increase in maintenance costs related to our PSA-operated CREDO aircraft and an Express ASM reduction of - - - Excluding special items, fuel, and profit sharingour main-line CASM went up only 0.6% in 2011 versus 2010,and our combined CASM was up only 1.9% strong operational and ?nancial performance allowed our team members to earn approximately $25 million in combined operational incentive payouts and profit sharing in 2011.We_are pleased to be able to recognize our tea m?s accomplishments throughout the year with these incentives. I I I I We ended the quarter with $2.31 billion of total cash and investments, of which $365 million was restrictedflhis was our highest year~ending cash balance since 2007.1'he year~end total cash and investments balance was up from $2.28 billion in the end of 2010, of which $364 million was restricted. I During the quarter, We completed the slot transaction with Delta Airlines, whereby received certain slots at Reagan National Airport, the right to provide new service to Brazil.and a cash payment of $66.5 million in return for certain slots at New York?s LaGuardia Airport. Under the provisions of our Citi term loan,that cash was restricted from use by the Company for one year unless we paid down the term loan or replaced the cash with eligible collateral. Subsequent to closing, the Company was able to post unencumbered collateral in the Citl loan, which allowed the majority of the $66.5 million in cash to become unrestricted. During the quarter, we also exercised on; call right to repurchase 113 slots from Republic for $47 million.These slots had been pledged as collateral for $44 million borrowed from Republic during the Company?s bankruptcy in 2005.These slots were already being operated by the Company, and are now free and clear. CONFIDENTIAL R-OO369250 For the fourth quarter, the Company generated $23 million of positive cash flow from Operations, and used $42 million of free cash ?ow, defined as operating cash fiow less net capital expenditures. We paid down $159 million in debt during the quarter. For the toil-year 2011,we generated $488 million of operating cash fiow,and $286 million of free cash flow. Looking forward in 2012,we will continue to remain disciplined about capacity-As I mentioned on our last cattwe plan overall capacity in 2012 to be up approximately 1%.The increase is largely the result of new A323 aircraft with a higher seat count replacing older 737 aircraft, Domestic main line is expected to be up only while international is forecasted to be up approximately main line ASMs are projected to be approximately 73.5 billion for the year.The ASMs break down by quarter as follows at approximateiy 17.5 billion in the first quarter, 18.9 'biliion in the second quarter, 39.3 billion in the third, and ii? in the fourth, Express capacity in Ni 2 is planned to be down year?over?year. We are forecasting main iine fuel prices to increase in 2032 based on'the January 23 fuel curve.We expect fuel price to be in the range of $3.14 to $339 for 2012. Forecast breaks down by quarter as $3.33 to $3.18 in the ?rst and second quarters,and $3.14 to $3.19 in the third and fourth quarters. in terms guidance for 201 2, we intend to maintain our cost advantage versus other major carriers;Forthe full~year 203 2,we are forecasting main iine special items,fuel,.and profit sharingversus 20$ 1 . First quarter main iine CASM is forecasted to be up to second quarter up 1% to 3%,third quarter up 2% to and fourth quarter up 3% to Express CASM is forecasted to be down approximately 1% in 201 2. Consolidated forecast will be up approximately Wis. Looking at Ca,pEx,we continue to make important investment in our product and operations with a focus on interior upgrades,customer self-service protects, airport automation, and recovery tools.We are forecasting total cash CapEx to be $289 million in 2012.This includes non?aircraft CapEx of$170 miilion,and net aircraft CapEx ofSiiQ miliion. - - - in sum mary,i would iike to thank ali ofourempioyees for their hard work and dedication. During 201i,we recorded our-second consecutive fourth quarter and fuli year profit,despite fuel prices that increased our costs by aimost $1.3 billion. it took a tremendous effort by all 32,000 team members to manage through this chailenging time-,inciuding reducing capacity,controliing costs,and maintaining acommitment to exceptional operating believe we are weii positioned to maintain that momentum into-2012With that, i wiil turn it over to Scott. Scott Kirby - US Airways Group Inc President 'i?hanks, Derek. Before discussing the revenue environment, i'd like to also thank'ail of the employees of US Airways for all of their hard work and the great airline that we are running todayWe had our best-ever operational resuits over the holidaysand ran a great airline throughout the entire fourth qua rter. Turning to the revenue environment, i wilt probably sound like a broken record from our iast two earnings calis.Weiare pieased with the 11% year~over-year increase in passenger RASM. Both ieisure and business demand were strong throughout the quarter.We simpiy did not see any evidence of macro?economic weakness in our business?i'hat was true even across the Atlantic, with transAtlantic RASM up 32% year-over?year, which siightiy outpaced the strong domestic performance. I As waive speculated on our iast two earnings calls, if you take a step back, it appears the underiying economy is better than the macro headlines would lead you to believe. Certainly, airlines revenues are performing well, and from a broader perspective, corporate earnings remain generaily good and most economic data is okay. Turning to the outiook going forwardthe new year has started off strong for both ieisure and business demandAs an example, the second week of january is typicain the largest booking week of the year, as ieisure traveiers begin planning spring break and summer Vacation, while business travelers return from the hoiidays and make their initiai plans for business travel in the new year. Our booked revenue was up 35% year-over-year in that week. Additionaliy, booked corporate revenue is up almOSt 30% year-to?date in 2012. Business demand in particular remains quite strong. Ti?iOi?ritB-?Cii Erasmus?reetevenreborn 3 Contact Us it anything, the new year has seen a step up in business demand from the already strong leveis that we saw in the second hait of 2010 or sorry, 2011.As a result of the strong demand environmentthe pricing environment also remains strong,and the industry is successfully recovering high fuel prices. I Regionaliy we expect the Atlantic to continue slightiy outperforming the domestic entity for U5. Airways.As we move forwardwe are overlapping numerous fare increasesifrorn last year, but the yeanoveeyear comps do start to get a little bit more dit?cult.That said/we expect both January and February RASM to be up about 30%.With the tougher comps and higher ieisure focus,we?d expect March RASM to be up a littie less, but stilt in the high?singie digits. in conclusion, we haven't seen any signs ota siowdown in demand. in fact, it?s quite the opposite,with the robust pricing and demand environment. I I I Now will turn it back to Doug. Doug Parker US Airways Group foo Chairman, CEO Ali right, thanks, Derek, thanks, Scott. Look, before we get into questions,l am aware that there is a good bit of specuiation about our Company and as it relates to bankruptcy?nd am aware there are, therefore, questions youguys may want to ask because indeed many of you are paid to specuiate. But in an etfortto head some of that off and keep uson the focus of the daywhich is our earnings and not speculationd?ve got a iittle statement here to read that i do,and tell-you what lc'an?nd if you guys would hopefully use that as the answet to of the questions you may haye,because that?s going to be myanswer to ail-otthe question-s you may have.We will try and do it that wajaand head offany questions. Soat any rate! know part of the reason forthespeculation has been US Airways? historicai comments on consoiidation and being such proponents of consolidation.And the fact is,we have been on record fora long time about the need for this industry to start earning a fair return on invested capitatand we have been on record that one of the ways to ?x this problem is through Consolidation. That being said.the reaiity is,a large amount of consoiidation has already occurred in our business.We have a much less fragmented industry than we did when we merged America West and US AirWays in 2005, and that industry consolidation has been a major contributor to the improved resuits that you see today at US Airways and throughout our industry. And furthermore, as today's results show, US Airwaysdoes not need to participate in consolidation.0ur employees are running a terrific stand?alone airline, and we're generating financiai returns that are similar to or better than our target peers. We're extremeiy proud that the hard work of our team has gotten us into a position where we can controi our own destiny. We can now decide whether it?s best for US Airways to operate as a standwaione company or participate in further consolidation overtime, and that's what we intend to do. So, while it's no longer imperative that our industry de?nitely not imperative that US Airways participate in consoiidation, we are, of course, ail/rays interested in studying potential value~enhancing opportunities. And part of studying these opportunities is ensuring we have good counsel?heretore, as has been reported, we have indeed retained Barciays Capital, Millstein 8: Company, and Latham &Wati Dan Camy Vice Pmamemt Rwanda Mamagammi gang-v" From: Elieson, Richard . - . Sent: Tuesday", April 23, 2013 1:46 PM - -- To: Friedman, Rob; Casey, {Don . Subjact: RE: The Street: Airlines need 113 be saved governmen-i: Dan, 5? we dc; increase as! chamge feeg, i?d have refram immadiatefy inareasing the mica of fare. bund?eg and see if we can?t get the med?a :0 make some hay out me fact that we Q-ffer as": affardabie way t0 fer cugtamers its shie?d thamseives from tha hike. This maid be great far ?ncreagmg awareness anti taming more {:m?mmem agate fare hunc?ies (anci in a way that we amid never say ourseives bezause we? wamdn?t pit than?; agamst or sriticize mange service charges}. Rick CONFIDENTIAL From: Friedman, Rab Sent: Tuesday, April 23, 2013 12:31 PM To: Casey, Don Cc: Elieson, Richard - Subject: FW: he Street: Airlines need to be saved from government . 3&2 Sen, Have wefare we going te matte the LEA change fee increases? lf 50, de yeu expect lecreeses in beedle gaming? Thanks, Reta waited eeneemee ehengee te eel?ey United Airiines raised. the majority of" its change fees for domestic and international flights by $50 East week. "We carefully manage our seat inventory and incur costs when a traveler elects not to fly in a reserved seat. We adjusted this fee t0 better compensate us for these i costs," United spokesman Reheaan Johnson said. (Swat/Read Werrler bleed ?neu?e? Street Martial/The Middle Seat Terminei btee - - - . . Ree Frledmee Wee President, Marketing: From: MA SmartBrief lmailto:aee??smartbdefteml Sent: Tuesday, April 23, 2013 12:22 PM CONFIDENTIAL To: Friedman, Rob Subject: The Street: Airlines need to be saved from governmeht u?flzp?s 5635 lh?g Edwa- h?obil??e?i??fT {at ?tt?i? if eh?'oi??i?l?e?bl?rmz Breton ?ya-mi ?o a . 'rmwewrvwiwwW ?li?t??h 23; 2&33 *is?x?l?mhruummsamu 99le - A mum mu in ~5wwi'4omdun- Wink 'r?nin?tmv (?Iran w.ka gnu-M - mum i Hale-ml. ?mm mug i n'mdeWWJme mm, are Mrweve, Southwest: expect Q1 promo, eheiyete my US. airlines should report healthy profits for the ?rst quarter, say. The first quarter of the year is usually a slow quarter for the airline industry due to the lack of major holidays. Delta Air Lines, US Airways and Southwest Airlines are all expected to post profits for the quarter. CNBC American City Businese Journalszaieighz{Durham N.C.5?Triahgie BizBiog Seeking?ighe {rt/22} . ?tted hiriineo transitions; to new ?hioego heedqoertere United Airlines staff and executives are almost finished moving to the carrier's new global . headquarters in Chicago's Willis Tower. When the move is Complete, the Willis Tower will be home to 4,000 United employees. The Willis Tower, formerly known as the Sears Tower, is located in the central Loop business district American Citv Business Journals/ClimaticCONFIDENTIAL their News sir Cenede issues nreiiminerv reort tr it, a 5? gm?; (we em r. Is: .t ?egress - ,geig we) site {Zeitgeist end thee a? ioronto; theron moose; ifi;;"Ze; . . i um Mix-M 5w: to Magnum-2;, h?oemul mm. Nam anvqu mm on.? xxtv'? ham lix L32pr The subscriptien worm is taking ever, are you ready? Subscriptions aren?t just about newspapers and magazines anymore. There are subseriptions fer cars, DVDs, software and more, One?time transactions are part of the past and recurring revenue modeis are in vogue. ?ownteed this-free white . es and ietor 7 re :3 warm: Mn is devmhv! we". 2: you ?Inga mam Imam editeriel: geeuester etteteey ?e eeiitieei ?op" . A Walt Street Journai editOrial says the politics of sequestration resulted in "a poiitical flop" of a decision to furlough'air traffic: controllers rather than cutting spending elsewhere. The editoriai stated: ?Or: Monday, as flight deiays were hitting traveiers at airports around the country due to r" these aliegedly unavoidable cuts, the top story on the Department of Transportation's website announced a $474 miilion grant program that promises to 'make communities more iivabie and _Zsustainable.? Howrah-out 'awarciin rants to the control towers atHartsi?ieid ihme ?e?j?treet Eournai {e22} . - - erase for fineneiei from Wile ferieeghs US. airlines are warning that they might lose tens of of doliars each month due to delays from the ground delay program imposed by the Federal Aviation Administration. The FAA has started furloughing air traffic: controiiers due to the budget'cuts. ?Gin-revenue management and finance teams estimate that this negative impact upon demand couid resuit in the loss of up to 2% of our domestic passenger revenue, up to $40 miliion in lost revenue per month," said David Holtz- {Delta Air Lines? Vice oresident of operations controi. AvistionWeek?omrAWEN Eire: {st/22;} Bl - titer News us see-es ire CONFIDENTIAL f?m?i we? aw Quip-Stub n. we w. no team; z; 25; w-n n. 1mm, he gtreet: eiriinee tn tee free": government . Columnist Ted Reed says the US. government isthenext threat to the nation's airiine industry. "We reaiize that the federei government spends more than it takes? in'end that the soiution is to reduce spending and to raise revenue," he writes. "But is there a way to reduce spending that does not cause deiays in a deiicateiy baianced air traffic 5 stem that transported 815 passengers last year?" EneStreemom {W231i mite en ?the White House said ?ightdeiays stemming from the furioug he of air trafficcontroiiers couid have been avoided if Congress bed reached an agreement to avert the semester. _"'fhis is a result of sequester that is never meant to be White House press secretaryiiay i Carney. "And it was never meant to be iaw becauee Of consequences iike this._" Meenwhiie, the airiines iaunched the "Don't Ground America" campaign urging citizens to send a message Congress and the administration that the oppose FAA?imposed ?ight delays. Eng bioo - - . -. enetore gotten me to oheegeimie m: - - A group of senators is urging the Federei Aviation AdminiStration to drop the ban on personai electronic devices forpassengers on commercial ?ights. Sen. Ciaire said tn ruie is "a great eXampEe of a ruie'thatneedsIto The Wen-Street'3oorneiief22) - ?entreet Management Seftwere eeyere A?viee Contract Management Software can be chaiienging due to some key characteristics of the oontraot management process. In thie guide, read about the entire evaiua?tion and purchase cycie, including key considerations and pitfaiis. ?ewnioed tee free game now and team how to manage the process to your best benefit. - . . - . CONFIDENTIAL raveiers tace deiaye at WW airports due to tarioogi?ie The furloughs of air traffic controllers imposed by the Federal Aviation Administration caused ?ight deiays in New York City on Monday. ?Controllers wiil space planes farther apart so they can manage traffic with current staff, which will lead to delays at airports including New York?s LaGuardia,". the FAA said. Travelers at John F. Kennedy International Airort and Newark Liberty Internationai Airport also faced deiays. Bloombero attest! changes to potioy United Airiines raised the majority of its change fees for domestic and flights by $50 last week. ?fWe carefuily' manage our seat inventory and incur costs When a traveler elects not to fly in a reserved se_at._ we adjusted this fee to better compensate us for those costs,? United spokesmankahsaan'Johnson said. Warriotabteg {45,22}; mewaii meet, Journai/The Middle'Seat Terminai bioo {area} I: mid-M 4.. . as; Vegas airport to see boost from eel?tie Airways merger The McCarran Internationai airport in. Las vegas couid see a iift in international! flying after the merger between American Airlines'and US AirWays, experts say._ "We already have British AirWays doing extremeiyweliwith itsservice to Heatnrow and now Gatwick (in modem," said Da moo Hy.iton,_ an air service consuitant to the Las Vegas Convention and Visitors Authority. Stronger alliance can only heip effortsWithinternationai carriers." Veeasi?ncxom {Las Vedas} ma??yh: . the? tee-ties ow to wattage empioyees Millenniai employees are iikely used to constant feedback, so communicate ciearly with those on your staffi Focus on set high standards for quality and admit mistakes when you make them, writes Steve Cody, managing partner of Peppercomm. ?Being authentic with a generation that prizes authenticity above all eise is probably the singie best we to manage the unmanageable," he writes. Inc! online (free reoistrationi tome) CONFIDENTIAL Direzztar Newark Semame mama? . . . WestJ-et . Calgary, Alberta, Canag?a MAINTENANCE NMANAGEROF 2' .. - - CAPE AIR 1 a Hyannis,M/3. CONTENUOUS . - - - - Sugenfsgor! Smuwtg JetBlue Aimays Long island City? NY Trans Siates Airiines St. Lauis, MO Hawaiian Airlines Hono?u?u, HI Spirit Airiines Miramar, FL Tech?iaaipiannmAircraft Base United Airlines Ch?cago, iL mintenama SsmuEa?erTechMc?an United Airlin?s?nc Houston, TX Chief Qpera?nq Officar The Port Authority of NY NJ New York, NY vm'raresicient: Ghief Safetg ()fficer M8109 Airways Long island City, NY CONFIDENTIAL This SmartBrief was created for mMriadmanQaa??m Subscriber Tools - - Advertise 2- .: ,a ?M'ntu calm "hing gxi :3vawmimmesiifma-emmta?n I I - . - Jim Eubanks 20274074822 Undate account i?f?f?l?i?iatim?} Change e-mail address i 1 - - Prim: irienciiv farmat i Web versinn i Search was: news; i lawni?ag Magia. Ki? Job Board. . Jackie classic: 2525407?787: hm u-w ,rm. i About A4A Airlines for America (A4A), fermeriy known as Air Transpart Asgociation of America (ATA), vigorou?iy advocates for America?s airlines as models of safety, customer service anti environmental responsibility; and as the indispensable netwerk that drives our naticn?s economy and gimbai competitiveness. 4?7?le CONFIDENTIAL 1999?2013 SmartBrief, Inc.? Legai Lgforma-Ligg 10 CONFIDENTIAL . From: Parker, Douglas [dparker@webershendwick.com} Sent: Thursday, February 14, 2013 10:4? AM To: Parker, Douglas Subject: AMR conference cat: transcript US Airways M&Af0ther American Airlines US Airways Group, Inc 2013?02?14 5239196? GMT Event Date: 02/14/2013 Company Name: US Airways Event Description:American Airlines US Airways Group, Inc Merger Cali. Source: US Airways MANAGEWNT DISCUSSION SECTION Operator: Good morning and weicorne to the American. Airlines US Airways Merger Conference Call. Participating on the call this morning, are Tom Horton, American Airlines? Chairman, President and CEO, Doug Farker, US Airways Chairman and CEO, and members ofhoth companies leadership teams. We will begin the coil. with some prepared remarks from Mr. Horton and Mr. 'i?arker and will then open the caii. for questions. After the speakers? remarks, there wiil be a, question?end?answer session. {Operator Instructions] As a. reminder, today?s call is- being recorded and a copy ofthe slide presentation is available on the following websites: and on the investor Relations section of aacom and usairwayscom. An audio archive ot?this call will be available shortly after the call has concluded. The discussion today may contain forward?looking statements that are not limited to historicai facts that re?ect current objectives, beliefs and expectations regarding future events. Forwarddooking statements may be identi?ed by words such as may, will, expect, intend, anticipate, beiieve, estimate, pian, project, couid, should, would, continue, speak, target, guidance, outlook, forecast and like words. All forward?looking statements involve signi?cant risks and uncertainties that could cause actual results and ?nancial position and timing of certain events to differ materially. Exampies of such risks and uncertainties inciude without. limitation: one, the failure of a proposed transaction to be implemented; two, the cheiienges and costs of closing, integrating, restructuring and achieving anticipated synergies, three, the to retain. key employees; and. four, other economic, business, competitive and/or regulatory factors affecting the business of US Airways and AMR generally. For other exampies of such risks and uncertainties please see the Risk Factors set forth in each of the company?s Forms and other ?iings with the SEC. At this time I would like to introduce Mr. Tom Horton. Please go ahead, Sit?. Thomas Horton: CONFIDENTIAL Thank you and good morning, everyone. Doug and delighted to introduce you to the new American Airlines. This merger will build on the strong foundation that the American team has put in place for the past 14 months, a transformed fleet with hundreds of new planes on the way, a stronger network with much . improved revenue performance, deepenedpartnerships with the best international airlines in oneworld, the premier global alliance, a stream of new products to enhance the travel experience and the renewal of our iconic American brand, all with the goal of putting our customers at the center of everything we do. - - . There has been. an. immense amount of work and progress and the proot?is in our performance and in the enormous value we?ve created. All of that has brought us to this momentous day. We?re excited to announce that our renewed American Airlines plans to join forces with US Airways to create a premier global carrier, a truly New American that can and. will compete and win as a. global industry leader. Simply put the new American will provide our customers with the most connected, most comfortable travel experience available bar none. And as we deliver a leading network, product and customer experience, our investors, our partners, our people and our communities will reap the rewards. When we look at what?s so compelling about this combination, we focus on four main things. First, our global. network and especially our ability to better feed our international network. The new American will offer 6,700 daily flights to almost 340 destinations in 56 countries. We'll have the best hubs and network, and more people will be able to get more places more easily. Second, we will operate from a strong ?nancial foundation with the power of American?s restructuring, enhanced by more than $1 billion in annual net synergies through this combination. Most of this amount will be coming from the revenue generated. by our combined network and a more ?exible fleet. That, coup-led with our competitive cost structure, will drive sustainable - pro?tability going forward. - . . Our strong financial foundation in turn leads to the third key point, which is that we?ll be able to continue to make the investments and services that distinguish the top tier players in today's very competitive global industry. The new American will have a modern, ef?cient fleet with all the comforts our customers expect. And not only that, we?ll have the right aircraft in the right market at the right time to give us- the ?exibility we need to match schedule to demand, a. big factor in pro?tability. And finally, with new labor agreements, we?ll have an unprecedented level of clarity and certainty as we develop our labor integration plan. These four key elements together position the new American to lead globally in delivering the network, products and customer service that our loyal customers deserve and expect. . As i mentioned at the outset, it's taken a tremendous amount of work in a relatively short span of time to reach this important day and the possibilities that it brings. Americans people and the US Airways? people put our companies in a position to make this combination happen in the right way. And the Board?s rigorous and extensive evaluation of alternatives concluded. that, with our own house in order, this merger is the best path forward to make the new~ American even stronger. The merger is structured as an all?stock transaction with. MR creditors and 2 CONFIDENTIAL shareholders owning 72% of the combined company and US .Airway's shareholders owning 28%. I am especially pleased that in addition to this merger providing enhanced potential. for full recovery for AMIR creditors, we were also able to obtain the support of a sizable portion of our unsecured creditors for a plan - that provides a recovery of at least a 3.5% aggregate ownership Stake in the New American for our shareholders today. - - The combined company will be called AMR Corporation, operate under the American Airlines name, and have its headquarters in Dallaswh?ort Worth with a signi?cant corporate and operational presence in Phoenix. When the deal closes, {will become Chairman of the Board, and Doug will be CEO. We known Doug as a. colleague and a friend for more than 25 years. And as many of you know, he is a first?rate leader. He started his career at American, and he understands all that we have built here. And I'm pleased to partner up with Doug as we take the new American into the future. Before I turn it over to Doug in just a moment, lwould like to take this opportunity to thank the people of American for their enormous dedication and hard work. in creating the foundation on. which we are building today. And now I'll turn it over to Doug. Doug? William Douglas Parker: Thanks, Tom. This is, indeed, a great day for our two airlines. We couldn?t be more excited. And I want to start by noting that we wouldn?t be here today if it wasn?t for Tom and his leadership and the team at American. Torn. is correct. 1' did start at American long ago. I started actually sitting in a - cubicle looking across to another? cubicle that had Torn sitting in it. And it?s nice to be sitting here today looking at Torn not in a cubicle. So at any rate, this really is just, it's fantastic for allreasons Tom .- stated. I'm. going to walk you through the slides that were included that - - - hopefully you have in front ofyoa. If you don't, we?ll make it so you don?t have to have them in front of you. But if you do, we?re now on Slide #6 which is labeled Global Network. Carrier. As most of you listening in know, I've been a long proponent of industry consolidation. I think this is the last major piece needed to fully rationalize the indu stry, enabling airlines to be intentionally competitive, but also sustainably profitable. And as you see on this chart, what happens is a very competitive set of three carriers between the new American being the largest, but very similarly sized United and Delta that results in a competitive global network of carriers. - On Page 7 what you see is this the world class global network that Tom referenced. This airline combined is extremely complimentary. First hereon the global side you?ll see the new airline will fly to some 18 destinations with over 250 routes. The fantastic Latin America network at American complimented by US Airways, Caribbean and Mexico destinations, the outstanding business network to Europe that American has complemented by US Airways network that actually almost doubles the number of destinations served in Europe. I. would also note as you look at this, there's not one of those routes that overlaps with each other of the nearly 250 routes on that slide. - Moving next to Page 8, you see this highly complementary domestic network, the blue lines being US Airways, red being American. You see the US Airways network with most of its intensity up and down the East Coast, ?lling in an area Where American wasn't particularly strong and where American is 3 CONFIDENTIAL AA-SR-01205806 extremer strong ?ying a lot of east or west over Chicago and Daiias, in and out ot?Miami and New York and L.A.., which we compiement well. Also worth noting, ifyou look at this slide, there are only 12 routes that we share. So between the prior slide and this slide, you have over 900 routes the two airlines serve, oniy 12 ofthern which are shared routes. And you see most of - those are hub~to?hub type tine, which of ecurse, we share. So this is an extremeiy complementary merger, putting together two networks that are highly compiementary. - On Page 9, you begin to see what this means in terms ot?the value of putting together these two networks and what it can mean in terms of cities served and for customers, the cities they can now serve. There are 130 cities served by American but not by US Airways. So once we merge these companies, US Airways customers can now fly to 130 cities they couidn't fly to before. Simiiarly, there are 62 cities served by US Airways, not by American. So by the same token, American passengers who couldn?t get to those cities on American now will be able to get there, will be able to get to those cities on American. Page 30 talks about how important this is to oneworld. Dneworld in - particaiar, as shown on the left, is an extremer strong alliance in terms of its ability to serve the largest worldwide premium destinations. And on the -- right what you see is how with US Airways becoming part of American and therefore leaving Star, how the balance of power shifts there. This isn?t necessarily the best way to show the balance of power as the chart on the left shows oneworld, while smaller, serves the most important markets but now oneworld will be similarly sized as Sky Team and Star as well; Soit makes - oneworld that much strongerPage ?11 talking about the significant bene?ts for ?yers, some of the product enhancements that Tom. and his team. have been. working on and. have been talked about. What this means is all these enhancements wilt be done but now on a larger airline as we take the US Airways system and move it up to Americans product enhancements. - - .- On Page 12, What I found to be a phenomenal number anyway, the combined network wiil have over a 100 million frequent ?yer members, the largest by far. i 00 million cu sterner preferred frequent. ?yers in a loyaity program that clearly is a huge asset that we can use to our advantage, in particular we expect that number to grow as more and. more people now can ?y on the combined network than what they?re doing in between the two of them. Tom mentioned as is shown on Page 13 the benefits of the ?eet modernization work that American has done as wait as a lot of the work, that US Airways has done results in what wiil be one ot?the most modern, ef?cient ?eets in the industry. it Will also be what is certain to be one of the largest ?eets in the industry when you add the regional ?eet over LSOO aircraft. So it?s a huge benefit. On Page 14 we start to talk about what I am personally more happy about than anything is what this means for the employees of both companies. Torn thanked the people of American. 3. want to thank the people of US Airways. They?ve done phenomenal work getting us to this point. And the reaiity is now with this merger, we can do more for our employees than we conid as stand?alone companies, certainty this is true for US Airways. it aliows as to finally get our emptoyees into an airline with the breadth and the scale that gives them better job security, allows us to provide a path to higher compensation. 4 205807 We?re happy to have the support of so many of our employees and labor leaders. It's a great. day for all of them and for all nine, and we coulcln?t be happier about it. - Page l5 just gives you some quotes from labor leaders on both sides - expressing how happy they are about this transaction. That?s something you A generally see on the date of announcement of a merger. We?re happy to have that support today, - - Page 16:3 talks about the synergies we expect, This will be your 2015 numbers. But what you see are network synergies around $900 million, some cost synergies of $550 o?'set by a cost dis?synergy with. labor harmonization That is the increase in compensation that I talked about for employees is a negative $400 million. The result is over $1 billion in annual synergies We expect those to be, the cost of obtaining those is a onetime cost of $1.2 billion that. will be spread over three years. And we can talk more about all those numbers if you'd like as we get to questions. Page 17 shows that how those compare to other mergers that have been announced in the past. We believe these numbers to be achievable, They look conservative versus other airlines. We hope that to be the case and that we can do even better than this. We're highly confident that we can indeed. achieve the $1 billion per year and we are - that confidence is enhanced by looking at what other airlines have done So when can we get. this done? Page 18 we start talking about the road map to completion. The bottom line to this is we believe we have a target closing and emergence in the third quarter of2013q?l?he long pole in the tent is antitrust approval. We jointly ?led for HSR - diel- our HSR ?ling (in-January 3 so that work has already begun. Based on what we've seen with other airlines, based on what we know about how complementary these networks are, we don't expect any issues with the regulatory authorities but they-certainly need to do their work and we appreciate that and look forward to working with there. And that?ll take some time. We expect that again will completed at a - schedule that will allow us to have this closed and merging and AMR emerging from bankruptcy in the third quarter of 20i3then ?nally on Page 1.9 just to summarize Where Tom started us; this we think is one of these transactions that is great for everyone. It?s great for the shareholders of US Airways. It's great for the creditors and now the equity, as Tom noted, of AMK which is phenomenal. It's great for the employees ot?both companies, which couldn?t make us happier. It?s good for our customers because you now have a i?ietwork to fly across that is strcinger and is more competitive with the other global carriers. And its? good for all the communities because the networks are so we plan to continue service to all those communities and the people that live there will have more access to more cities over the combined networks. So that concludes our comments. Tom, anything else? Thomas Horton: No. It just tool; you ionger to say what said. We'll open it for questions. Thank you. Operator? QSLA Operator: CONFI Thank. you. {Operator instructions] In the interest of time, we do ask that you limit yourself to one initial and one follow-op question. And your first question comes from Mike Linenberg Bank. - Mitre Linenberg>3 Good morning and congratulations. z Hey, Mike. Thank you. Hey? Mike. - Mike Linenberg>: Hey. So two questions here. One is, Tom, you?ve done a great. job working through the bankruptcy? the Chapter 11 process and it feels like you can see the ?nish line. We?re still I guess a few months astray since the deal. as you indicated, is not going to close until the third quarter. Are there additional. things that you jointly with US Airways can do that may result in - i don't know - additional savings or upside. Or are we 99.9% there? - - - Thornas I-iorton>: Welt, Ithink, as you know? Mike, and thanks for the comments. it's been a. pretty powerful restructuring. And, indeed, our cost structure is competitive and our balance sheet is strong. "And the company is returning to strong profitability. So that?s good. We will continue to see the benefits of the restructuring ramp up in 2013. You?ll see that in the ?rst and second quarter in a very meaning?il way. And as Dong and I kick off the transition planning here; obviously we?re going to look. for anything we can do to be creative in View of what the new company is going to be. Of course, we work within the con?nes of the anti?trust rules. And we will continue to operate our companies asrseparate companies untii closing.- But . we?ll be very thoughtful about things like facilities and supplier contracts - and. things that will have bearing on the combined company. . Mike Linenberg>: Okay. Very good. And then just my second question. You?ve mentioned about you're obviously going to have to operate per the anti-?trust rules on one hand. On the other hand, my sense is that there are things that you can do as two separate companies. You can still probably sit down and talk; about things maybe like maintenance plans or IT or maybe even. begin to engage in code sharing. ls that something that you could start now because I know code sharingr does involve a DOT process? It may be something that's just better. something that would be better to implement when you, formally merge in the third quarter. . Thomas Horton? Yeah. I think as to code sharing, that's something that we?ll start at the time we close the deal. in. the interim though, we?ll put together transition teams on both companies with an integration leader. And we'll have leads in each of the functional areas. We?ll start thinking about implanting how we want the company to look, and operate on. day one. So we?li be doing a lot ofthat planning work. And we'll be looking to create ef?ciencies and better processes everywhere we can. CONFIDENTIAL - Mike Linenherg>z Okay. Weii, very exciting. That?s great. Thomas Horton>z Thank you, Mike. t Thanks, Mike. Operator: Thank you. Your next question comes from Jamie Baker of JPMorgan. Thomas Horton>z Hello, Jamie. - Jamie Baker>2 Hey. Good morning, gentlemen. How are you? z Hey, Jamie. a Jamie Baker>z labor is on board and that you both have saver backbones, i guess Pro a little surprised in the timing ot?reaiizing all of your synergies. I wonder, I'm not sure it." you?re going to answer, if you?re just playing it safe, given the integration mayhem that occurred at United [indisoernible] last year or are other areas of the integration besides IT and labor where you think that yours may simply prove more complex? William Douglas Parker>z That's not. the case where there?s anything - about this we think is more complex than either of as have had to go through. So again, we like to go set objectives and targets and do our best'to exceed them. So we?re hopethi that's the case he_re.- This is what we believe is the work of both of our teams is certainly achievable. And we plan to go get that. There's nothing here, Jamie, that is different or going to be harder. . - - i g" indeed, with labor behind us, i think most of-this gets much easier. So We - - should be able to get, we should be able to get this done sooner rather than later verses some of our competitors. So anyway, I think that?sthe answer. i also should note, if it hasn't been noted, Torn and 1' are sitting here in Dallas with a number of other people. There?s another team on the line who is in New York which includes Veras [ph] and Bella [ph] and Bev [ph] from Tom?s- . - team and Soon Kirby [ph] and Derek from our team. So anyway, Scott or Verase [pit], do you want to chime in on that? lthink you got it. The fact. that we have labor-on board means we?ll have lO0,000 people working together on the integration and will. make it go much smoother. And we?ve learned a lot of lessons from the past as having gone through integrations on both sides that should make our integration process smoother than its been historically hit each of us and some of our competitors. Jamie Baker>1 Okay. That?s helptiil. William, Douglas Parker>2 They're in New York, by the way, because there?s an investor iuncheon that?s happening later which some of you will probably be at. And there's also going to be a webcast. Jamie Baker->1 Right. And maybe this will come up at the luncheon, but 7 CONFIDENTIAL 205810 sinee Scott is dialed in here, obviously-this'deal is, unlike prior deals that we?ve seen in the industry, this deal doesn?t appear to be done or getting done on the basis of capacity rationalization, all of that. So yes, i fully expect that aggregate capacity is unchanged. Bot-there is still room, presumably, for some hob rebalaneing. Not de~hubbing, but - rebaiancing. Would you be able to speak, for example, the reiationship- .- between JFK and Philadelphia? Inst relative ASM size today, how that might - look in 2015. How Phoenix sandwiched between LA and BFW how that may be rebalanced. - - farm; my,? Thomas Horton>r iamie, I?ll take maybe a cut at that and let Doug and Scott chime in. Obviously we're not at a point where we can talk about network rationalization because we don?t yet have the approvals to do so. But our plan is to maintain all hubs onrrentiy served by both companies. And, but we recognize that as market conditions change here, we're going to need to be really smart and thoughtful about making network decisions that create the highest return for our owners. And so that?s What we'll go do. That will. be our guiding prinoipie here. And so there will be some changes. But it?s going to he built on the notion that we're going to retain and buiid our existing houseJamie Baker>: Excellent. Thanks a. lot, you guys. We?re very enthused. about. this. Take care. -. . . .- . Wiliiam Douglas Thanks, Lianne. Thomas Horton>z Thanks, Jamie. William Douglas Parker>: So are we; That?s it. See you, Operator? Hunter Keay>1 Oh no. .- - Thomas Horton>z Never want to hear oh no. - William Douglas Parker? Who said oh no? - Thomas Horton>1 Hunter Keay, are you on? - Hunter Keay>: Is this me? That was me that said oh no. Good, .i?m glad i didn't say anything else. I was on air. So that's helpful. z And Jamie, you?re still on. Hunter Keay>2 That. was a close one. Okay. Hey, this is Hunter, Canyon guys hear me? William Douglas Parker>t Oh. Hi, Hunter. Okay, yeah. - Thomas Horton>z Hey, Hunter. Hunter Keay>: All right. Good stuff. Your next question comes from 8 . 205811 Hunter Keay, Wolfe Trahan. Let's talk about the fleet a little bit, not just necessarily your order book, but the existing fleet. is the Section 11. 0 process actually over of?cially? Can it be restarted in. terms of addressing the aircraft that you have obviously ?ying for you right now? Doug, are you able to provide any input on that process too as it pertains to still, obviously, fall under the bankruptcy umbrella? And I guess the bigger question is, is it possible for you guys to take delivery of all the planes you have on order, still keep capacity growth under say 2% on a consolidated basis, and generate positive free cash flow next year? Emmy,? William Douglas Parker>: You asked a lot of questions there, Hunter. Hunter Keay>z i know. Squeezing them in. - William Douglas Parker>t Well, I can answer the last one. I'll, let Tom. answer the Section 1110 process which is the existing aircraft order between the two companies we like and can remain in place as is, deliveries as scheduled, and still have the kind of growth rates that we think are the right growth rates for the combined carriers which are modest. And if it happens because there's so many, there?s so much replacement opportunity between the two airlines. Thomas Horton>z And I?ll take the other part ofthe question. The Section ll 9 process is complete. And, of course, we've af?rmed the aircraft contracts. But because we have a lot of new airplanes coming, but we also have a lot of older airplanes coming otliof lease. We have tremendous flexibility in the new ?eet, the combined fleet, to dial up or down capacity. So i think it's going to be; it?s going to provide for the right sort of ?exibility to match supply and demand and to create returns for our owners. That's? what this is all about. Hunter Keay>: Okay. Thanks a lot. And final question on the reservation system out. over, curious on how you guys plan on attacking this and what you learned potentially from the Delta Northwest situation and Continental situation. And are you guys going to be using any of the same third party - vendors to help with that process? And can we get a. timeline on what your expectations are too? And thanks for all the time. William Douglas Parker>: Sure; All right, Hunter. A little early for all that. Again, we're just announcing the merger today. We have a. lot of work. to do on transition planning. And having done that, not until we close can we start actually working on implementation of integration. But What think, what i know I can tell you, is what we learned at America West US Airways, and while this could vary by system, in general what i know we learned is that it?s much easier to take the larger airline systems and put those in place at the smaller airline than the other way around. And we did some of that in America West US Aimvays. So I think the ongoing premise would be that you'd see mostly American Airlines systems put in place at. US Airways, unless there?s a really compelling reason not to do that. And there may be compelling reasons. And we may ?nd those as we go toward. But like I said, if you?re trying to guess, 9 I would guess that you?d see American Airlines systems put in place at US Airways. But we?ve got a lot of work to do to see if there are compelling reasons. They may be unread. I just. don't know yet. Hunter Keay?e: Okay. Great. I'll mute my line. - William Douglas Parker? Thanks. z All right. Thanks, Hunter. z were going to have to call on it because she's z Kevin Chrissy William Douglas Parker? Kevin, you on? Yes, .I am. Thanks. I William Douglas Parker>: Thanks. z Can you, going back to the aircraft deliveries. lthink the press release said 600. That was 600 over what timefrante?? Thomas Horton>z Oh, it runs out really to the balance ofthe decade. If it?s 10 years, 1' think, Tom, years ago, and I. think. it was in discussions of the replacements and stuff back in the day, you thought that you could handle about three airplanes a month, or something like 36 airplanes a year I thought was what you thought you could comfortably handle. So now we?re talking about 60 airplanes a year if 1' just divide it by 10. At the same time, the two companies are merging. Why is this okay? . - Thomas Ho.rton>: Well, I hope it's okay because that's what we?re doing. t Me too. Thomas Horton? We're taking about five a month this year. And we?ll do the same approximately next year. And it?s really a very dramatic transformation of our fleet which is going to reduce our fuel costs and our maintenance costs and create a much, much improved product for our customers, So we're excited about it. We tool: about ?30 airplanes last year. So it?s, the transformation of the American fleet. is happening very, very quickly. In fact. we now have more 737 8005 than in the 80s. And our customers are taking note. So yeah. we can. handle it, Kevin. And we?re in the midst ofit right now. We?re introducing the 777 300 into our ?eet. in. fact, l?rn here at the DE Admirals Club looking out at it right. now. It's a beauti?il new airplane. And that's going to be really the flagship of our fleet. But we?ve got the plans in place to accommodate the new airplanes this year. Okay. Thanks. And I think one of the other, one other separate question. 10 CONFIDENTIAL . ls there any plan as part of the synergies given the bankruptcy and stuf?, I know there was some division as to whether it was possible, but is there any credit card combined deal as part of the net synergies? - Thomas Horton? Well, that?s something we?re going to evaluate. That's one of the big decisions to work through going forward. t Okay. Thanks, and i'll mute as well. - Thomas Horton>z Thank you. Kevin. z John? Hey, guys. Thanks for taking my question here. Just two. Could you just elaborate on some of the big buckets that are driving the revenue synergies and cost synergies, if there is anything that has an outside contribution? And just to clarify the last question from Kevin, just to be clear. there is no credit card agreement in that revenue synergy number? Ijust want to clarify that as well. Thomas Horton>2 That?s correct. Scott, tell me if I?m wrong. z Yeah. There's no synergies assumed in the revenue number from the credit card deal [indiscernible]. As Tom said, that?s something we?ll have to go work on and see if there?s additional opportunity going toward. Thomas Horton? While you?re talking, why don't you answer the rest of John?s question. - - - . - Sure. The revenue synergies broadly are kind of from three big categories. One is about network connectivity. You put. two networks together and you can just connect more customers and fly between Charlotte and Chicago. We can now connect customers on both ends. Second is ?eet optimization. This was, I. think, the largest revenue synergy in Delta Northwest, as an example. But it?s putting the right sized airplane on the right route. And as you put two big route networks together, you have opportunity to move airplanes around and put large airplanes on high load factor routes and visa versa, that?s another several hundred million dollar synergy. I And then ?nally it is winning back and Winning corporate share. Delta and United with global con?dence in. networking has been able to win share from. both American and US Airways on a stand alone basis simply because the networks are more comprehensive. And being able to win back our fair share is the third large bucket of revenue synergies and. that adds up in total to the $900 million you?ve seen in the press release. Great. Thanks. That?s very helpful. And I know, guys, all of you have analyzed a range of different consolidation scenarios across the industry over the years. And I know it's a learning process as you get your hands dirty. But I couidn't help but notice that chart Where you had revenue. sorry synergies as a percent of revenue and you're sort of low versus some of the 205814 other deals. Structurally is there anything about new American, their network, assets that couldn't. one day generate synergies over a billion dollars as you get your hands dirty and ?nd new opportunities? - Thomas Horton?): Well, we will of course look to exceed our estimates of synergies and we'll work very hard on that. But unlike cost synergies which are straight forward, revenue synergies are as you know more sensitive to assumptions and the revenue environment is pretty dynamic. So we've worked real hard to make sure our assumptions are reasonable and not too optimistic. We?ve seen some other deals where projections were maybe a little high and folks struggled to hit the target. So we're con?dent that we will achieve these targets. Great. Thank a lot. Thank you. z All right. Glenn Engel, are you on? Glenn Bagel? Yes, I am. Thanks. I guess a follow up to that one and I guess Tom sort ot?touched on it. if you looked at the other mergers that we?ve seen although they?ve announced big, synergies, they?re really not evident in the numbers. I can?t say the margins of United, Delta, or Southwest have done any better than, the industry in the years following the mergers. So why will your merger create added value when we really havent . seen it in any of these previous mergers? - William Douglas Parker>z Let me try and [indiscernible]. Look, Glenn, that?s easy to say. Of course you can say well their relative margins haven?t improved as much versus the industry as what theyhad said in the synergies. What you don't know is What would have happened had they not done it. And the reality is there are competitive responses that happened to each of those. So and my own View is, again I. don?t know ifeachof these had it. in their analysis, but certainly I know from ours American plus US Airways Whatwe know is had we not done it the combined earnings of those companies would have been lower by the $680 million of synergies we said we were going to have, if not more. So you can?t just look at. the margins of everyone else who is going through other things themselves, for example, bankruptcy ?lings, other consolidation, and say, well, you didn't improve enough. ?versus the industry. So, therefore, you couldn?t. have gotten it. What you don?t know is what would have happened had you not done it. - And having said all that, in this case, clearly there can he responses. But there?s not going?to he a response of another merger of a large scale. And I don?t think you're going to see a response of someone of a. large airline tiling bankruptcy. So I don't think, you're going to see the kind ot?things that have resulted in what you?re describing which is the synergies do take hold, but you don't actually see it in terms of relative margin improvement because others go do things as well. Because I don't. know what others do at this point. This is, as had been noted, we're, it?s hard to imagine another larger merger beyond this one amongst US. carriers. 12 CONFIDENTIAL (SA Thomas Horton?): lthink it?s fair to say, Glenn, it?s all in the execution. And we?ve got to get this right for our customers. lt?we don't do that, then. the revenue synergies don't exi st. And Doug and I. are going to be very focused on making sure we put together a team here that is the best of the best and goes out and executes this thing in an extraordinarily strong - fashion. - - - - Glenn Engel>z And as a follow?up, can you go through the major technology platforms and Where you're different and Where you're similar? William Douglas Farker>t We don?t have that in front of us, Glenn. Glenn Engel>1 Thanks a lot. - William Douglas Park.er>: Thanks. Operator: Your next question comes from Dan McKenzie of Buckingham Research Group. Daniel McKenzie>2 Oh, yeah. Hey. Good morning, guys. Thanks for the time here. Hi, Dan. Daniel McKenzie? A Valentines Day announcement here. ice to see a. merger oflove. Are the, a couple questions here. One is just housecleaning. Are the merger synergies net of the anticipated carve-outs? Or are you anticipating those are so tie minimus that not really factor? And then how do the synergies phase in by year? It appears that there could be a net dis-synergy [ph] in. year one? Or does the ability to implement cosnectiyity really offset thatThomas ?otsam: Dan, Pl} start and then Doug can chime in; But we don?t anticipate any carve~outs This is a merger that is Very complementary and. in fact, of the 9'00 or so routes that we serve together, only 12 Of them are direct overlaps, as Doug mentioned. 80 we think this. this will, this should clear regulatory approval without any carvemouts. William Douglas Parker>: Absolutely. And then as to timing of synergies and transition costs, Dan, what we have said is we expect the merger to be accretiye in 2014. So those transition costs spread out over a three-year period and they're certainly front?end loaded. But they?re not large enough in the ?rst year to offset the synergy value that was created in. the first year. Daniel McKenzi.e>: Very good, Thank you. And then given what we?ve seen from other investors are sensitive to execution and integration risk and you both have done airline and I wonder" if you could just comment about 7 what you learned or about udtat the biggest things to keep your on, just based on your experience essentially to mitigate that risk. 13 CONFIDENTIAL . 6 - William Douglas Parker?): Yeah. Investors should be sensitive to that. Again in our case two thing. One. making sure the management teams are fully integrated, excited. ready to go at. the time you. annou rice the merger.- Tom and I will work together and endeavor to do that. The great news is we both have extremely good teams. So this is not going to be a problem of finding the right people. It's going to be a high~=elass problem of making sure you end up with the right mix of a couple of great teams. So" we will do that. I?m highly con?dent we can accompiish that and looking forward to making sure that happens and have a team in place that can go execute. And their the second one. again, lwas harking back to what I said before, the learning experience we had that we will certainly bring to this is it is airlines talk a lot about during these mergers, about the systems. And indeed it is about systems. What really is the real issue is the processes that those systems drive, is where you can get yourself caught. {know at America West US Airways our reservations system. integration was not an issue at all. The system worked perfectly well. The problem is a reservation system drives all sorts of processes throughout an airline and it was harder for the large airline to learn all. those new processes and caused us some issues that we probably wouldn't have had if we had gone the other way. Or certainly wouldn't have had in the same scale. -- - - So lthink steaiing from a competitor,- I know from talking to people at Delta, they called it adopt-and?go. .1 think that?s a good philosophy to have. it doesn't mean you do it in every case, but go adopt the larger earriers' systems and processes and try and put it. on a smaller carrier is easier then trying to go the other way around. And that's certainly something we learned through our experience. - - . - - ?We: - Thomas Horton? And. i would just add a couple of. thoughts tothat. I think ?rst and foremost it?s about running a good operation, running a good airliee which goes to the systems and all the things Doug talked about. At American we focus very much on our highest value ouStomers, global travelers that provide a disproportionate share of our revenue. And our strategy over the past couple- of years has been all about building a. great experience for those customers. And Doug and have talked a lot about that. And so our mission going forward is going to make sure that we are. pushing forward with all of those things and ensuringthat we only make it better for our best customers. - - - Daniel Mo.Kenzie>: Thanks much. I appreciate that. Thanks. Dan. Operator: Thank you. Your next question comes from Helene Becker ofDahlman Rose 8: Company. Helene Becker>z Thank you very much. operator. Hi, guys. z Hello, Helane. Hi. 14 CONFIDENTIAL - Helene Becker>~z Thank you for taking the question. So my one question, my first. question is I know you need EU approval for this, and earlier in the week the EU rejected the Ryanair takeover of Aer Lingus, even alter-they . actually had agreements in place to divest things. And Fm just kind of wondering, you're a bigger merger, it shouldn't affect you. you should have no problem. getting their approval: but are you concerned at. all. about. it? Thomas Horton>z Helane, it?s Tom. We're not concerned about that. In fact if you look at our Transatlantic business, there is really no overlap. So I think this deal should be readily cleared by the EU. Doug-anything to add? - William Douglas Parker>t Absolutely. - Helane Becker>: Okay. Then my followup question is Doug, Iknow that your flight attendants are voting on their contract with the vote due to be counted I think February 28. Are you do you have any comments with respect to that vote? And I noticed. flight attendants are quoted as saying they agree with the merger. I noticed that your 1AM union said they were not going to be in favor ofthe merger. So I was just kind ofwondering what you thought about that? - - William Douglas Parker>z lwouldn?t characterize it ?that way exactly. - Both of these are related. to standalone agreement. Flight attendants are voting on. a standalone agreement that is currently in rami?cation, and I don't know much more than that. Our union leaders are out working to get it rati?ed, and I?m hopeful this time it will get rati?ed. And our IAM contracts are still in negotiations, and I believe what you saw from our 1AM was a statement that said we?d like to see you guys get our contract done before you go work on this merger. So we?d like to see that too. We?ll see if we can get that doneThe very nioe thing about this merger for the US Airways employees is it allows us to pay our employees better than we can as a standalone company. They all know this. We spent several years talking about it, and if this merger weren?t to happen, we would have spent several more years talking about it and educating our team on the fact that the route network. we have, we didn?t generate the same revenues we couldn?t have the same cost structure. And that?s the ease for any standalone contracts we Sign before we get this merger done. But once we get the merger done, which I expect we will now, that they'll all of our employees will be better off. QHelane Becker>: Okay. Great. Thank you very much and congratulations. z Thanks, Helene. t Thank you. William Douglas Parker>: Thank, you. Operator: 15 CONFIDENTIAL Thank. you. Your next question comes from Jeff Kauffman of Sterne Agee. Jeffrey Kauffman>z Hey guys. Congratulations. I - William Douglas Parker>t Thank-is? eff. - Thomas Horton? Thank you. - Jeffrey Kauffman>: Thank you. Just a quick question that you addressed earlier; but how are the strategic priorities in the consolidated company any different from the strategic priorities of the individual companies? You talked about. some of the bene?ts ot?the new routes in Europe, but when we look domestically you're going to have SOD?plus regional aircraft. You?re going to have five hubs on the East Coast of the U.S., internationally How does the combined entity look at the world differently than the individual companies before? Thomas Horton? So I?ll start and I'll let Doug chime in. I think it?s about capitalizing on our new position as the leading world class global airline. And with our stronger, more powerful network: lthinh that?ll allow us to leverage that and win more business, And that?s what the revenue synergies are re?ecting. Jeffrey All right. Well, listen. Thank you very much and congratulations to both. - William Douglas Parker? Thanks, Jeff. Thomas Horton>z Thank you, Jeff. Operator: . . At this time Media are invited to ask questions as well. Your next question comes from Kevin Starks of CRT Capital. - Kevin Starke>z and congratulations. The press release that you put out this morning isn?t clear on what the recovery would be to singledip creditors. while it is clear that doubledip creditors are going to. get post-petition interest. Wondered if you could comment. on that and discuss whether there's any relationship between the ultimate recovery to singlewdip creditors and the equity and What is exactly this mechanism by which the equity could receive more than 3.5% of the company. Thanks. Thomas Horton>1 Yeah. Hi, Kevin. As you can imagine this is pretty complicated stuff so Ill try to keep it fairly high level as appropriate to the call. We?ve been very focused on building value at the company and there was talk of merger earlier in the year and we felt it was best for us to go get. our restructuring done and then pursue the discussions from a position of greater strength which is what we did and in fact the deal was struck with the American owners owning 72% of the combined company. So we have also struck a deal with a group of the creditors to create a plan support agreement that would provide the mechanism for how that 72% would be 16 allocated among the stakeholders of AMR. And I think what's interesting about this is that the unsecured creditors are, this very much enhances their to be fuin satis?ed, par-pins accrued. And as part of this deal. with this group, we agreed that 3.5% of the u, equity of the combined company would be ailocated to existing - - shareholders. So having the unsecured creditors fully satis?ed and having equity created for the existing equity holders is, as you know, really quite extraordinary. And the way the deai is structured is that, and it's fairly complicated. But the punch line is that once the unsecured creditors are ?dlly satisfied, par plus accrued, any incremental value that gets created over a certain period goes to the equity holders over and above that 35% I talked about a minute ago. So it?s really quite an interesting construct and I think has the potential to be quite a good deal for, of course, our creditors, but also our existing shareholders which is very unusual. - Kevin Starke>z Does your, does the bond holder group own. some of the single-dip claims? - . - - Thomas Horton>: They do. Kevin Starke>z Okay. Thank you. Thomas Horton>1 Thank. you. Operator: Your next question comes from john Godyn of Morgan Stanley. - John Godyn>: Hey, guys. Ijust had a foiiow?up. Scott, you mentioned one of the buckets of revenue synergies is winning back corporate share. So if I think about that, it sounds like the net synergy to the industry that?s accruing as a result ot?this deal is actually less than whatever synergies US Airways and American speci?cally are able to achieve. Or are there offsetting incremental synergies for the industry that might not be included in that simple math that I just adjusted? - - i Our revenue synergies are just about what's going to happen for American Airlines, not about what's going to happen for our competitors. And at least some of this, not all, of this, but some of the synergies are increasing our share by having a global comprehensive network that can now compete and Win against United, Delta, Southwest and everyone eise that we compete with. John Godyn>2 Got it. But I guess that?s a ?xed pie. Or do you expect that pie to go up? You?re taking that share out of effectively United and Delta?s synergies today? Yeah. Weil we're not commenting on what the size of the pie. You as do a lot better job of torecasting what. [indiscernible] how big the pie will be. But our, the synergy numbers do include some redistribution of the pie to American Airlines John, this is Verase The only other thing i would add is when you think about this you should think. about it on a more global basis and between the alliances including oneworld. So there?s a lot ot?opportunity as orieworld gets bigger and stronger with this acquisition. There?s a lot of opportunity for shifting share from other alliances and high value customers internationally to our joint businesses. John Godyri>z Okay. That?s really helpful. That might be an offsetting positive. Thanks. . . .. . . Operator: Thank you. Your next question comes from Aaron Carp of Air Transport World. Hello, Aaron. Aaron Cathie: Yes, hello. Could you go in to how long the discussions have been ongoing oi?in terms of - you said Mr. Horton you wanted to get American bankruptcy in play, the reorganization in play first. How long have the actual merger discussions heed ongoing? And how difficult was it to move away from the original plan of emerging as an independent entity? Thomas Horton>t Well I can tell you that, and Doug knows-as well having spent time at American, Americans been. looking at US Air for about 20 years now. So it goes back. quite along way. But Doug and i had a conversation back in the summer of 1.7.01.1. But as it became increasingly clear that American was going to need to go pursue a restructuring arid get its own house in order we -. - - set that to the side. But. it was clear that USAirways had a. strong View about this and we also believed there was value in a merger.- . I I But we felt very strongly that it was important that we get our own house in order and get our costs competitive, our balance sheet sorted out. And once we got. to that point which we did iater in the year, we really rampiedup' our dialog with US Airways and indeed we signed a nondisclosure agreement with . them back. in. the middle of the year. And so our teams have been working - together diligently to evaluate the benefits of the mergerand we?ve also been working hard to create the right labor contracts and labor constructs to facilitate the merger. And once we got. all of that squared away it-beoame clear this was really the right deal and the right time and in fact mnerioan could do it on terms that were sensible because of having gotten our restructuring out of the way. - Aaron Carp? And Mr. Parker, what did. you. learn from the sale attempt to merger, that?s a few years ago, that applied to this one and made the outcome different? William Douglas Parker? First off that at first we think was extremely helpful in getting us here today, not just because we learned from it, but also because i think it was key in starting a series of consolidation in the industry. Frankly, I?m not sure Delta??lorthwest would have gotten done if we hadn?t done what we did in terms of Delta. So 1' don't View that as failure. I think we did What we were supposed to do, and the result we're really happy with, which is consolidation in the industry started. And that led us to 18. CONFIDENTIAL follow-on consolidation that's gotten. us here today. Now as it related to American, if anything we learned in that process was it?s important to make sure our View was inthe Delta transaction, much like this transaction. There?s so much value created by the merger and bankruptcy is supposed to be about value creation for creditors. So we knew if we could just our View was we could create enough value for the creditors that that would win the day. In Delta that wasn?t the case. We got in i think too late, and we also didn't have the supportof the employees '80 in this case we have both those things, and that helped persuade Tone and his team that this made a lot of sen se, because there was we didn?t have those issues to overcome. Aaron Carp}: Thank you. William Douglas Parker? Thank you. Operator: - Your ?nal question will come from Christine Grimaldi ofAyiation Week. - Christine Griinaldi>z Hi. How are you all doing today? William Douglas Parker? Hi, Christine. Thomas Horton>z We are great. eiQ Christine Grimaldir?e: Thanks for taking my call. :l just wanteci to ask kind of a two-patter. How long tic you think the actual how long do you . . expect the actual integration to take? And also When-do you expect single operating certificate for your transportWilliam, Douglas Parker>r The single operating certi?cate, actually Scott, chime in if i have this wrong, but I believe in the last couple it?s gotten done within an 18?month period, which'is - so '1 would expect we should be able to do it certainly within. that timefrarne. And that is pretty ranch - then longest pole in the tent in terms of operational integration. So i think it's the same answer to your ?rst question. We would. hope within 18 months after closing the merger we?d have full integration by having one certi?cate and certainly looking to consumers like one airline, actually well before that, because operational integration. is kind ot?hehincl the scenes. One certificate issue that. makes it a little harder to mu your airline but the customer doesn?t see it by then. What. the customer sees would hopefully he sooner than that. The last piece of that is always the-res migration, which I don't know exactly what the ti meframe is, but something that should be shorter than 18 months. - Christine Gri.rnaldi>: All right. Thank you very much. Operator: - - Thank you. I would now like to turn the call over to Doug Parker for any closing remarks, 19 CONFIDENTIAL Wiiliam Deuglas Parker: That was me. And again, lookg I?ll (31056 again by saying thanks to of you being here. This is exciting news to all of us. it?s just the beginning. Obviously, we've get a 101; of work ahead of us, but we're real exeiied about the prespects. We're going to go beiid an airiine that is great for everyone involved, for our employees: for our custemers, and for our investors. We ceuidn't be happier about it Tom? Thomas Horton: Couidn?t agree mere. Thanks, Doug. Well said. William Douglas I?arker: Thank you for your time. Unidenti?ed Participant: We?ll be in touch, Unverified Participant: Thanks. Operator: Ladies and gentlemen, that concludes our American Airlines and US Airways Merger Conference Gail. Thank, yeu very much fez." your participation. You may now disconnect. 20 CONFIDENTIAL CONFIDENTIAL US Airways Merchandising Products b: mama; US Airways Merchandising Products USAimays effers several merchandising products that are comparable to preduct suite - Faster Changed Under insert-v?eadar a Faster 2 CONFIDENTIAL CONFIDENTIAL Choice Seats US Airways? Choice Seats are similar to Preferred Seats product. Choice seats are those closest to the front of the plane - They do notfeaturo extra fog room Choice Seats can be purchased oniine, via phone reservations, at a kiosk, or from an airport agent Choice Seats are a non~refundabie product cam; mr mus Foster Charged Under maestmeacier Footer 326538 Paid Upgrades US Aimiays'offers'GoFirst upgrades on ?ights within North America Priced at $50v$?001 based on length of haul (seems?to be about $50500 miios) - Offered during web check?in, through reservations, arid through airport ticket counter agents internationai GoEnvoy prociuct is no longer advertised, but it avaiiabie within 24 hours by {tailing reservations or asking the airport (according to fiyertaik) 0 Pricing appears to be higher than our LFBU product in Europe Footer Changed Under Lawnmower Fania Aprii 21, 2013 CON Paid Upgrades (cont?d) Non?eiites are occasionally able to Hg: for an upgrade up ?0 48 hours- prior to ?ight departure The Upgrade offer is sent Via emaii and Charged to the originai form of payment when it clears Prising appears to match that of GoFirst upgrades Foster changed under Msen>Header 8? Fmter wafwwufa ?yam wwgaumsa? p.345: Wm ergg-L ix.- . mm Di swam: wamsw um: mum?, mummx . CONFIDENTIAL April 21, 2013 AA-S 326540 Change Fees - US Airways? change fees are in line with Amerioah?s, at $150 for domestic itineraries . MoveUp product is oomparabie to SDFC product MoveUp is avaiiabie for $75 on domestic, Caribbean, and Centrai American flights, or $1 50 for ?ights to Europe, lsraei, and South America MoveUp is offered within 6 hours of departure The product is compiimentary for top-tier members US aiiows passengers to stand by for an earlier same?day flight at no charge if the eariier ?ight is booked to capacity. Faster Changed Under kiss?meauar 5 Form: CONFIDENTIAL Aprii 21, 2013 326541 Priority Boarding US Airways? Preferred Access product aiiows early boarding (simiiar to our Group 1 product) and access to the priority'iane at airport security (simiiar to our Priority AAoCess product) Pricing is $10 per person, per direction Footer Changed um: Ensa?>Hea?er :3 Footer CONFIDENTIAL April 21, 2013 R431 326542 April 21, 2013 Tm US Airways Club US Airways aperates 13 dubs, ail in domestic airports Locations: BOS, BUF, CLT, HSO, BDL, LAX, LGA, PHL, PIT, RDU, Passes are effered for the foiiowing durations: Annual, 90-Day 1-day sealer Changed Un?ar insamHeausr 3 Fame? 3 CONFIDENTIAL CONFIDENTIAL tn?Fiight lntemet - US Airways offers GQGO in?ight across their Airbus and Embraer ?eet - (3060 pricing is similar to that offered on American - 50919? Ems:th 332% ass R3215 7. _r itw? ?lmsE170 4p 20 Foster Changed Linda: :aeemHeade: 8: Water AA-S 326544 Checked Baggage US Airways: generaliy charges higher bag fees them AA . Bag fee waiver poiicies far eiites and premium cabin passengers are $935 generous than AA some; Changed under Enssn-vHeaa?er 3 Footer 10 upgrades-thmi CONFIDENTIAL April 21, 2013 10 326545 A mu.th- From: Monique R. Sears Sent: Friday, February 15, 2013 10:10 AM To: Subject: 12. NYT Service Cuts May Follow Merger of Airlines New York Times February 14., 2013 Service Cuts May Follow Merger ofAirlines By JAD MOUAWAD And then there were three. The airline industry tool; a decisive step toward greater concentration on Thursday with the announcement that American Airlines and US Airways had agreed to merge, forming the nation?s biggest airline. The merged airline, to be called American, leaves just three major carriers Delta Air Lines and United Airlines too able to o??er extensive domestic and international service, a sharp contraction. over the last decade. But while airline executives argue that mergers are good for passengers because they bring more service to more destinations, some economists and consumer advocates warn that all this consolidation comes at a price for travelers. With fewer carriers, passengers have fewer options; fares and fees are now more likely to go up, particularly for ?ights between midsize cities. And more cities, especially smaller ones, can expect to see ?irther reductions in service. ?it?s much easier to have tacit collusion with just three airlines,? said George Hotter, a transportation economist at the University of Richmond. ?It?s not. illegal. But it?s like having a few big people in a small boat. Anyone?s decisions tie you all together.? That helps explain why fees had become so uniform within the industry in recent years, he said, and why all airlines new charge extra fees beyond ticket prices for things like checking bags, rebooking reservations or even picking seats or boarding early. Those extra fees now account for a growing share of airline revenue and are a big reason behind the industry?s renewed pro?tability. Fares, too, have risen in recent years, according to the latest government statistics. Some of that increase, said, reflects rising oil prices. And while airfares on average are still lower than they were in 1995, once adjusted for in?ation, they have been. steadily rising since 2008. But some airports, where the number of carriers has fallen, have had steep increases in fares. Ticket prices between Delta?s hub in Atlanta and Detroit, for instance, rose more than 20 percent from 2007 to 2011, while the number of carriers serving that route fell to two from four, according to a study released last year. Still, most expect the merger to be cleared by federal antitrust authorities, who have approved seven major mergers in the last decade. The last time the Justice Department challenged a merger was the proposed combination of United Airlines and 1 CONFIDENTIAL US Airways in 2001. That merger was rejected on the ground itwould reducechoice and possibly lead to higher fares. Since then, regulators have taken a different view of airline mergers. Instead of looking at any carrier?s overall. market share, antitrust authorities now examinewhether a merger would decrease Competition on speci?c routes. - The department raised no objections to the merger of Delta and "Northwest in 2008. it required United to sell only a handful oftakeoff rights at Newark Liberty Airport before allowing its merger with Continental in 2010. And when Southwest bought AirTran, federal regulators found in. 2011 that ?_?the merged ?rm will be ableto offer new service routes that neither serves today.? I I A decade ago, the Justice Department ?wouldnot have stomached mergers the size of Delta?Northwest, United- Continental, or American-US Airways,? said Paul Stephen Dempsey, a professor of global governance in air and space law at McGill University ?Now, having approved the gargantuan Delta and United acquisitions, it cannot equitably deny American the same.? ?Apparently, Washington believes that this is the optimum path to industry health, and that concentration and collusion is preferable to regulated competition," he said. Airline executives say mergers are necessary to reduce financial volatility and restore a measure of stability to a business that lost about $60 billion in the last decade. Instead of stifling competition, the argument goes, bigger airlines with bigger networks provide passengers with more travel options, more destinations and, theoretically, betterservice. I have been along proponent of consolidation in theiindustry,? W. Douglas Parker, the chairman of'U'S' Airways, said Thursday about his airline?s merger with American. ?And this is the last major piece needed'to rationalize the industry and make it pro?table.?_ Mr. Parker said that the two airlines had only 12 overlapping routes out of a combined 900.111 addition, he said, more cities would be seryed. American ?ies to 130 cities that US Airways does not serve, and US Airways ?ies to 62 cities not served'by American. Airline said passengers would benefit from the mergers in some ways._ Airlines are now in a much better position to buy new planes, invest in new services and build better lounges. Since its merger, Delta. has invested in new terminals in Atlanta and New York, and new business~class seats on its planes, for instance. I ?The US. industry has really turned the tide,? said John F. Thomas, an airline consultant with LEK. Consulting. ?Historically, airlines haven?t had the funds to invest. But they are now making healthy returns and are willing to invest them back in new products.? Mr. Thomas also pointed out that the mergers allowed airlines to reduce the number of hubs, the big reason for the industry?s excess capacity. ?That?s a pretty substantial change in the structure of the industry,? he said. But in some cases, airline dominance at particular airports has made it. harder for rivals to compete, and contributed to higher fares, according to a report last year by the American Antitrust Institute, a nonpro?t group that lobbies for more competition, and the Business Travel Coalition. It said mergers had hastened a ?troubling metamorphosis? of the industry, ?from one in which hub airports were 2 . CONFIDENTIAL 9688 designed to. accommodate multiple, competing airlines to a tank-large, closed systems that are Virtually impermeable to competition.? The study found that routes operated by both United and Delta had experienced bigger than average fare - I is. increases after 1their respective mergers, while competition decreaSed. The study found that the number of airlines serving Newark to San Francisco, two major hubs for United, dropped to one from three, and average ticket prices rose more than 30 percent from 2009 to 2011, The mergers, of conrse,_l1aye not eliminated competition. Alongiiyith the three big? carriers, Southwest Airlines still holds a substantial share ofthe domestic market. With its purchase of AirTran, SouthWest has also set its sights on international destinations in Mexico and the Caribbean; Bot Southwest?s period of unfettered growth is over and so is its ability to provide a cheaper alternative There are few markets le? where Southwest can now enter and slash fares to "quickly gain market share its winning strategy for decades. - In May, the airline announced it would lease to Delta its ?eet of Boeing 71.7 jets that it inherited when buying AirTran, a move that signals the airline does not see much expansion for its ?eet for the next ?ve years, according to Timothy O?Neil-Dunne, a managing partner" at TZImpaCit, an aviation consulting ?rm. ?SouthweSt is not being a disrupter O?Neil-Dunne said. The biggest challenge for the new American Airlines Will be to integrate the two airlines? operations over the next couple of years. That is no easy task since airline mergers are often rocky involving complex technological systems, big reservation networks as__well as large labor groups with different corporate cultures thatall need to be. combined seamlesslyThe merger is expected to be completed in the third quarter, but. it will be at least another year until the carrier gets its single operating certi?cate. And the road ahead promises to be bumpy. United angered passengers iast year. after'a series of nierg'eprelated computer and reservation mistakes, and late and delayed ?ights. ?Mergers are difficult,? said Darryl Jenkins, the chairman of the American Aviation institute, a research and consulting firm. hey require two things. Prozac because they'will test your patience as a passenger; And" Dramamine for all the turbulenceyon will go through. There will. be a point where passengers will be interrupted for a While. These things happen.? I I I CONFIDENTIAL 9689 January?, 2913- AMR Corporation Attachment 4(c)51 NotUsed From: Collins, Seen Sent: Thursday, May 17, 2012 2:14 PM To: Wariick, Peter; Goren, Bella; Goulet, Beverly; Momenarny, Brien; irvin, Candice; Schwendinger, Greg; Briggie, Eric; Backover, Andrew Subioct: RE: Today's LCC presentation transcript Bank of America Merrili Giobal Transportation Conference Attachments: April 2012 PRASM Performanoepptx As Andy said, ?This is and how we can use this information for a broader conversation.? in answering Peter?s Specific questions for this Didn?t AA outperform OAS in April? Yes, AMR outperformed OAS. Siide attached shows that. Didn?t AA outperform UAL in 01? one. 193.93g mm mm (Mainiine) Passenger revenue per avellabie seat mile (cents) 12.02 10.92 10.0% (Consolidated) Passenger revenue per availabie seat miie (cents) 12.67 11.49" - 16.3% United 10 2012 1Q 2011 MW (Mainline) Passenger revenue per avaiiabie seat mile (cents) I 11.35 10.90 4.1% (Consolidated) Passenger revenue per available seat mile (cents) - 12.44 7 - - 11.83 5.2% line basis, AA us Airways 11.93 11.91 11.79 *(Noie: excludes adjustment) From: Warlick, Peter Sent: Thursday, May 17, 2012 12:53 PM To: Collins, Sean; Goren, Bella; Gouiet, Beverly; Mcmenamy, Brian; Irvin, Candice; Schwendinger, Greg; Briggle, Eric; Backover, Andrew Subject: RE: Today's LCC presentation transcript Bank of America Merrill Giobai Transportation Conference All? i am going out on a limb here. is someone pulling together points to refute whet LCC is saying in public forums that we can use with investors and just for example, Kirby says beiow, ?We have lower revenues because we have competitive disadvantages compared to United and Deita with a smaller network?. Didn?t AA outperform UAL in Q1 and all OAS in April, even though'we have a smaller network? isn?t the real problem that they have is that they heVe a far less competitive network and product. 1 148 4 Waiting until next week is too late. in this day of information ?ow, that is old coid news. This seems like a perfect opportunity. Peter From: Collins, Sean Sent: Thursday, May 17, 2012 12:02 PM . - To: Goren, Bella; Goulet, Beverly; Mcmenamy, Brian; Irvin, Candice; Schwendinger, Greg; Briggle, Eric; Warlick, Peter Subject: Today?s LCC presentation transcript Bank of America Merrill Global Transportation Conference US Airways Presentation Teleconference LCC US 2012-0547 14:09:19,206 GMT Event Date: 05/17/2012 Company Name: US Airways . Event Description?ank of America Merrill Global Transportation Conference Source: US Airways MANAGEMENT DISCUSSION SECTION Glenn Engel: . [Starts Abruptly] speakers Scott Kirby, President of US Airways and like many executives in the industry Scott started at AMR. He worked his Way up the ranks on the revenue side of America West before being promoted to the President of the merged US Airways-America West in October 2006. I always enjoy Scott's presentations because scott has strong opinions and he seems very happy toexpress them. think you could be a good sellwside analySt if -. you?re looking for another career and I always learn a lot whenever he talks. So we are looking forward to hearing Scott?s words. I I J. Scott Kirby: Thank you, Glenn and I appreciate that introduction there is, I suppose irony in the career story for me here today and I'll say I?ve been coached by the lawyers to try to be less most coming than I normaliy am, at least on the subject of AMR. Though, as many of you who know me know i am not terribly good at doing that, and following the advice, but I?ll do my best today to do that although I will talk a little bit about it. I?m going to take probably just 5 to 10 minutes in a short slideshow here and then open it up to comments, questions, whatever you want in the room, let's talk about because that?s generally more interesting than me ?ipping through a bunch of slide to stuff most of the people in the room or listening on the internet already know about US Airways. So that was our forward-looking statement slide and to start with an overview for the industry, this is something we have been saying for a while but I think we have more proof of it today that the industry really has fundamentally restructured. I have been meeting with a lot of investors over the past few months in the normal course of business and certainly as we've been involved in the AME situation plus to even more than normal. One of the things that I have found in the past few months is that we are meeting with people that have never seen before, over the years and a new group of 2 0148 5 investors many who are long only investors, less trading long long termand a lot of people will come into those meetings and start the meetings and say, be patient with me, I?m just learning the industry. I or our fund has never . interested in airlines before, but we think that this might be a point where - this is an investible business, a term that you historically didn't hear in the airline industry. Either this might look like rails and that consolidation and rationaliZation in the industry may have made this an industry that while it's still cyclical, the highs will be higher and the lows instead of being what they were in 2008 or 2009 where airlines were contemplating bankruptcy and were writing about who is going to be the next to tile bankruptcy. Instead of that - that our earnings will go down and I'll talk a little bit about 2011 in contrast to 2008 which I think is a very good data point to show that the industry really has restructured and that that?s truethe group of investors that are starting to look at the airline that also has the opportunity for those of us that have been in the airline industry for a longtime to have an industry that trades at higher multiples if we are plus cyclical if that probability that something bad is going to happen and the stocks are going to go to zero goes away, it's certainly rational to assume that the really low multiples that airlines, US Airways and others trade out today could be changed overtime. So consolidation has really been one of thethings that has driven that. Consolidation has also helped with capacity discipline and it has allowed the industry to do things like ancillary revenues, again hard over state the importance of that for US Airways would be about $500 million of revenuethis year, $500 million revenue last year. That is a structural permanent change to the industry and one that's impossible to overstate the bene?t from it._ -- Because of all that?s happened in the industry and the structural changes, the industry has done a great job at offsetting higher fares. We?ll talk about that on a slide a little bit later, so I will wait and we feel like we are very well positioned in 2012. So on a standalone basis US Airways can produce margins that are at least as good as the rest of the industry which we are happy with, we do it in a different way, We have lower . revenues because we have competitive disadvantages. compared to United and Delta with a smaller network but we do it by having a cost advantage and . that?s a sustainable niche that works for us. And there is opportunity of course to make it better in a transaction with MR, an opportunity also to make it. better for AMR but on a standalone basis we're very happy with the airline we have and with the results that we are producing today. So turning to some of those results. Thanks, Pete. DeSpite the more dif?cult year?over?year comps, we continue to perform very well in terms of a revenue performance and so we were proud of the unit revenue performance that we have in the industry near the top of the industry and that?s in a capacity environment for us that's more. We actually do have smaller capacity growth, but what is for our smaller capacity growth because we get this question a lot is generally based on or it's entirely based on the fact that we are replacing smaller 737s with A3213 and as we are taking delivery of those aircrafts, our ASM are growing by about 1% on a year?over?year basis. - As most of you who follow us know we have a constraint in our pilot and flight attendant agreements that limits the number of shells that the number of aircraft we fly and several years ago we reduced capacity in 2008, 2009 and got down to that limit. 80 we are at the bottom the number of aircraft we can fly. And so as we take larger gauged airplanes to replace 7373 with A3213 we have capacity growth. 'And so in that world where our competitors are actually reducing capacity and we have "slight capacity growth through large gauge this is a very strong unit revenueperforrnance. That also does help us them on the cost side though I think our cost benefit is, there is more to this. We've been disciplined as an airline thrbughout about main keeping our unit costs down and you can see in the first quarter that we had actual decline in our unique, our CASM ex-field and that is certainly amongst the large network carriers by a very wide margin, the best in the industry and we will continue to enforce that discipline going forward. - That gets to pro?tax margins for US Airways that we are in the middle of the path in the industry. That is in spite of the fact that fuel prices were up signi?cantly in the first quarter and as most people know we don't hedge fuel so in a quarter like the first quarter where there is a rising fuel price environment, that's a negative for us. And over time that has proven to be an effective strategy, even in a rising fuel price environment, our fuel prices are the lowest in the industry but in any given quarter there'is going to be more volatility. In the second quarter of course if fuel prices stay where they are today it?s going to be a big tailwind for us because we bene?t from lower fuel prices and I won?t go into the hedging "story because most of you have heard it, or like hedging Story but'if somebodyi'wants to ask a question about it, we will be happy to talk about it going forward. . The financing markets also remain opened, So the start ofithe year hasbeen - good for us in terms of being able to do get ?nancing "done. You can see we raised about $800 million in aircraft related ?nancing "and we jiiSt did an? attractive deal with DCA slots to raise another $100 million. so the financing markets remain open which we are happy with and our" treasury team has done a great job of coming to market and taking advantage of that-and making sure our financing needs for aircraft are-locked in. Turning to the outlook for 2012, with the teat of 2012, first I'll spend a minute talking about the revenue environment. The revenue environment I think is pretty remarkable. If you step back and even go further back to 2010 2010, 2011, 2012 the industry, US Airways and the industry have had revenues up near doublendigit percentages three years in a row, that's a pretty remarkable results for a mature industry, for a cyclical industry. I don?t know of any other industry that in the macroeconomic backdrop that we have had for the last few years can say that they had revenues Up close to double digits for three years in a row. Again 1 think, this speaks to the restructuring that has happened in the industry. A lot of people asked the question of is price elasticity going to overwhelm us? Can this continue? I think the answer is, it can. If you take the larger macroeconomic view and go back in time at the time of deregulation, U.S. Airline revenue was about 1.5% of GDP. That declined to a nadir in 2009 of about 0.6% of GDP. It bounced back to about But if you just look at this in a historical context, there is an awful lot of room for airline revenues to go up relative-to where they've been historically in GDP. Similarly, if you look at pricos, in real terms prices are close to 50% below where they were at the time of deregulation. So airfare remains a great travel bargain. It was up in the last few years, 4 0148 7 I "av-cm?- we're back kind of in real terms to where we were in 2005 or 2006, but well below where airline prices were prior to that. So I think we have a long way to go, a long way to go potentially in terms of our ability to generate - - revenue. . . - As we have come into the new year, neither revenues have remained strong. As you can see, our numbers there are up high single?digit..iLooking forward, in May I think that we are going to have unit revenues up in the mid single digits. May, of course, is a tougher comp. I will also while lam here take the opportunity to talk about the somewhat the obsession with month?to-month unit revenues that a. lot of investors now have because so many of us report revenue. And if we are going to do that, lwouid caution to at least adjust for the calendar. Some of you follow other industries, some of you just tell me about the restaurant industries, so you get really frustrated with this but I?ll give you May as a simple example. In May of last year, the ?rst date of the month was a Sunday. So you had because it's a 3l~day month, you had an extra Sunday, Monday, and Tuesday in the month. This year because a leap year, it?s starting on a Tuesday and so you have an extra Tuesday, Wednesday, Thursday. So you are trading a . Wednesday and Thursday for a Sunday and Monday and Wednesday and Thursday are much lower RASM days than Sunday and Monday. So just on a calendar basis, May is going to hit by about 100 basis points compared to what itwas last year, - . . - now because anything has changed but just because the calendar days have moved. Of course those better calendar days moved into April, so April had 100 basis point roughly benefit from the calendar. - - So the swing between April and May is 200 basis points just because of the . calendar that's not even tougher comp, that's not anything else but just the calendar changes that are happening. And this by the way happens all the time. If you trade a Saturday for a Sunday which happens one .in-seven months . of the year in a normal year, that?s 100 basis-point-swing, just a Saturday for a Sunday in a month. . - . .. So for those of you they do focus onthe RASM, this is sort of . [indiscernible] So I would caution you to look at the days or weeks that are in the month and understand that there is going to be volatility just based on the days or weeks in the month. The demand environment however remains strong. As we look at demand, we've seen no changes to the robust demand environment that we described on our last earnings call. There was a little bit of hiccup back in the February time?'ame. Again, I think it's just normal volatility lasted for about three weeks. Since then the demand environment has been strong, continues to be strong. We are being aggressive for the summer in terms of our yield management strategy. US Airways were actually taking premiums almost across the board for the sununer and so in many places you will find that we are priced higher than in the other airline out there, - at least our lowest fares were higher than anyone else out there, because we have confidence in the demand environment and don't want to sell too cheap for the summer. So we feel really good about the outlook for May and the summer, for as far out as the can see. - - This is a new slide that I kind of like to talk about. What had happened with fuel prices and we probably should have taken this all the way back to 2008. I will also use this to contrast and talk about the changes in the industry. if you go all the way back to 2008, US Airways, we had fuel price go up $1.3 billion yearwover?year. It was the ?rst of two crises followed by the recession in 2009. That $1.3 billion increase in fuel, while we don't have it on this chart. Our fuel price, we only passed through about 15% of that fuel price increase to the consumer. So, we went from making $400 million in 2007 to losing $800 million in 2008, And historically, that?s what always happened in the industry. That?s what made this industry not investable because fuel price could spike and it all flew through straight to the bottom line. . - 2011, in contrast, fuel price was up another $1.3 billion year-over-year, but even with that big fuel price increase, we passed through 85% of it to the consumer. It wasn't 100%, but we passed through 85%?of it in 2011. And our earnings went down, we went from earning something like $400 million to earning about 100 million, so earnings did decline, but unlike 2008 where we lost $800 million and where were writing about bankruptcy, 2011 was manageable and in the face of those kinds of fuel price increases, a pretty good outcome and it's not just US Airways, this happened across the industry. This to me is the best data point to say that the industry reallyhas restructured and has changed. - Through the first quarter of 2012, we passed, even with fuel. prices going up,? we passed through 186% of that. So we were of course making up for what happened in 2012. I am. encouraged as fuel prices have continued to come down that the outlook has gotten even better. I actually at the end of every dayupdate of our full?year price forecast for fuel, just run out the forward curve, what will our fuel be and how does it compare to budget. We set the budget beginning of December. Yesterday for the ?rst time, the full year budget number is actually the full year forecast for fuel is actually better than the budget that ?we set in December. That doesn't I mean a lot, that's an arbitrary number, but about a month'ago it was more than $300 million worse. So we had Over $300 million improvement in our fuel forecast just in the past month or so. So, very encouraging on the outlook going forward, particularly in an environment where we haven?t seen any downturn, any slowdown in the demand or any evidence if there is a slowdown . in demand. - - I almost skipped through the most interesting "slide to talk about consolidation. So of course, I will stick to what we said publicly. We had advisers to review the American Airline situation, people who had known that for a long time. It's also quite public that we have reached agreements with all three of America?s unions that preserves more jobs and have contracts that are competitive with their peers at Delta and United. At the end of the day, America in one way or another is going to have contracts that are competitive with United and Delta and that?s what we have offered to those employees. This is a fantastic opportunity i think for them clearly because its preserves jobs more so than the economics of the deal. It creates a company that is sustainable and that can compete with United and Delta. The reality is United and Delta have route network advantages that will. allow them to compete in America not because there is something wrong with America with the brand or the service or the product or anything else, but because they have route networks that are comprehensive and they are global and that that is attractive to consumers and you have to have a route network that can compete with United and Delta if you are going to be in the market competing with United and Delta in order to have pay and bene?ts like United and Delta have. So we are happy to have done that. It's a tribute to the leadership of 6 89 ?rms?: the unions. It was a risk for them. That's this is something that?s never been done before. They took a chance and they did it because not just because they are going to get better economics out of the deal but because they want to build an airline that is here for the long term and sustainable for the long term and an airline that can restore American Airlines to the preeminent position in the industry that it was historicallysynergies from the deal, that's what allows us to pay employees mOre. We were pretty explicit about it on our last earnings call, but essentially what we?ve done is American has proposed $1.25 billion in labor cost cuts. I think it?s important to understand the bankruptcy process because it?s become clear to me over the last few weeks that a lot of investors don?t understand it and some have a misperception that what that means is Americanwill impose a contract on labor that is $1.25 billion cost out. That?s not the reality. The reality is they can reject it, but they still have to negotiate with the union and they still have to get a contract. No airline has ever emerged from bankruptcy without consensual labor deals because the risk is simply too great. If you are an investor in the emerging company, if you are creditor that owns, that's going to own part of the emerging company on a standalone basis, if you come out without labor contracts, you run a huge risk of what?s going to happen because eventually you're going to get labor contracts and how you're going to get them, everyonewho is in the airline industry can know, but you?re going to get labor contracts. So the court can impose the new contract. It can just reject a contract and leave it open to - negotiations, which is an important point Ithin that some don't recognize. But in any event, we went from that $1.25 billion hack to $800 million in concessions from those unions. So essentially taking the unions to market rates, market competitive with where Delta and United are. That's mostly about pay or mostly about productivity and pensions, American was already .- competitive in total pay, but having pensions and having less productivity are the places where the union stepped up and agreed that we needed_- they . - needed and the combined company needed to be competitive with United and Delta. The reality is we can generate revenues that are thesame as, United and Delta and because of that we ought to have paid the same as United and Deltaare very encouraged about the process and feel very good about it. This is . - the transaction that?s better for all the stakeholders. It?s clearly better . for labor, it saves jobs, it?s better for creditors, it creates far more value. Because of the $1.2 billion of synergies, it creates value for American Airlines creditors, for US Airway shareholders and we're encouraged now that we're able to work with American Airlines and the Creditors Committee to hopefully get this deal done. So we feel very good about what has happened so far in the case and where we are today. So in conclusion, again the industry I really think this isn't your father's airline industry, it really is a different industry today. The industry is much better prepared because of all the structural changes to deal with high fuel prices or economic downturns and US Airways in that environment on a standalone position, we feel very well positioned with a great opportunity actually to transform both US Airways and American and create a future that's bright and positive for both of those airlines, the investors that are involved with those airlines, and the employees of those airlines. So with that, I went longer than I said, but I will open it up for comments and 7 9O questions. I will start out. The US Airways, America West hasn?t fully integrated its labor force yet. So what makes you feel that you?re going to able to get American, US Airways and America West altogether when you have challenges just getting your own two groups together. J. Scott Kirby>z Yeah. it's ironic but the solution to that issue at US Airways I think it?s probably because we?re able to get this deal done. We are working with and the main a the area that people focus on the most is USAPA, our pilots union and in this case there is'a huge bene?t for our pilots in getting the deal done. They go to the new - they can go to the new contract at American which is very large pay "raise for the US Airways pilots. So as 1 ?y around the system, as Italk to the union leadership at USAPA, they want the deal to happen and they want us to get done and they are working cooperatively with us and with APA to get the deal done.? As to the seniority integration issue, I think this is the way out of the box for them. For those of you that follow the industry, both the - there has - been the seniority to ?ght between the former US Airways and the former America West pilots and as long as that seniority dispute is happening and as it resolves by a court, they really can?t negotiate a single agreement with the company because they can?t agree on what?s going to happen with seniority and they are waiting for the court to answer that question for-them. This is a way to start over and not start over completely, but at least hare a fresh beginning. Today, you know what, the [indiScernible] they painted themselves into a corner, into a room and neither side can compromise. This is a way to start the process over in a new integration. There is also federal legislation, the McCaskill?Bond legislation which will mandate binding arbitration. So the plan in this 'case is that-Our union and APA combined will have a joint contract and we will have that hepefully on the? day we close the merger, assuming we do. That contract will be in place and - so there will be a joint contract in place and then more than likely the seniority issue will go through a process and ultimately get to arbitration, but because we will already have a joint contract in place that arbitration will be binding. It will just get implemented. In the Airways America West case, it went to binding arbitration but there was a requirement-as part of that that the two anions negotiate a joint contract with the company which wasn't done yet. And because it wasn't done yet, it hasn't One the side that didn't like it could prevent a joint contract from getting done and because of that the seniority integration never happened. in this case, there'll be a joint contract in advance and the seniority integration will happen. I?m encouraged that USAPA and APA, the two respective unions, are working well together and working jointly with the company. So I are optimistic that this ironically solves the largest hangover from the US Airways America West transaction. z Not being hedged, you have an opportunity to - well actually lower prices, I mean increase your market share against those other airlines who are in that position, either owning your re?nery or being a third hedge. 8 91 wees. What. are you plans in the short?term? z Well, we like our hedging strategy. if you go look over the last several years since we started hedging. We have the lowest cost of fuel in the airline in the country. And that?s even in arising fuel price environment. If you just think about the rationale for hedging and I'll distinguish hedging between two, what Southwest did in 2006, which was really successful was take very large long position in oil over a several year period, so hedge or buy their needs for the next three to four years all at once, make a bet on oil prices along. That is different than systemic hedging. What everyone else does in the industry today is systematic hedging where they buy, they don't try to time the market. They are [not trying . - - . [indiscernible] the market. They are buying fuel month end, putting hedges in, disciplined is a word you will hear them use is a lot. Disciplined hedging strategy where we do the same thing every month, no matter What: the price is. If you are doing that, you are buying the same amount of fuel every month that US Airways who doesn't hedge is buying. So while in the month of May, we buy 100% of our May needs in the month of May and airline that systematically hedges will buy 40% of their May needs in the month of May, and about 25% of the June need in the month of May and 20% in July in the month of May, i0% of August in the month of May and 5% in September in the month Maythe month of May, they bought 100% of their fuel needs. Except by doing it with-auctions, they pay a big action premium and the premium on oil is big, volatility is high, there is a geopoiitical risk premium, so you pay a big auction premium, a geopolitical .. risk premium and you pay typically contango [ph] it is in back organization now, but most of the last. four years, you have been paying a contango, so it makes it virtually impossible for a systemic hedging strategy where you use options to ever pay for itself, because you're buying the same amount of fuel. i every single month and you are paying the big option premium. That's why over time US Airways that has lowest costfew of anyone in the-industry even though fuel prices have been rising, so we don't have any plan to change our strategy. - - - - The question was is an opportunity if you have done lower prices and gain market share because you are in abetter position? z No, I?ll make that a simple answer, but no, I?ll make it a longer answer, but we should as a responsible stewards to the company maximize, do it necessary to maximize earnings and gratuitously lowering fares just because fuel in the last week have come down a little bit. There is still at $110, it's remarkable we talk about $1 a barrel as a good fuel price. I can remember into the US Airways America West merger and people 50 investors tell me it's impossible for airlines to be pro?table at $50 a barrel of oil, that?s changed but $110 a barrel is still a level. We still don't have adequate returns in the industry. We need to generate, still generate strong revenues and hopefully fuel prices will keep going down but we have a responsibility to improve the financial of our companies, generate adequate returns, there's no airline in the country that generating an adequate return on investment capital and we've got a long way to go to improve our earnings and improve the fundamentals of the business, I think we 9 92 are on the right road. I am really encouraged that we are on the right road, but we certainly don?t plan to just lower fares just because fuel prices go down for a month and who knows it will be next month. At $15 a barrel it may not make sense to hedge but if the premiums were only 5, would there be any circumstances that you see that would make you change your hedging view in the market? - - i z Well, we would always be open to looking at it, we pride ourselves on waking up every day and looking at the world in whatever the circumstances are in a new way. It's hard for me to however understand the rationale for systematic hedging and I suspect that auction premiums are going to be always be large because there is going to always be a big geopolitical risk. premium. Some people talk someone, others have asked why don't you buy deep out of the money call to buy sort of catastrophe industry insurance. But unfortunately, just as an example, the market recognizes that there is big tail risk in oil prices, some haven't been around and so the market prices that in. If we were ever going to hedge, it would probably be trying to do something and I would I would hate using the term hedge. It would be doing something like Southwest did which is at some point saying, we are going to make a bet on oil, we?re going to go in big, we are going to buy it pretty big, We're going to go long oil in a big way for several years. That?s something that Conceptually and intellectually makes sense. At the moment, we don?t have any plans to do it and I doubt we ever will, but that make sense. A systematic hedging program where you hedge month~inand month~out seems really hard from me to rationalize because of what I just said. In a systematic hedging program to buying the same fuel every month,-youjust - you are buying same amount every month, you are just buying it to move forward. 1 think they are doing that so they can be heard on the internet. Thank you. -- z To some extent there might be trade?off between systematic hedging or long?term hedging something that's about our cost issue for you versus leverage on the balance sheet. On the one hand if you hedge out large number of years of volatile cost, you could run a higher leverage ratio, if you don't hedge it, you have that tail risk of a massive increase in prices which? could cause a bankruptcy if you have too much risks there, debt. So how do you think about leverage versus systematic hedging because it?s all sort of seems to be linked in terms of just corporate risk that you take. Well, ironically, I think you create a larger risk of bankruptcy with a big hedging program. We and a number of other airlines found that out in 2008. That was kind of a eureka moment for us that we had oil prices declining a lot from $147 ultimately down to $35 a barrel and we were hedging airline at that time. And we were actually and because we had a post cash collateral for our hedges as oil prices declined, we were coming very close to our cash covenants because oil prices were declining, I mean was ironic, was getting better for us but posting cash collateral on that, we were waking up in the morning and hoping oil price didn?t go down because we couldn?t afford to post the cash collateral. So that?s the problem with doing a big hedge. We are not the only airline that experience that look at what happened to Southwest, a great airline, a very well managed airline, but look what 10 93 happened to them in 2009 with their fuel hedges because oil prices declined. So it's a misperception that they think had a hedge is something kind of safety net and insurance because it?s not oil price is putting a big hedge . in place, creates a massive risk that oil prices decline and that can be triggering event because if you got a big hedge in place you got to go post collateral for all of that. You could do it by doing options and not have that risk but just think about it for us to buy a year's worth of options at the market $350 million. - - So if we wanted to go buy three years worth of options, oVer a $1 billion of cash out the door to buy that insurance policy. 80 we have half of our cash gone to buy that insurance policy, that I think creates a lot more risk to the firm and it does not taking [indiscernible] the other point I make is oil prices we have a natural hedge with oil prices which is to the economy that probably the biggest more likely reason oil prices will rise is because we have a strong economy and we can pass that doing revenue. The disaster situation is you have a big oil hedge in place, something that happens in the economy, the economy declines, our revenue declines, at the same time, oil prices are declining, but because of your hedge you are still paying higher prices for them. - - - - z On the side, you are spending generally more than depreciation?, descent. size (3211313): program for fairly leveraged carrier. Why are you doing that and two, you tend relying more in short~term leases than most, which i thought tend to be more expensive versus the other carriers, why do you choose that? So ?rst on our CapEx. Our CapEx excluding aircraft is about $150 million to $l 80 million a year, most of that is mandatory safety maintenance kinds of items. Discretionary CapEx is relative smaller portion of that. We then have capital expenses, the larger number that you will see'in your model and others is for aircraft delivery, we had a slide in here about aircraft financings. Why do you think of that is large CapEx and it is large CapEx, that's an aircraft orders that we put in place in 2006, whether-we do today or not, I don't know, but was done in 2006, so-we are living with it. The good news is, we are able to spend at the last transaction we did, we included [indiscemible] so almost 100% ?nancing on that, so there actually winds up being little cash out the door as to short?term leases versus other ownership structures. You. see it's moving more towards just did double ATC, so that also in total a legacy of kind of history. They got US Airways/America West position and we are doing more to own aircraft and being long term on aircraft as we go forward. - Very speculative question which you probably wont answer, but of the three legacy carriers, you are the only could have sort of the handcuffs in terms of capacity minimums that you have to? maintain. If a merger where to take place would it be a goal to try and gain more ?exibility that it well, let me phrase it differently, would there be an opportunity to gain more flexibility in that total contract renegotiation process? The deal that we have negotiated with the Allied Pilots Association we - think it does have ?exibility, competitive ?exibility, competitive scepe. 11 94 We aiso think it creates a stronger airline, so there are some opportunities for growth, places like Dallas to China and there are more opportunities in'a stronger airiine then there wouid be otherwise. But we feel very good about the deal that we?ve negotiated and both the financial strength of the combined company and the flexibility that we have if-sornething unfortunate happens to deal to respond appropriately. - - - We've had a bunch of airlines adopt the more room and coach type products US Airways hasn't, why does it makes sense for you and it makes - sense for others and do that change when. you team with America? z There are differences between our two or between the route networks of US Airways and American for example and so the analysis might change if you are ?ying in competitive large business markets like Chicago. That said you look at what?s happening with us in terms of choice seats and that is your product where you pay more to sit in a better seat and coach. That's running at a run rate of $1.00 million per year. I am not sure that taking two areas of coach out means you can sell enough more of that product to make it work but we're agnostic about that, we would want to look at the numbers and do the analysis once we were in more detail at American to see if it made sense for the combined airline, we don't start with or the pre support bias one way or anotherLast question? So you were commenting on the capacity for the market potentially to pay higher fares relative to what they paid inithe past. Could yon talk a little . bit about how you think about that by segmentlike large businesses, small businesses, consumers and because I see-where some places could be that, I see other places where there?s real constraints because of the mixof the fly?s now versus say 5, 10 years ago. - i i. - z I have looked at price elasticity hundreds of times in different ways - and starting with the ?rst job that i had at American Airlines is to do a big price elasticity study years ago. And in all of those studies you come to something close to that step. Price elasticity for leisure traf?c is about minus 0.7 and price elasticity for business demand is about minus 0.3, that by the way is the same numbers that Civil Aeronautics Board used in the 503, 603, and 703 when they did the analysis to regulate airline pricing. And I am convinced with those numbers are approximately correct. What that means is demand for our product inelastic and when we raise fares revenue goes up, - leisure revenue goes up less rapidly than business oriented revenues would, but it stiil goes up as well. It?s also consistent with the data you look at, that decline in revenues as a percentage of GDP 1.5% down to 0.6% I think was a decline driven by growth of low cost carriers and lower fares and in a world where fares were demanded in elastic and you put lower fares, revenues goes down2009 going back up as fares are going back up on inelastic good, revenue is going back up. So like the high class - I get it from the industry a lot, the high class problem to worry about, our fares are going to go up somewhat that there is demand destruction. Again I use - some of that those data points to say where we are today is back where we 12 95 were in the 2006 [indiscemible] timeframe, in terms of real fares and in terms of fares, revenue to percentage of GDP, I think we have along way to go. I have never seen any evidence that that is the case. Andwe look at the last two years, we have had yield going up and we had demand going up, you, can't calculate price elasticity of demand in that environment because it?s a positive number and sort: of a negative number. So it's not on my list of top 10 things to worry about and I feel really good about the demand environment, I am absolutely convinced for my career in the airline business following revenue that demand is in fact inelastic. Okay. Glenn Engel: Thank you very much. J. Scott Kirby: Thank you,r Glenn, thanks everyone. 13 4 9 6 97 American Airi?ines Delta JetBiue Southwest/AirTran United Continental US Airways Source: Publicly disclosed information +11% +53% +7 to 80/0 4.5 to 5.5% AIRWAYS CONFIDENTIAL DRAFT Airways Merger Travel Agent FAQ 1.23.13 6:00 PM ET DRAFT Airways Merger Travel Agent FAQ I. What was announced today? 0 Today we announced that American Airlines and US Airways will combine to create a new global airline. The combined company will have the scale, breadth and capabilities to compete more effectively and pro?tably in the global marketplace. 0 Customers will have access to more choices and better service across a larger global network, as well as the expanded international opportunities that come with a stronger oneworld? Alliance. What will the new company be called? 0 The combined airline will retain the [iconic] American Airlines name, one of the most recognized brand names in the world. Where will the company?s headquarters be located? I The company will be headquartered in Dallas-Fort Worth and will maintain a signi?cant corporate, operational and hub presence in Phoenix. Will ticket prices increase because of the merger? I The airline industry is, and will remain: extremely competitive. 0 [in fact, studies have shown that airline mergers over the past ten years have not. driven. up airfares, and there is no concrete evidence suggesting that overall rates would rise] 0 This transaction will create a more competitive alternative to United, Delta and others. a Are you planning to pull out of any cities? What about international service? a The combined company is expected to maintain all existing hubs and service to all destinations currently served by American Airlines and US Airways, as well as expand small-city service, providing signi?cant "bene?ts to those communities. 0 The combined company is also expected to provide the most. service in the East Coast and Central regions of the US, including US Airways? East Coast shuttle, and to become a stronger competitor with a greater network presence on the West Coast. 0 Customers will benefit from the expanded international opportunities that come with a stronger oneworld Alliance. 0 With the new American Airlines, you will be able to book your clients on more than 6,700 daily flights to 329 destinations in 52 countries. What changes can customers expect to see immediately? 0 As we work toward completing the transaction, it remains business as usual at US Airways and American Airlineswnothing will immediately change. 0 We expect to transaction to be completed in - For now, you can continue to book: track and manage flights through usainvayscom, and earn Dividend Miles by ?ying with us and through our numerous mileage partners. 0 Until the merger is complete? each company will maintain its current loyalty programs (US Airways ?Dividend Miles and American Airlines .AAdvantagellil). Existing miles will be honored: and there will be no impact to your US Airways Mastercard or US Airways Visa Signature. AIRWAYS CONFIDENTIAL DRAFT Airways Merger Travel Agent FAQ 10. 11. 12. 1.23.13 6:00 PM ET What do I tell customers if they ask about today?s announcement? it As we work toward completing the transaction, it remains business as usual at US Airways and American Airlineswnothing will immediately change. 0 Our customers should continue to book, track and manage flights through USAirwayscom. 0 Customers will have access to more choices and better service across a larger global network: as well as the expanded international. opportunities that come with a stronger oneworld Alliance. Will future travel reservations on US Airways be affected? 0 No, customers will not see any changes to their existing travel reservations. Customers should continue to book, track and manage ?ights through usaimrayscom. Can customers fly American Airlines with their US Airways ticket and vice versa? No American Airlines and US Airways will remain. independent airlines until the merger closes. Customers should continue to book, track and manage ?ights through usairwayscom. What new bene?ts can US Airways members expect once the airlines merge? 4- Upon completion of the merger, the new American Airlines will offer the world?s largest airline loyalty program with many attractive opportunities, including: A best-in-class elite program; It More ways to can} miles from a global network. of options and partnerships: 0 US Airways member bene?ts include 122, new destinations through which to redeem. miles 0 American Airlines member bene?ts include 62 new destinations through which to redeem miles 0 Barn and redeem. miles with. more than 24 airline partners 0 Earn miles with more than 111 mileage partners 0' Unmatched redemption options including ?ights: hotels, car rentals, vacation packages, one?way awards and club memberships; Worldwide bene?ts through the oneworld Alliance; and The potential for additional high?quality bartners and improved rates as the industry?s largest loyalty program. I If customers have miles on both programs, can they combine them and use the total new? 0 No - all existing and future miles earned in the Dividend Miles program or AAdvantage will be combined into the new frequent ?yer program once the merger is complete. 0 American Airlines and US Airways will remain independent airlines until the merger closes. How long will it take to integrate the airlines? two different mileage programs? 0 As in any transaction of this size, we anticipate the integration process will some time. We intend to create an integration team comprised of individuals from both companies to oversee the integration. efforts. 0 We will keep you updated as appropriate. HIGHLY CONFIQENTIAL - RESTRICTED EISSEMINATION ONLY Respanse US Airways merger effer CONFIDENTIAL AA-SRHOOB75753 (Wan CONFIDENTIAL HIGHLY - RESTREGTED ONLY (i - DESCLAEMER American Airiines This merger might make sense but not now WHY patnto creating successful New Am, and ther?es a short path to daylight, all buiiding I blocks in place . . Doing this merger now is a massive distraction to the mission and extends period of time company isat risk, ability to respond to exogenous event's actions is cheltenged due to constraints from having muitipie stakeholders under bankruptcy A merger now means Am is fixing structural problems and taking on sit that risk, whereas in future either a) could mergewith ?fixed? tower risk company or b) not ?fixed? company which is thus cheaper. lf we?re looking out for Am stakehoiders, why soive their problems for them? - - The oniy airlines to merge in bankruptcy were US and AWA, which was out of necessity we don?t need a merger to emerge from bankruptcy successfuity, Delta and Continentei didn?t The real synergies aren?t impressive business are incongruent? rev synergies are a pittance compared to other companies that have merged - strategic fit section - The synergies we are creating are risky and can be easily destroyed, whereas stand stone is more cost-based and known Only benefits are scale, no efficiency gains left anymore - can?t use merger asa catalyst to transform cost structureb/o AM is done with bankruptcy restructuring (US 4x restructuring means they have little tat left, and their restructuring has put them even further behind than Am on HVC). Terms of offer don?t generate enough value to offset risks - We create a heaviiy indebted company that limits future flexieitity vs. other companies 1 that emerge from bankruotev with low debt CONFIDENTIAL CONFIDENTIAL - RESTREGTED ONLY Executive summary American Airiines 2 This merger might make sense but not now WHY on path to creating successful New Am, and ther?es a short path to daytight,'all building biocks in place - - Doing this merger now is a massive distraction to the mission and extends period of time company is at risk, ability ts respond to exogenous events and Strategic actions is chaiienged due to constraints from having multipie stekehoiders under bankruptcy A merger now means Arr} is fiXing structural problems and taking on all that risk, whereas in future either a) col.in merge with ?fixed? tower risk company or b) not ?tixecl? company which is thus cheaper. if we?re looking out for Am stakeholders, why soive their problems for them? - The oniy airlines to merge in bankruptcy were U8 and which was out of ne'eessitym we don?t need a merger to emerge from bankruptoy'sucoessfuily, Delta and Continental didn?t The rest synergies aren?t impressive business are incongruent - rev synergies are a pittance compared to other companies that have merged strategic fit section - The synergies we are creating are risky and can be easiiy destroyed, whereas stand- atone is more cost-based and known - Only benefits are soaie, no efficiency gains left anymore can?t use merger as a catalyst to trapSform cost struuture' bio AM is done with bankruptcy? restructuring (US 4x restructuring means'they have iittle fat ieft, and their restructuring has put them even further behind than Am on HVC). Terms of after don?t generate enough value to offset risks We create a heavily indebted company that limits future fiekibility vs. other companies that emeree from bankruotcv with low debt R-00675755 CONFIDENTIAL HEGHLY CONFIDENNAL DISSEMINATSON ONLY Chapter 1 I Unfike US Airways, American does not need a merger to thrive US Airways has the weakest icmg term prospects of any major carrier A combination of American and US Airways wiil not materiaily advance American?s strategic objectives Whiie i?w merges" wauii? Synaa?'giasg. US a? synergy Lemme: i3 in?amed Thy. mat Mimi: (Em? 31-; ztufz?eratiy pmr?ww? dam-9.5 rm: a fair a? mew-2mg va?uieza given 923%; {zaira?wr Ham ?amegrg?t signi?cam?y ?mp 233m 2" sum; ?aw-K2? ?93: (taffeta? U33- fwnarisav?a {iy?aier?g wouii? his-:3 n'mzrgez American Airlines Rw00675756 HIGHLY CONFEDENTIAL - RESTRICTED ONLY 3 New American has been redesigned for Lang term success; . American Airiines I CONFIDENTIAL HIGHLY CONFIDENTZAL - RESTRECTED ONLY American: Preferred giobai carrier for Investors Among the iowest non-fabor costs of any major US carrier Highiy competitive labor costs I . Retirement and medicai benefits in Sine with industry leaders Fieet to adapt to changing market conditians Broad portfoiio of aircraft choices to address n?twork opportunities Market-based scope agreements aiiow expansion of regio??i operatidns and codesharing with domestic partners to Outsource aircraft maintanance and airport operations Among the ipwest Eeverage of any major US network carrier 0 Liquidity and financial resilience to withstand market American Airlines 5 CONFIDENTIAL R-00675758 HEGHLY - RESTRICTED ONLY American: Preferred glcbai carrier for High Vaiue Customers Hubs in the cities with the largest_ cancentra?on of high value customers - An expandihg international network designed around the pia?es themast important customers want Deeper and broader partnerships with the worid?s premium ?i?ines' Leading-edge investment in product and service upgrades that high value cusmmers desire . . - . Outstanding passenger productivity and ponnectivity thruugh tech?ptogy A seamiess and comfortabie total trave? experience for high waive I - customers - Broad partfolio of aircraft a convenient scheduie pait?m I 0 Mailing to youngest, most efficient ?th among US peers Premium terminais in hub cities American Air?nes CONFIDENTIAL CONFIDENTIAL Noniabm Cash Savings Debt and Interest ?Vendors and Facilities I ?Aircraft 57mm - - -. - 2013 2014 2015 2015 2017 HIGHLY CDNFEDENTSAL RESTRICTED DISSEMINATQON ONLY Namiabor savings of $4.3 aver five Wag i -- 2013-2033 ?fatal Smarts: Interim} American Airiines HIGHLY RESTRICTED ONLY $1.1 biliion in average annual labor savings Labor Cash Savings Awe??rage Labor Savmgs $1.13 $1 050M Agents, Reps, 8: Planners Management I Support Flight Attendants Pitots Mechanics, Ffeet Service, and Ether Ground 2013 2014 2515 2015 2017 i fsaume: company analysis Wore: Edam payments related to earryvoats and severance: Includes fncremenml outsourcing costs Excludes one~time costs but inoiudes incrementai outsourcing costs. CONFIDENTIAL CONFIDENTIAL Rasult is a higth competitive cast structhf? I Total Mainline'EX-FUeI Unit Costs Stage-Length Adjust?d ?mmwm 8.4C 73?? New American D'eIta' us Air?ays datum?m and campany anatysis. . HIGHLY CONFIDENTIAL RESTRICTED DISSEMINATION ONLY New; New American udjtmed [or gym?? native! ogamn?ng savings, excluding an mien a iabor paymen? I CONFIQENTIAL RESTRICTED ONLY . . The fleet-plan is transformed over the next five years . _v The ?eet pian repiaces cider, fuei inef?cient aircraft such as MDSOsand 7675 with newer, next generation a?'craft such as 7373 and W873 Mainline Fleet By Type_ .YE 2012; - 446 Moan I 3737/ A329 Family 5757/ 8757 8777 5787 M030 8737/ A320 Famiiy B757 - - 3787 American Air-?nes . I i i . 10 1O CONFIDENTIAL CONFIDENTIAL CONFIDENTEAL RESTRICTED DISSEMNATION ONLY Fieet reptacements will improve earnings I Fuei efficiency and iower maintenance more than offset the increased ownership of the new aircraft I Aircraft were evaiuated on an absolute and repiacement basis to ensure adequate return on the capital investment Repiacement Examp?e1~ew A319 vs. 20 Year-0k! Nib?80 Annuai economics per aircraft Current MDSO Revenue Fue? Maintenance Crew, Landing Ownership New Net Earnings Fees, Services, #319 and Other Net Eamings ?dssume$3?0fuet 515mjfessfageleng?z 2.332 unwafdepamtras. hmourtetfmqintanmce neg 1i 11 CONFIDENTIAL HIGHLY BESSEMENATION ONLY . . . and aliew us ta better mateh aircraft is market: size Today Future umwam Smaltest . -. narrow-body 3.08 3124 140 102 Larg??t .- - regicnaijet 75 76 . 66 76 "Gap" 32 48 74 American Airiineg 12 I?m-m, 12 CONFIDENTIAL HIGHLY CONFIDENTIAL RESTRICTED DISSEMINATION. ONLY Enhanced Scope agreements provide operational flexibility - - - - I: Increased maximum number of Earge regienai jets aIIowed to operate from 47 to 40% of narrowbodv ?eet size in 2017 I Increased codesharing up to 50% of domestic capacity I Increased outsourcing up to 35% of spend and to outsource a?rport services Damestic codeshare Outsaurced Cast Total Percent of regi?nal ASEVIS capacity percentage of rota: American 2012 American 201? United 2012 ?eita 2012 US Airways 2012 American Airlines . . 13 13 R-00675768 CONFIDENTIAL HIGHLY CONFIDENTIAL. - RESTRICTED ONLY impraved speratianaI erxibiIi?ty drives: significant portianofrevenueimpmvement . - - Ma?ority of improvement is ?catch up? as we remove constraints that our competitors do not have Right Sizing Aircraft Revenue Fannerships In minions} Product lmtIatIVES . I I . $1 185 Net Net Bene?t $1427 bene?t of increased 'costs 'from' change in $760 gauge 'f_20171 2913 2014 .1615}. 2016' American Air?nes Sour/cs: Infemui Campanyprajatflons 14 MS R-00675767 HIGHLY - RESTRICTED ONLY And American has very substantial fleet flexibility td respond to market conditions I . . -. Options, lease expirations, and elder unencumbered aimraft provide flexibility to respond to market conditions - Capacity purchase renewals and expirations and unencumbered aircraft provide regional flexibility Mainline Fleet Flexibility Regional Fleet Maximum Plan Minimum I Max:794 Max: 693 241 185- %g 2017 LAmeric'anAirlines . . ?5 15 AA-S R500675768 CONFIDENTIAL {avarage iratio will improve to best-in?nlass Leverage Adjusted Net Debt/ EBITDAR mm Hm. 3.7x 2.11:: Amefi?ar: USAirw?S/s I United Betta. New Ame?can. 2013-2017 . .. Year endi?g'Se'p't?mber 2012 EBITDAR range '15 HIGHLY CONFIDENTML RESTRICTED ONLY - 16 MS CONFIDENTIAL HIGHLY CONFIDENTIAL - RESTRECTED ONLY American?s netwmk is; designed 150 meet high vaiue cusmmer demands I American has hubs in the four Eargest metropolitan areas of the United States 139 of Fortune SOmepanies are iatated in cur key cities; many of our high vaiue customers are their'top'travel?rs I - Fortune 500 Corporations Metrbpoiitan Popuiation population Rank .NewYork I - 58 LgsAngeiChicagm Miami Emma: US Census; 20.101 Fammazma Am 9 rican E1333 17 CONFIDENTIAL HIGHLY RESTRICTED ONLY __Gme is internatima? a whare ?ema?d is strongest Dem-and Forecast I international Capacity (201145) 43%: Domestic UK Europe Latin North Latin South US American Die-{ta United American Highej' growth ES proleFted ail Airways 201? international regions 2012 i plan Source:FY2012 two Scheduleouta American Air?nes 151?: f, 18 R-00675771 CONFIDENTIAL HIGHLY CONFIDENTIAL DISSEMWATEON ONLY . Partners prov?de access to preferred destinaiionsfh '5 If oneworid partners have hubs in three of the top five international destinations for premium passengers - Pren??um . p?ssengers Rank International Premium Passengers Per Day {miliions} oneworid Partner #1 London Heathr?w 2 I #3 Hang 3mg CATHAY #5 Tokqu Hi9 I Sao Paulo #20 I Ma?rid #22 I I Syd?ey #23 Kuaia Lumpur Passengersaokin?: American Airlines I I I I i? 19 AA-S CONFIDENTIAL HEGHLY CONFIDENTIAL - RESTRECTED DISSEMINATION ONLY increase expected share of high value customers - I American, 'with its Joint Business partnerships, is a header in pmjected corporate revenue share in the biggest domestic and internationai markets Projected Worldwide Corporate Revenue Share Top 50 Markets by Jain: Business Projected Woridwide Corporate Revenue Share Top 50 Markets by Carrier 36% Other American United 18 Delta 18 No JB United . American 'De?ta US Akways 38 YEJune 2:912 Quafhy of Service In?ux (c251) welglitedfsr YE July 2012 company trove}, Ail campanfesia PRISM ware usmfm? reuemm,? based]. American Airlines 20 20 R-O 0675773 CONFIDENTIAL - RESTRICTED UISSEMQNATION ONLY industry consolidation has not changed America?s . .pOSitimj 'its?. hubs - IViarkei:share1 of US-hased carriers Rank . .. . MIA .ORD- LAX. . . $61333 2912': 32098-5 'gpi? @998]: 23.1sz 2002 .2012 2012 1 {us-52% 03?36% {mam 2 u5?3% mum 3 4 "usU5v212% SOURCE: DUO scnerjuie data ?Markat Share - Percent uf mm: ASME (iaciudes regional arid internaeronai ?ying) American Airiines 21 21 CONFIDENTIAL HIGHLY CONFIDENTIAL - RESTRKETED ONLY internationally, particula'riy in'Latih America 1 Latin America is one of the fastest growing economic regions American?slead is significantiy stronger than any of our competitors, mien 'in their best e?tities Latin -- Atlantis: - Pacific I Ameriesrmmines? my mum :93, t} ?r :2 13% 1 ?tim?a I Ammamminm? . 4 311mm AIRWAYS f3 22 *A?an?c and Pacific airiines Enciude goint business agreements wpresenled by US. came! LAN 3% 10% an M?w American Airlines 22 And American Continuesto maintainistrohg pp?Sitions 22 MS CONFIDENTIAL HIGHLY CONFIEENTIAL - RESTREGTED ONLY American $5 continuing its tong history 0er products and services Iadi?'g I . Nate: am: {ounge waging. American Airiines 23 23 MS CONFIDENTIAL HIGHLY RESTRICTED DISSEMINAHON ONLY I First and only air?ne to take delivery of Boeing 777-300ER Newjredesign of industry Eeading Flagship suite - . - New fully ?at, 100% aisle access Business Class r, a ?rst for a North Ani?rican Afriine A321 Trah's?on?n?ntat Soon to be onEy amine to offer three dassesof service Exdusive First Ctass and fully ?at Bu??gess Class Best-product for cross-country tr?vef betw?e? JFK .. AH new r?ainiine airtraft'i-ie-iive'red late 2013 and beyond New Airbus and Boeing aircraft Wiil offer most advanced With more industry leading products arriving it) 2013 -- .Nrwx 24 R-00675777 CONFIDENTIAL HIGHLY - RESTRICTED ONLY American wi? have the youngest fleet in the indu'stry Average Mainline Fleet Age (years) 15.4 NeWAmericari 2017 I: ZA'rh?ripa?' ilmif?d :7 US'Air'w?ys I Ame?ca Ammes 25 25 AA-S CONFIDENTIAL HIGHLY CONFIDENTIAL v- RESTRICTED ONLY - American?s facilities are alse industry leadir?ig' I American works with airport partners to provide passengers with the world-class amenities and services they value New terminals at and Miami .. 3? Admirals Club and A Flagship iouhges feature Offer-3' .profess'ibnail ?'riVironm?ntgb?rmnalized amenities to mak? the trai??i experience maria r?laxing aridbroductive 26 American Airlines - BFW: Terminal opened in July 2005 and serves as Americans internationai gateway at its iargest hub. JFK: New staie-ef?art, world-class terminal at JFK Airport is designed to make domestic: and international travel easier and more convenient for passengers. The new facility cost $1.3 billion and covers 1.5 million square feet. MA: The $28 biliian new North Terminal expansion project solidified Miami?s place as a major player for international traffic. 2E5 AA-S CONFIDENTIAL pmfitabil?ity American United Year ending September 2012 HIGHLY RESTRICTED BISSEMENATION ONLY 7? New American expected to generate industry leading Margin New American Delta US Airways 2013-17 Range Ssurm: SEC damtments and Company an qusis American Airlines 27 M-S R400675780 CONFIDENTIAL HIGHLY CONFIDENTIAL RESTRICTED ONLY Chapter 1 Uniike US Airways, American does not need a mergerto thrive American has gone through a restructuriag process that WEN position It for future Success A combination of American and US Airways mt materialiy advance 'Am e'rican?s strategic objectives germra?e Afmvaws? wifma??re Q?fsyram'gy wiua is Liz'i??rrsaticra?iy If $153 gyrawgm cm 2351?. {??f'get ?Eggrz??ata?t risks, a5 Cm?z'ara?y yamgmez? frat ragm?ew?fa fair Sg??if m? gamma: \rz-g?gge {Each (Lumen: prasmcis - I Abs'a-Erw ?y Imgirwaii USAIrways). Ammc; 3?3 am? wm?d 53:5 mm;- a merger American Airiines - 28 HIGHLY CONFEDENTIAL RESTRICTED DESSEMWATION ONLY US Airways hascompleted fourrestructurings in the past decade, but several challenges remain Unit revenue disadvantage that wiEi fead to negative pro?ts Once US Airways? iabor costs revert to market rates Network that is domesticativ oriented (while industry is international}, and focused in markets that are less important for High Value Custamers Fleet and product portfolio that wit! require significant upgrade to became tempetitive Management team that has a history of overconfidence, and inability to know-through cm promises 29 29 CONFIDENTIAL AA-SR-00675782 CONFIDENTIAL HEGHLY - RESTRICTED ONLY I Airways has restrUctured fbur't'i'mes in the past decade '30 30 CONFIDENTIAL 'wai lug? ling. 1' US Airways has consistentiy maintained a Iarge revenue gap to industry, but has generated from a significant cost advantage Revenue per ASM Cost per ASM United 16.74 Delta 15.71 American 5 .55 US Airways US Airways- RASM 16% belaw competitors US Airways CASM 17% betow competitors Klara 25 mainline, stage?Bength adjusted fur three months ending Sept 30, 2012 3 SOURCESEC Filings, ORG, US DOT Form 41, Company Data? 31 31 HIGH-LY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY However, US Airways current labor situation is unsustainable, and US will likely notbe able ta maintain its Cost - All major labor groups have open agreements - Pilots and flight a?en?an?cs have yet to be: integrated following 2005 megger Large number of negotiations need to be wmpletec?, resulting cost Increases and ?exibility/decreases Union Ani?n'd?bt'e sate . Labor Gf?up I Pilots(formerAWA) USAPA '122'30/2006 FIIghtAtfendanls {former US) CWA 125313011 Flee? Servxce - IAM 1281/2011 Agents meal/2031' - SOURCE: SEC Filings, DAG, US DOT Form 41, Company Data, US Airways 10K - 32 glam? 32 CONFIDENTIAL CONFEDENTIAL RESTRECTED ONLY ..Jeading to a sharp decline in profitability US Airways? 2911 Operating humane2 1* Bringing [32er to market rates increases costs by ?$530 mi?ion peryear '1 Resuttingoperatlng margm of wouid be we? behind Deita 633%, United and Southwest 5.0% Actual A: Market Labor CASM Margin 3.5% Labor CASM gap estimated ?110.61 cents (v5. average of Detta and United per AA stage length adjustment method) 2 Consolidated operating income exc?uding speciai items Company ?lings. DAG. US DOT Form 41 '33 33 CONFIDENTIAL CONFIDENTIAL HIGHLY CONFIBENTML RESTREGTED ONLY growth is expected in internatiunal' - Exiletted 0f - - 201231-789M CAGR 44%" Lama?saam, 41% I Asia Europe UK bgm?gitic: nited Betta American US Airways 34 US AifWays market is domesticaiiy 34 CONFIDENTIAL aim-{LY ONLY Within the United States, US Airways tacks presence in the largest East Ceast markets - I US Airways is bigger than Americanpn the East Coast, American has a much larger presence in the top 50 East Coast markets American serves 24 of the top East Caast to System markets with non?stop service vs, only eight for US A?rways Top 50 East Coast Markets American w?th Non?Stop Service US Airways internatianal Domestic System Source: Di'lo, MJOT American Airfines 35 35 MS CONFIDENTIAL I HIGHLY CONFIDENTML ONLY I US Airways? ?eet is aging-fast, and significant fleet renewai wiil be required - - - US Airw?ys? mainiine and regionat ?eets average age increases materiafly during the forecast period YEZOIZ Count Age 4 Nermwbody age increases 16% 12.4 - . 342 13.6 Wit?ebodies . 26 14.1 - '34' 3- . . - i sncreases 20% Mainline 340 . . I 67-69 Seats Owned regional aircraftage increases 29% Tu momer . . Express Total 282 15.4 267 i g'Toxa; Fleet 622 13.0 689 14.9 3 age isfrii? m?ra?u? cpem?ed by whollyawned winsidimias CONFIDENTIAL HIGHLY CONFIDENTIAL - RESTRICTED QISSEMINATION ONLY US Airways product offering traiis the other Ieading carriers American, Unitedg and aelta he?eve En the wafue m? pmduct Imestmetxia?d are pursziing muItIpIE whim US Airways is faiIing furt?er behind Pmductimprovements :2me Level of announced compIetion by YE2015 . Mane American Un?ted Deita US Airways Domestic, US Airways Prodactis FaiIing Behind ?wi?lg??i??nu. Lie~?at seats 6' Power~ports 57 37 CONFIDENTIAL ONLY . Significant inVestment wauld be requ?ireda's US r3. Airways has negiected their praduct and customers; And US g?rways has made it dear that they dc: mt pian to harmeniza product be American?s sta?dard pust?merg?n greatiywnceming our customem M3. Puwer North American Airline Satisfaction Survey (2012) Ovarali Airline satisfaction Scores a - Traditionai Network Carrier Segment .1 Deita . American -. United USAirways SOURCEJD. ?ows; and Asmciates American Airiines 33 38 - ONLY US Airways has the highest debt level in the industry which will make continued investment in fleet and product difficult - High debt ievei wouid increase the new carriers cost 0? capitai and limit invest in new products and reconfiguring US Airways? ?eet 1? Few, if any, unencumbered assets remain to borrow against 201% Adjusted net debt 2013E 4.2x US JetBiue American Dena United Southwest Alaska Airways Airtran sAdjusted Net Debi Tetai Debt (excluding Cap 03:: Leases at Unresincted Cash 39 Nail Sher-:1 research: Capitei EQ 39 CONFIDENTIAL US Airways has a history of overestimating prospects, and breaking promises US Airways? current management made lofty promises in order to consummate a merger with America West Merger has not been as successful as promised or advertised Promise Resuit "{Employee integration} wiil take time and take a lot of work and communication and candor. have a Set of faith we can do it.? I 7 years tater, the company has not integrated and labor groups are the lowest paid in the industry The combination have ?among the iowest debt have? Of a? major aimnes "2 Combined entity has the highest debt load in the industry a- "st Airways CEO Bruce Lakefield} said he does not anticipate a further reduction in Pittsburgh as part of the merger.,. [and] will consider adding capacity if demand dictates.?3 Pittsburgh operations and capacity have been substantiaiiy reduced and status as ?focus city? has never been realized US Airways has a unit revenue discoimtto major competitors Combined carrier maintain unit revenue parity with maior competitors nu?. Minn? in. ?amount I Consolidation has occurred but potential partners have looked elsewhere Merger wouid change industry g1) Pittshurgla #ostfoazette, June 20:35. (2) America Wort/US Airways press reiease .53) Pittsburgh Post-Gazette. May 2005. 40 CONFIDENTIAL la?Oi?z-Ame?icau; . . .. liu'l?ru?i tit-?u. hit/1' gv' US Airways made promises in the America We__st-_ .- merger that were never fulfilled - 95?19553195'33933?? 4- US Airway?? current managel?nent made lofty promises En orderw consummate a merger with America West US Airways Promise Result . . -- 7 years later the company has not integrated and . Employee mum be ?meg?ated labor groups; are the lowest paid In the industry Amongme lowest deb: geveis of a" major Cambinecf antitv has the highest night 1036 in I- . airlines the industry - Pittsbu:gh, Las Vegas, and LaGuardla all saw Cagacltv in But: Cities will not be reduced massive Sagacity {auctions 15% to major competitors . . . - disadvahta eof Unit revenua panty malor US AKWays has a i revenu . . American Alriin?s I ?1 41 CONFIDENTIAL . RESTRECTED emu US Airways? workforce is frustrated with broken promises Airwavs? unrecedented nperatio? of separate labor groups since 2065 has increased frustration among its employees and could present obstacles to a successful post-merger harmonization SOERCE: Elnomherg, T?eStraet, and American Airlines; ?3 42 CONFIDENTIAL HIGHLY CONFEDENTIAL ONLY Chapter 1 Uniike US Airways, Amer?can does not need a merger to thrive AmerEcan has gone thraugh a restructuring process that wiH position it for future success US Airways has the weakest bug term prospects of any major carrier ?r h. Wh??e moms: ?gei? was? . gamemte? US Airmey?s? estis'na'i'e nmgy km m9. ?s r3 mica ?shes Ths? aih??evahie {swagger risks dram as prasgmsesi- (fuses my: a fair sp?ii {if assia-e?sam?t same givea graz'z?i?e: :32}!er pmspasts Assam as {amiss (Ef?gy i?s?m'n US ?siz'vm?gs Americaz? meziitaz's sad c: ?30 ism-Em? WE??th :wr?sgsg'gm American Airlines 43 AA-S R-00675796 CONFIDENTIAL HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY A cembination of American and US Airways wiEI not help American pursue its strategic priorities A combination with US Airways wouId not Improve American?s'position in faSt growing markets, nor in other markets that are most Important to High VaIue Customers product and brand are not geared towargis High Vaiue Customers; integrating US Aii?ways Into American would require signi?cant capitaf investment, and would risk alienating core passengers Combined company wouid have an unsustainable hub configuration A merger wouId increase US Airways cost structure enainng Iaw cast carriers to thrive w?-m 44 HIGHLY RESTRICTED DISSEMINAWON GNLY Combined network wauld be heavily focused on domestic 2:112 inter?atmnaf Capagiw Percent of 44% 43% United Deita American US Airways American New US Airways American 2612 2817 Pian SOURCE FY 2012 DMD Schedule Data, AMR netwark pian 45 45 CON FI DENTIAL Mus Rn00675798 a 5 HIGHLY CONFIDENTIAL - DESSEMINATION ONLY US Airways would not strengthen presence in key growth markets The Airwaya network ?5 fawsed in ?ow mamas anti was net imprave American?s netwark in key regiem mdustry demand growth More 4-996 attractive 4.4% 4.0% 3.8% 3.5% Less 2.2% attractive US Airways capacity share Pacific South America Centra! America Domestic Caribbean Attantic E096 2% 13% 10% AA Rank AA US Rank Bomeatic inciudes AASOURCE: WC 2012 scheduie. Ccmpany ?maiysis American Airlines 46 CONFIDENTIAL 46 MS R-00675799 CONFIDENTIAL HIGHLY ONLY Integrating with US Airways? product risks alienating High Value Customers i I US Airways does not plan to harmonize product to American?s standard post?merger, which wii! American?s ability to attract and retain High Vaiue Customers I Even if product were harmonized, Customers of the New American wouSd have to endure inconsistent and substandard product as the campanies impiement a transition New American AA US Share of ?eet at updated proc?iuct standard of aircraft 100 100 ?95 109 100 "2013 - - :14 15 16 .2017? American Air?n?s 4? 47 HIGHLY CONFIDENTML ONLY Carriers have rationalized capacity in previous . . mergers; but such rationalization is not considered in US Airways? merger pian ?fo nme?cmmnineg (PE/dew)? ?mefgcanAiv?nes? American Airiines 48 HIGHLY - RESTRICTED ONLY Five hubs on the East Coast will be difficult for the "combined company to sustain Departures Connect MSA per day per traf?c East Coast hubs and Hub/ Departures population mil?on Percent of focus Cities focus airport per day1 persons totaf Wg~350 A 345 6 ~60 50 A anlbuwm, um, L, VJ w? uu,r\U= nu, . Him I ?n SOURCE: innovata 2912 scheoulei US Census Bureau {201? est); US DepadmentofTranspo?a?on (0918) 49 49 49 CONFIDENTIAL CONFIDENTIAL - .. I - HIGHLY A merger with US Airways weuici weaken .- - American in New Yerk City A merger with US Airwav?eiin'iinates AmeriCan?s option to codewshare with jetaiue ietBiue codes-hare is a key ofAmerican?s New York City Straiegy Codesharing is the oniy effective option to increase domestic feed into capacity constrained JFK I US Airways does not previde significant domestic feed to Americen?s'JFK hub gateway, and lose high vaiue customers in New York City as a resuit - ?omestic capacity at Thousands of scheduled seats, July 2013 1,019 American; I US Airways Americen ejetBiue _'Ar_nerican USAirways jetBiue SOURCE: Dim 50 {Ra-00675803 CONFIDENTIAL ~98 HEGHLY - RESTRICTED ONLY Merger would increase US Airways cost structure enabling {ow cost carriers to thrive I Cost structure of US Airways network w?fl increase through merger as labor contracts are harmonized I With higher costs and fares on the US Airways network, low cost carriers wituppurtumtrc: 51 um: emu :Apauu c155: mummy Capacity Impacted by LCC YE 3:112 53% 47% us bl. UA AA Source: BRO Btifai?tiuMASMs); LCC's inc?ude 36, F9, L. G4, MK. SYK vx.? WH American Airiines 51 Airways? merger offers Ra?onakfar?em untt?n 2008,2010 $3833 2035 $9 2012 HIGHLY RESTRICTED DISSEMENAHON ONLY For these reasons, the other mainiine carriers have reiected US Response AwmrmanAthes 52 HIGHLY CONFEDENTML - RESTRICTED DESSEMWAWON ONLY Chapter 2 Bn?k? i375 memime: ?mm we?. carvers": ., Zm?mrimnf??: mi miner W093i)? aw Smite? wifmzzi 5% imp.va nmrge?e? mm 1.3% fxirwf Am e'rican Air?ines 3'3 53 CONFIDENTIAL CONFIDENTIAL Estimated Synergy Va?ue HEY-CONFIDENTIAL RESTRICTED ONLY As it has in past failed mergers, US Airways has substantially- overstated the benefits of a merger with American {5 Millions) Range US Estimate versus US Drivers of US Airways overestimation 3510-570 $640 ($130.70) US Airways' cost synergies are based on ?awed assumptions without credible: basis $1330 {$990~31u) 51.121433? $981 51130?356 US Aim/ways assumes minima! investment in product and brand integration American AiriineS 54 AAHS revenue premium for the combined company than premiums achieved by industry ieaders in prim years HIGHLY - DISSEMWAHON ONLY US Airways? synergy estimates imply an unrea?stic The 5.3% domestic un?t revenue premium implied by US-AA modeied synergies would be higher lmpliaation of US Airways? industry ieader?s unit revenue advantage synergy estimate on unit revenue vs. average of next two carriers? Year Leader Unit revenue advantage SLA Domestic Mainline PRESM (cents) Pc$t~merger 2005 P?e?merge" with synergies . 206? 2008 10.02 200$ - 9.93 '2010 DLJUA I 2011 1 For each year, calculma domem: mainline SKA PRESM for can}; ofAA, 0L, UA, US, compare PR 5M 9! highest performmg carrier average of next two Am erica Amines 55 CONFIDENTIAL This resuiti steal share from competitars withOut elk; competitive reaction Delta . response Revenue bene?ts are driven Sargeiy at the expense or United and I US Airways assumes fu?l vaiue pf revenue synergies exist in perpetuity withouta competitive I la if mal??r for thin Two larg?qt air? inns to alan new rompanv mica Thpir Sources of Proi?tt?d Syn?rgies . United a Deira ?g Others SDU?CErAmerican IFS modes Americah Airlines HIGHLY - driven by an assumption that iting 55 56 R-00675809 CONFIDENTIAL HIGHLY - ONLY in reality, it is uniikeiy that a merged would generate higher unit revenue than United or Delta 3 U5 Airwayg revenue estimates suggegt the cambined carrier wauld receive 5% mm revenue 3 pmmium (we? Qe?a and United despita a comparahfe or patenti?ily inferior network f? I 5h ?mmcamkiriiness? 11-8 SOURCE: Company Rush/sis: Revenue: per equivath damesti: mainline seat American Airiineg 57' CONFIDENTIAL HIGHLY CONFIDENTIAL - DISSEMINATION ONLY While cost synergies are significant, US Airways makes flawed assumptions to overstate benefits Miliiens) U5 versus AA Drivers of gap US assumes that combined company {an negotiate materiaiiy better rates with 6055; American believes that incrementai savings is uniikeiy given recentiy restructured contracts and dominant market position of (3033 Sailing Expenses Distribution US estimates $65 savings {based on America West Station Services . . a deSpite no Cha?ge in passenger count US additinnal rent savings that are not Station Rent . . . . identified, or were inciudeci in error 6 US uses aggressive reduction percentages used to forecast Maintenance . . purchassng sawth from increased scale Repair Purchasing . US Airway5 estimates $130 or 26%, more annuai mn~rate cost synergies than American Total Cost ISynergies American Airlines 58 1 CONFIDENTIAL Labor costs couid exceed American?s estimates I Significant unknowns exist in iabor contract negotiations and additional costs may be necessary to fuiiy integrate the iabor groups Uniied recently absarbed a $5160 miilicn one?time. expense associated with payments to piiots to integrate the seniority list: Annuai zabor Dis?Synergies 530 630 Range Potentiai Cost American Airiines 59 59' ANS 2 CONFIDENTIAL Unprecedented AmatcmAidines? AA Mam Sim-x {fagma Mr I 0 (Jam imam-ax rii mw - ?Wm .M swam America??ir?nus? . kuna?caq?g?' us @Mgmemw . - HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATIQN ONLY Complexity of merging 34 Iahor greups wouId be .3 - 6 Saba-r groups 915:er groups 2 Iabar groups 4 Iabar groups 4 Iabor groups 9 Iabor groupg SOURCE: SEC American AirIines 60 3 CONFIDENTIAL ONLY US Airways aiso underestimates the one-time costs associated with an integration I US Airways assumes minor investments in aircraft and facilities even though a maiar product harmonizazian process; WOiJid be refiuired (S Minions) Onboard product standardizaticn Airport branding and standardization Training inicrmation Tecimolagv US Hm.) versus AA ($149} Drivers of gap - US believes that minimai standardization is needed and prcduct investment above base plan IFE, etc} is not reduired - American beii?ves standardization to Amer-item?s lavei is necessary to provide a consistentand compelling product Us beiieves that changing logas in airport facilities is that is required for rebranding American beiieves US Airways? simuid be. brought up to American standards to best meet customer expectations US assumes minimal training despite different fleet type and systems between carriers US assumes IT integration casts are scaled based on America West merger American estimates l? integration cost based an OA merger benchmarka of simiiar size and reievance "iota: One~Time Costs {5380} US Airways estimates miilion, or 27%, 1855 onetime costs than American American Airiines 61 1 4 I I . i I .- HIGHLY CONFIDFENTIAL - RESTRICTED DISSEMINATSON ONLY This is nut-the'fimttime USE-has:Invert-estimated synergigstb - gr, support a deal; in 2006, Delta publicIy: recognized that US'A-igways exaggerated merger benefitsMerger synergieg Premised On US Aimaya??tawed Etcjn?mic Assam pt'icans Assq chiudes; Significant Negative Synergies . . - - Merger bene?tspremiseci on reducing capacity of the combined airlines by 10% As a result, total revenues 'wiII beiess than the Sum of the {wastjagidaiuna cani?ars A$sumes an unachiavama level of ?xed angst am?gaw?thnut the} e?m?matioza of hubs 0r fpriqugh 0f employee's - - This is an unrea?'stic assumption behg?ts ar? overstated and unsu?ainama $t?bstan?ai ?eMafk s?ynergi?'s have aiready be?m r?aIized th?rngh Delta?s Transformaticn Pier: - US Airways cost swings ?ursrsa?stfc ag carrentb! partrayed exceeai $13 Additienany, many negative synergies are not m?ectecf US Aimays? projections, further reducing merger vaiue Increased ?eet campiax?'y Laws (31? vaiue Daciina In custcmansewice Lahur cast naga?va synergiag asaqciated wIth_in_teg__ratiQn_ "?gmi?m 25.1 SOURCE: Dena 59K DaIed 1211912006 62 62 CONFIDENTIAL 5 HIGHLY - RESTRECTED ONLY overstating revenue Network Bena?is are Qverstated anti Nat Sumamable L38 ?S-wrve? synergies 9 mm 935M hatwom ?Capacity? synergies synargies? Net capacitymiated Capacity?related cast Presence Tam! revenue reduc?am mduc?on Sam Uix? Manna-'3 23 SUURCEZ De?ta 8K Dated $231912006 63 63 CONFIDENTIAL HEGHLY RESTRICTED DISSEMINATION ONLY making flawed assumptioms on cost increased (lasts Arel??ore Likeiy than USiAiwvays? Projected Sav?ng$ of $7105.11 Cast synergies U3 Airw?ys? ?Deifa Cost category asiima?te egtimate (SM) Difference Information Systems 200 1 1 0 (9G) (?verhe mi 1 50 ?.9ch (4s 63-45%) war? 1 9 I "x 7m Tam Cast Synergiea T?oop (1.035) mj i Que-egg" :e?eil?gng Airways asserted in signing synergkas ("Mme Deita"s, sewing expense 67050 630391? in US 0.457) us CASM gap by 3 - US Airways expense-CASM is ?3.49. not 0456) i Defta's infemationa?l mix Expiains remainder 9f se?ing expanse gm 2.5x?tha intmna?anai tzaf?c'?f US Airways internatianai commiss?mns and hawking fees highs: Exclaim {may a ramwmn pm: nim?mm mm musk, . . . :Sourca? mm;- ue?imays. ?g 432 is fa. same cams my; SOURCE: Dena 8-K mated 64 64 CONFIDENTIAL HIGHLY CONFEDENTJAL ONLY we? as understating integration costs That Deita Estimates Exceed $1 US Airways Likeiy Understating One-Time (1:031:15 15:33 .. nt?wgency Tomi mam: Opera?am '5 ., ?(it .x A Lamar Cicmracw Other age emant?? 1:1) It? acidi?m? merge: wuss! reqhazk?nemei away-memo! mgr-Mk1 mama Sauna-r Liftkiwv?aym fairng site aeeumetu Hangman its US imys? lath??aicggy? ?swam: urirrz-s'rmtiun 13? US Numw? Jumgmr tars-5&1 cam agr? em'a 13.33:? Aesuhw?a (ash nnwai?mns magnum? and co wait-n US Aim-m HM 3126 ioheniom in math [Jaliia imam? ?d??ens imiuws crewman 32:4 .nx?t-jree and??! Maia? dudes: pmf?ssg?anxd iaes. :an pa'gm a La: HR 9, rand remrm?iims {am '1 cm: of eignificw :3 Mag mafgerfleg,? mm. msm?vaiimm s?ygwmi? ?z?a?a SGURCEZ Betta 8K Dated 1E19l2006 85 CONFIDENTIAL 65 HIGHLY CONFIDENTML - RESTRICTED ONLY Chapter 3 mush?, US Airway; .33?a'nez'?ag?m dams new: new? me) I Wh??e the: gm .Jed n?mrm'w \mm?d gamma-We. syrsaezigim; US mg? azg'tima?ca a? synergy va?ue ?5 dmmaiicaiiy in?amed 15m 1 2-15; mopesad {3091; rephrasmit a fan? spii?i .mcm?ssc vain-e: g?vm': (each I a giggz?? impmved merger ?fe? ?ram ??mgy?a: Amarimr?s Crawjiiwriz egm?i mm wwi? dz: . t8? Wii?mut {merger American Airlines 05 68 CONFIDENTIAL CONFIDENTML - RESTRECTED DISSEMWAWON ONLY Mergers have inherent risks The industry consistently views mergers as risky due to labor, technciogy, and network integration cha?enges {Mne'is'xt-axml um?, A mega . ?kmerican Amines CONFIDENTIAL CONFIDENTIAL HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Nat all airIine mergers are viewed as successfm "?fewkx a I, z??eita Canadmn mm swan Indmn Asmnm; 2 in?lM mm a I it I, fir-mt" ?g??iTE? C(mtinezzmi 7 Airiines; 5 ?Ziiz?i?rml @?Ammca? WM Air?ms 1m AIRWAYS A: . Austrian VI amymamm a 5wissuir? gabm'ia $5 i II Alnwm; my. American AirIines 68 CONFIDENTIAL Higher risk of achieving bene?ts than incurring costs HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Risk Low High Steady~state merger synergies <3 miIlionS) Risk of achieving bene?ts/ Incurring costs Revenue $553 a Does not cons?der potentiai competitive response Synergies? I Requires to surpass competitors an unit revenue Cost $589 I Majority 01? cost init?atives are tangibie and connected to Synergies speci?c initiatives PotentiaI shortfaII if scale ef?ciencies do not deveiop . ($647) . . integratmn of Iabor groups resuit higher costs Net $425 . . . . synergies Iabor dis?synergy and Iess?certam revenue/ cast syner?g?es make everaII upside uncertain 130' am! I. meue 5.3185. 0mm. It) includea prom sharing. American Airimes 59 69 CONFIDENTIAL - RESTRICTED ONLY Patentiai American/US Airways merger has overall riskier profila than previaus deals Risk relatiwe to recent airline mergers . Lower integration risks Operations integratian risk No current reiationahips leg. codeshare, alliance) Few common systems and aircraft types 34 iabor groups with very different contractual terms Challenged labor relations at both companies Labor harmonization risk Continuity risk integration simultaneous; with bankruptcy procass Flexibility risk Opportunity cost Post?integration risks Alignment of business modeis unproven impact of alliance switch adds uncertainty Does not fill network gap Merger rationale risk Labor agreementss less flexible ginanClaliESiliemy ?53? I Combined airline likely has industry?s highest leverage Feww potential partners left American Airiines 79 7O HIGHLY ONLY Un?ke ??ii Ames?cm {3:63-95 My? weed me:- 2mm; ?Jhii?e me. me: W?Gmd garmwt?z 5'er Airways? ?atware? 3y: e??gy mime ?53 in?amd 1' The {$325, each? 5 .. harm? .. mt? .4 and 31202.. American Airlineg 71 CONFIDENTIAL AA-SR-00675824 CONFIDENTIAL HEGHLY CONFIDENT This is not a merger of equafs 2?31 1 Total Revenue Mainline Aircraft Wide-body Aircraft Top 50 Domestic Markets Served Top 50 international Markers Served Next Generation Aircraft on ordarf option American Contribution $24 Biliion $13 Billion 65100% 885 22 97% American Airiines 72 HIGHLY CONFIQENTIAL - RESTRICTED ONLY The US Airways offer of 70% ownership to AMR does mt justify the risks associated with the merger The AMR Sahara needs in be ta fairiy comgensate AMR cred?ors Like multipies based equity sp?t US Airways l?v?iuit?ple1 4.7x AMR ZUISE EBJTEARZ $4,162 Implied AMR EV 19,697 Less: Adgusted Net Debt (Ml/13) 9,667 lmplied AMR Equity Value 10,030 USAirways Market Vahm 2,1327 Implied AMR Ownership 80.5% 1! Based on market vaiue of US Air and projecied 331,113 balance shezetand 201.155 aircra? rem {ram 9,!5 LES Airways pmi?w?ns 252013 AME EBITDAR pm {on-ha for $120?; of professional fees. $103m oi labm? one?time costs American Air'iines 7'3 73 CON HIGHLY CONFIDENTIAL RESTRICTED DISSEMINATION ONLY Chapter4 I Un?ke i353. Aizwawss, (:i?xz?neg??czm mm; mm: - HM astEs'nat'e 36$ wuwm $8 drursz?em?caIiy inf?atm m?tgaa'gi; :Tzeag'gge; .k .1 3 mg Etch; 33:19}; as; {jam-is: reagr?ess?g'st 2: monomk: with :3 ?gment. grmpa?: 5: American Airlines 74 CONFIDENTIAL CONFIDENTIAL de from I Text HIGHLX CONFIDENTIAL - RESTRICTED ONLY 75 75 Ru00675828 CONFIDENTIAL HIGHLY CONFIDENTSAL DISSEMINATION ONLY NOT USED American Airiines 76 76 CONFIDENTIAL HIGHLY CONFIDENTIAL RESTRICYED DISSEMINATION ONLY We have several concerns with the strategic rationale of the merger I Different core customer segments (ire. vs. leisure oriented) Drastioally different approach to network and pricing strategy Aircraft density arid cabin product optimized for core customers segments, and thus significantiy different Networks not as oompiementery as in other mergers (eg. COIUA) White combination would strengthen East Coast and Transatlantic: markets, US network does not AA weakness in Paci?c nor does it enhance American?e position in other international markets Network overlaps and 5 competing hubs on East Coast wouid require significant changes US Airways does not have a rati?ed agreement with AA unions US Airways has not integrated its own workforce after the merger; adding complexity to labor negotiations (and tabor integration Unclear that scale would automaticaliy provide a network advantage to American History has shown that the Largest airiines are not always the best performers it has been suggested that a merger wouid result in more rationai behavior in the industry However, existing oiayers already behave rationaliy. and a merger wouid not eiiminate entries of new, fees rational Even US Airways agrees that the industry ie aiready behaving rationally 77 CONFIDENTIAL HIGHLY EHSS Americanmri?tnes? AA and US different business Network geared towards iocai customers Strong in top markets Hubs have strong Eocai demand Strong in Latin and Europe, with a growing presence in Asia High yields on direct markets Passenger Mix Direct Connect Network geared towards ?ow customers Limited iocai market in hubs Connecting smaiior domestic and internationai markets: Via hubs Limited iocai market in hubs Reiative high yieids on connecting ODS through vaiue pricing versus non-stop Large share of ciosevin bookings at iower than competitor fares Focus on high value customors Large corporate customer penetration Key customers vaiue direct ?ights Expected revenue corporate share 23 Focus on ieisure and iower vaiue corporate customers Limited corporate cuoiomer penetration Key customerc accept connecting ?ights for vaiue Lowor density cabins with more premium seats impienren?ring ieading cabin product Higher density cabins Cabin product Eimited (avg. no power porto) scrunch. a, . used forihe 201 1 industry revenue domes?oaity/ic?rema?ionai} based} Menu. (.11 wuumy unru luv A ux r} ulum my?? were r-M ,nuvo. 78 . . - HEGELY DISSEMINATEQN ONLY US airways fleet ;s aging fast, and Significant flegt renewal IS US Airway?? main?ne'and regipn'a? age ind-eases; mater-aw during the forecast period Narrowbody aga increases 16% Widebodies 25 14.2 34 3.9 a Msh?neaze - - Ew? mcreases 109$ Mainline 340 12.4 342 13.5 7439 Seats - Owned regions! .- Turbogrogs aircraftage'mczea-ses'; Express'?atal 282 15.4 - 261" 11.9.9? '?otal?eet 622? 13.9 509 I 14.9 I - 7% Regivna! uizmz? age isfm' operated by whoiiy uwned subsfdicn'ets' 79 CON Fl DENTIAL AA-S HEGHLY - RESTRECTED ONLY US Airways has the highest debt level in the industry which would expose the combined to even more risk High debt ievei wouid increase the new carriers cost of capitai and iimit ?exibility it) invest in new products and reconfiguring US Airways? fleet Few, if any, unencumbered assets remain to borrow against 2012E Adjusted net debt 2013E 42x 3.3): 1 .2x US JetBiue American Delta United Southwest Alaska Airways I Airtran ?Adjusted ?ef ?ag? lefa? web! (exciudmg Pensrons) Lap Op Leases at UnF?stricted Cash so Waii Street research; Capiiai iQ 80 CONFIDENTIAL HIGHLY RESTRICTED ONLY And US Airways has significant debt maturities in the coming l! US Airways? has over billion in debt coming due, with a large amount payable in 2014 - Additional will be needed to prevent even greater liquidity concerns US Airways? upcaming debt maturities including capital leases miliians 2012 2013 2014 2015 2016 Thereafter SOURCE: US Airways 10K 81 s: 81 CONFIDENTIAL CONFIDENTIAL Revenue Synergies -- Durability Adjustment mainline stagewlength and seat density adjusted unit revenue Mainline SLA PRESM Centg Pre~merger 10.02 DUUA Assuming full synergy capture for the merger would result in a perpetual 5.3% premium fer domestic Post-merger with synergies?vz 10.33 AAIUS 11.75 1122 Based an VS 2:21 Z?n urn-ink, SLA stage image}: Adjusted to 2,3 04?) miles Mame: 5955Mn-vemte gregarij AA of whimsy: 9M comes?om other airlines ("741% ,fmm DUUA) American Airlines 'AAius 82 CONFIQENTIAL RESTRICTED DISSENHNAWON ONLY Amarican?s new cast: structura Wm be highly competitive with the ?ndustry Maics'ity of the impmved cast structure Ea aimac?y piace, and; American is weii 5m track is achieve in Emma! savings 3Q 203.2 Mainiine Ex?Fuel CASM Stage Length Adjusted United American Delta New American US Airways swam: document's. New As: atijumtd far prajvc bed ia'bor and nua?febur resh?ucf urine, savings American Airiines as 83 CONFIDENTIAL CONFIDENTIAL RESTRICTED DISSEMENAT I Suppiiers and aircraft ?essors have agreed to provide signif: savings. Wza man achieve $3.6 hi?ion of $u?apiier aad Aircraft savings Whtie such negotiations typicaliy result in the reject?on of aircraft, we avoided significant reductions to the. ?eet Negotiated to {Jane Additional Pianned US Afrwa 5 3.0 5? 99% 32735 Achieved New American American 3 89113 um ?nu-3. United Cash Savings Somme: man-Amezican Minster: Sm $373 minim a! mm mm Savings American Airfines (>56 84 CONFIDENTIAL Caribbean Domestic 05mm: includes AASOURCE: [3530 203.2 scheduke) Airbus Current Market Outiouk 2012 American Air?nes 85 85 CONFIDENTIAL HIGHLY CONFIDENTIAL - DESSEMINATION i SM Domestic Enclu'des AASOURCE: Duo 2812 schedule; Airbus Cu Market Ou?ock 201.2 Amer?can Airhnes 85 86 CONFIDENTIAL AA-SR-00675839 CONFIDENTIAL CONFI US Airways made premises in th never fulfilled US Airways? current management made lofty promises in order to consummate a merger with America West Merger has not been as successful as promi?ed or advertised Promise Result "{Employzee integration} will take time and {aka a lot 0f work and cammunication and candor. 2 have a lot of faith we can do it.? The combination will have ?among the iowest debt levels of all major 7 years later, thk?: company has not integrated and labor groups are the lowest paid in the industry Combined entity has the highest deibt load in the industry Airways CEO Bruce Lakefieldl said he clues mat anticipate a further reduction in Pittsburgh as part ofthe {anti} will comider adding capacity if demand dismiss.? Pittsburgh ogerations and capacity have been subgtantially reduced and status as "focus city" has never been realized I Combined carrier will maintain unit reVenue parity with major competitors Merger would change industry US Airways has a unit revenura discount in maler commuters Consalidation has occurred but partners have looked elsewhere Pas? ?3 Pitzsimr hPos?Huaw?e metre, lune 20:25, America West/U3 Airwavs press release, Ma Zil??j. 87' Fla-00675840 CONFIDENTIAL - RESTRICTED DISSEMINAWON EBITQAR Splits The AMR awaership gbare needs 20 be 86% is?; order justify merger US Airways: Muitipie 4.7x AMR 2013!: EBETDAR $4,152 American Airiines 8g 88 CONFI DENTIAL HIGHLY RESTRKITED DISSEMENATION ONLY Touted bene?ts assume no capacity reductions deSpite evidence from previous mergers ?We heiieva we?d need mere ?ights out 6? {Shar?ette than we wouid awn as US Aifwaya . standa?me? . {Foggy Parka; CEQ. Afrways i Capacity aha nge in years foliowing merger change vs. industry 3 years pust~merger 20101 2008 2005 2013 LTA Mythic-9%? Han3; 4.2% mncvata ?cheduke data 1 United example is for 2 years post-merger America neg 8?3 89 CONFIDENTIAL CONFIDENTIAL HIGHLY CONFIDENTIAL - RESTRICTED ONLY American is compieting a very successful restructuring Newly rati?ed, lung?term contracts with ail labor groups save the company $1.18 per year, provide competitive costs, operational flexibility, and financial incentives for the company?s long term success Concluded renegotiations with our suppliers and ether cost reduction activities that will drive nearly $4.3 biliion in nan- Eebor cost savings over five years Compieted refinancings and reduced net debt by over 35%, creating an industry leading capitei structure with newfound flexibility and durability to withstand market Removal of historical structurai constraints coupled to a more powerqu customer strategy will drive over $18 in incremental annuai revenue by 2015 American Airlines 90 MS CONFIDENTIAL - RESTRICTED ONLY Employees are new aligned and financially invested in American?s success Gverali salaries and benefits costs are new lower by 17% I All organized labor groups at American and American Eagle have ratified sixuyear contracts that also engender substantively more operational flexibility I All are nowfinancialiy aligned with new equity grants American Airlines *5 91 Rw00675844 CONFIDENTIAL HIGHLY CONFIDENTZAL DISSEM With ?$28 worth of cost?saving initiatives completed,- the new American will be highly competitive with the industry LTM 3Q, 2012 Mainline Ex?Fuel CASM Stage Length Adjusted US Airways US Airways New American Delta Delta New American American United United American Strum): SEC (imam-3mg. EW American adjusted f0! prsjected labor and nimhbm r9?ruchu?ng savings AmeriCan Airlines 92 AA-S CONFIDENTML v- RESTRICTED Cumuiative mn-iabm aavings of nearly $4.2 billion will be realized Costs have been reduced by {extruam?ng {Miami} dsebt and renegat?ating facility and aimra?ft leases Non-Labor Cash Savings mii?ons @21nterest84 Other Faci?ties Unsecured Debt 1,413 Vendors Aircraft 2013 2014 2035 I 2015 201? Source: mmpany American Airiines 22-3 93 CONFIDENTIAL HIGHLY CONFIDENTIAL - RESTRICTED DISSEM I American?s impmved capital atructufe WEII aIIow American in reduce its Ieverage and huiid and maintain its Iicguid?ty New American I New American Dem: United Unites? US Airways US Airways American American Delta 14% Source: SEC ?ing); ami Company analysis: New Amman IrEsziudes adjustments i?m' dent arm spending improvement due tn venlyudueing American Airiines 934 CONFIDENTIAL HIGHLY CONFIDENTIAL RESTRICTED ONLY Our strategy is teamed 0n becaming the preferred glahal carrier for High Value Custemers - Hubs in the cities with the largest concentration of high vaiue customers An expanding internationai netwerk designed around the places the must impertant customers want to fiy Deeper and broader partnerships with the world?s premium airlines Leading~edge investment in praduct and service upgrades that high value customers desire - Outstanding passenger productivity and connectivity through technolugy A seamless and total travel experience for high value customers - Broad portfolio of aircraft a convenient schedule pattern Moving to youngest, most efficient fieet among US peers Premium terminals in hub cities American Airilnes 95 CONFIDENTIAL HIGHLY CONFIDENTIAL - DISSEMINATION ONLY E: Ur?ike US Ais?wa'yg, ?merican?s netwmk is bum am?nd mas: metmwiitan areas with the magi High Vaiue-?ugtmmera Curmrme trance! can?tracts are wan based on fir of ?etwo?c and acmunt travel i Since December, corpmate acmth wins and renewa?s have acca?erated yearjdver year New York Los Ang?fes Chicago Bailas . WW. A Miami - American US Airways Source: US Census, 2010. Foriuna 2MP. ?56 American Airiinies 96 CONFIDENTIAL HIGHLY CONFIDENTSAL - RESTRICTED ONLY Amer?mn?s Mugged internatimna??y; Wham strangeat Gamma gmw?h Es expected mm {20114535 Damestic Europe Latin North Latin South Higher Growth is Projected internationaiiy in all regions American 2017 plan United US Airways American Delta FY 2012 GHQ Schadule Data Amerrcan Airiines CONFIDENTIAL 97 CONFIDENTIAL HEGHLY CONFEDENTIAL RESTRICTED DISSEMENATION ONLY Amer?can is expanding its; netwmk partnershim Na partnership Interline Code share Alliance Joint Business on each other?sfiigh?ts . coordina'don - marketingand sales and cost sha ring .m Current 120 airlines amm Future additions mum-u American Air-?nes 9?3 98 CONFIDENTIAL passengers Premium Passengers Rank #1 #3 $415 #19 #20 #22 #23 international Premium Passengers Per Day (miliions) We are am? wi?h m1?" mnewmm partners oneworid partners have hubs in {hree of the top five ?ntemat?ona! destinations for premium oneworid Partner mam}; Amwm CMHAY Emmi; MFM 1'an mg {?maiagg?a Samar infatuation 01 Fremhsm Pussangcr Booking: American Airiines 99 HIGHLY - RESTRICTED DISSEMINATION ONLY The New American ?th win ?arrew the gap between regionak and main?ne aircraft Today uwwaa?? Smaliest I - narrow-body 10'8 124 1?30 102 {argest regionaiiet 7D 2?6 66 76 ?Gap? 38 48 74 26 American Airlines 10? 190 CONFIDENTIAL CONFIDENTIAL HIGHLY - RESTR "and impmve overal! pattern of service Today - Mainline?120?140$eats) Regionauams Seats} Future Campetitor 83m 93m GAP 103m mam a (SAP - 1pm 4pm a American Air-?nes lO?i 101 ANS CONFIDENTIAL HIGHLY CONFIDENTIAL RESTRICTED DISSEMINATION ONLY American wiII have the newest and most modern fleet I In addition ta supe?or gaggenger amenities, the View ?eet affairs; cast hene?ts: improvet?fueI efficiency iow maintenance casts Average Mainline Fleet Age (years) 16,4 DeIta A?r American United US Ameriaan Lines Airiines Airlines Airways AirIines (2017) SGURCE: MAS Carr;me Aheiivsis American Airlines 102 mm? 102 HIGHLY CONFIDENTIAL RESTRICTED DISSEMINATION ON American is investing in industry~leading products and services I. UVIUIIH miles redeemed we d?metran tetl?li?sinduetry in customer value .2. lt allows us to generate in incremental mileage revenue, with Citi funding the vast majority of the benefits, including all that require eucaeh investment - Main Cabin Extra modifications start this tall, with majority of fleet completed by Summer 2013 - While we plan to drive incremental revenue by upsetting customers, the reel win here is our ability to retain and increase share from high value customers Widebody retrofits are currently in the planning phase, and we will begin conversion of 67 widebocly aircraft to fully-fiat, 100% aisle access business seats in 2014 it Once this is done, the combination of a completely retrofit 777-200 and a lie?flat with the industry?leeding products we will introduce on the and the new 787 will position us very well to capitalize on our expansion objectives 103 CONFIDENTIAL sly and with great results restructuring expedition - Led the industry in unit revenue performance for seven of the East eight months 1? Led the industry in operating margin improvement Secured six year iabor contract that provide 3x in annuai savings, inciuding freezing ati pension obligations and terminating retiree medicai I Restructured xx aircraft financing arrangements to secure over $1.3 in savings a Reduced debt by $2.5 *1 Refinanced $1.3 bitiion of secured debt that will resuit in the: million of interest savings I Took dettvery of xx new aircraft while restructuring and executeci capacity parchaee agreements for xx aircraft of ftying with regionai partners It [product investment} m? MCE or international business ciass? I Continue to build network thraugh partners - Qatar, Tam, JetBtue, Hainan, Sri Lankan. Air Tahiti Nui SOURCE: TBD . 194 104 CONFIDENTIAL ANS HIGHLY - RESTRICTED DISSEMINATION ONLY ?Catch up? Imtiai?wg that: marmma many h?smricai mmtra??ntg are 59%: drive $3.3 In mwme In: 233;?? Revenueh??a?ves millions 1,257 $3 Codeshare @1813. GaugefRegisnal 979 2013 2014_ __2015 2015 50mm: Int?mai Company pm?vctitms American Airiines 105 CONFIDENTIAL HIGHLY CONFIDENTIAL RESTRICTED DISSEMINATION ON Our recent industry leading revenue performance suggests the strategy is beginning to show results I In Q3 2012, for the second quarter in a row, our unit revenue grew at a higher rate than the rest: of the industry II American has ranked or 2nd in unit revenue growth each quarter in 2012 Consolidated Unit: Revenue (PRASM) Growth United USAirways American 13.6% - international LF was 81.7%, up with higher feeds in ati~lin3ernational Q2 2012 Q3 .2912 CONFIDENTIAL 0 4o r. driven bv a 3U: ?r lntemationai was 82.0% in May, up 2.6 piss yr/?yr - Atlantic LF increased 2.2 915 to 83.3% Latin LF was flat at 798% Pacific LF jumped 11.9 pie to 87.4% June?s consoiidated (PRASM) increased an estimated 8.6 percent compared to the prior year period, driven by a strong yield environment and increased load factors across all regions. Of the companies who have reported in June (9L, WM and US) and based on current CA June guidance, AMR's consolidated PRASM (year-over?year percent change) has outperformed the industry. This is the third consecutive month AMR has outpaced the industry average Primary factors driving June Performance: Strong demand led to improved LF across all entities. Unit revenue was up across entities. ., international performance has improved, as American continues to capitalize on its joint trans-Atlantic business with British Airways and lberia by offering an expanded network to its business customers. i afin Amnrinn mntiiv in qtrannth 105 CONFIDENTIAL 1~ HIGHLY ONLY Mi a? ?hese af?rm have mg?i?me? American regiam indugtry ?gadersh?g 3 3 2 i 5 structure and aiiminatien of gauge disadvam?age wi? ensure Ame?can?s success Market leadership in the best giobai mariiam Mass on premium service, campe?tive cast LTM 3Q 2012 EBITSAR Margin 153?17396 13.2% Delta United American US Airways New American Source: sac document? 3m? Company anawss?s American Airlines 107 AA-S R-00675860 CONFIDENTIAL LY Uh - For YE 4011, American had a nearly pogitive passenger revenue gap and an over positive fatal revenue gap to US Airways Stage Length Adjusted Mainiine PRASM Wteww?nrnerican MUS Airways 14.02: i- 12m 10.9: -- 8.0C - am mog'a?? no? Source: SEC Filings: Mainiine Pawenger Revenue; Note: US and HP data combined throughout American Airlines :93 108 HIGHLY RESTRECTEO ONLY American has Maintained 3 Revenue Premium over US Airways in each Quarter for the Last 8 years I When normalized for differences in stage Eength, American?s average quarterly revenue premium Over US Airways is roughly 18% over this time period Stagg Length Adjusted PRASM Revenue Premium Compared to US Airways 35% 25% 20% 15% 13% 5% 094? Sousce: SEC 7 Stage Length Adjusted Meanlme Passenger Revenue; Note: US and HP data combined throughout American Airiines 109 CONFIDENTIAL be 4. US Airways made promises in the America West merger that were never fulfilled US Airways? current management made lofty promises in order t0 consummate a merger with America West US Airways Promise Result Cmmoyse gm? 5 Wm be integrated 7 years later, the company has not integrated and labor groups are the lowest paid in the industry Combmed entity has the highest debt load in the. industry Ameng the iowest debt levels of all major airlines Pittsburgh, Las Vegas, and taGuardia all saw massive capacity reductions Capacity in Hub Cities wiil not be reduced Unit revenue parity with major competiwm US Airways- has a unit revenue crisadvantage of I 16% to majar competitors American Airiines 3.10 110 CONFIDENTIAL NLY US Airways? warkforce is frustrated with broken promises US AirwayS? unprecedented operation of separate iabor groups since 2005 has increased frustration among its emp?cyees and couid present obstacies to a successfui past?merger harmonizatian SOURCE: ?loomberg, TheStreet, and W512 American Airlines 111 111 MS CONFIDENTIAL HIGHLY - ONLY Growth is facused on the most attractive markets Eemand and Capacity Growth AA Capacity Growth ABM CAGR) industry Demand Growth (201247 RPM - Focus on higher yieiding passengers with smafier aircraft and higher frequa'ncv Acid new destinations for hub feed and network breadth Expand codes-baring with damestic partners Domestic Diversify presence in the region I Leverage joint business strength to increase key busincss market penetration Euro 8 . . . Impiement new routes and increase European and markets served Buiid on American?s Reading pasition in the regian Latin Growth with strong business ties to US and Europe America I Leverage partners? regionai further increase American?s virtual network New service secondary markets that currenriy do not have direct service to US I Connects US and Latin America with fastest growing economic regiun Asia 1? Higher than industry capacity grawch due- to iow current base in region Capitaiize on iarge iucai market demand Leverage, joint business agreements with JAL Qantas Source; CompanyAnaiysis CONFIDENTIAL CONFIDEMTIAL RESTRICTED WSSEMINATEON ONLY Total cost savings average $2.6 biliion per year Totai Cash Savings 3 Labor Non Labor $2.13 $1.73 $1.73 2013 Z?l? 2015 203.6 2017 30mm.- 3113 Ware: Exdude: mm?mne labs: payments Muted to may-aw and wrancv.? (ndudw increment/c1 ?sourcing mm 113 CONFIDENTIAL Aiso increasing the netwark through partnerships Joint usiness Na partnership $nter?ine Code share Ai?ance code on ?ights cmrdina?on marketing and 53195 and cost sharing Number of partners (YE 2011) :mr?ue wrung: ?mm-am?w Recent additians kw?w?ds American Airiines HIGHLY - DISSEMWAWON ONLY 314 114 AA-S CONFIDENTIAL HIGHLY CONFIDENTIAL RESTRICTED DISSEMINATION ONLY oneworId generates disproportionate revenue share Outsized revenue share vaiidates oneworIcI?s positioning as the premium giobal aIIfance and KS resonance with High Value Customers Revenue Share Premium Versus Seat Share (pts) Iv" .. I. 3mm ALLIANCE +?me .2012 1?15 American AirIEnes 115 MS CONFIDENTIAL American also maintains strong positions internationalty, particuiariy in Latin America Market shareIL of US-hased carriers Rank Latin America Caribbean Eumpe Pacific 2008 2012 2008 2612 2908 2012 ?18?18% 8M) scheduseda?a Ike? Share 9erneni distal EmemamnalASMs American Airlines 116 116 HIGHLY CONFIDENTIAL a RESTRICTED ONLY The strategy is working in each of our I Unit revenue growth has been strong across ali five hubs, and grewth is expected to continue I Domestic unit revenue grew 5.8% in the ?rst eieven months of 2012 Damestic Unit Revenue ?rewth First eleven months of 2312 ?$ourzat campmy rayon {Conmiidated YTD November 2012 v1, YTD Navenmrr 2a: 12? 1?17 HIGHLY RESTRICTED ONLY in each international region Unit revenue growth is robust in all four entities and re?ects American?s strengthening position in Asia and Latin America Unit revenue increased 6.2% in the ?rst eleven months of 2012 Unit Revenue Growth ?rst eleven men af 2012 ?Savrm: lntamul'wmpany report {Mainiv?na VTD Navembar 2012 vs, YTD November 20.1 1} 3?1 3 118 CONFIDENTIAL - ONLY Conclusion II American: Preferred airlines for investors ?Best in class prefitability ~Stre?g capital structure mOperationai flexibility to adapt as II American: Preferred airline for high value customers ~Hubs in the right places and premier partners Renewing and rte-gauging our fleet "Leading products and services I Our existing strategic assets combined with our restructured balance sheet and cost profile creates a lengwterm competitive advantage American Airlines 119 119 CONFIDENTIAL CONFIDENTIAL HEGHLY CONFIDENTIAL RESTRICYED ONLY Results in campetitive labor unit casts ?5 Our reiative pasition will continue to improve as other carriers either have open labor contracts or new costlier agreements not reflected here Mainline Labor Unit Costs StageuLength Adjusted wwmm, 3.7C 311$ - 2 American United {Jena US Airways New American 35mm?: SEC documents- ana? company analysis, 120 151022: NMAmericnn ndg?ed for grafemrd iaba! savingsl excluding Wartime Irma! and intrememaimn?mmting casts 120 CONFIDENTIAL HIGHLY CONFIDENTIAL RESTRICTED DISSEMINATION ONLY Best-in-class nomiabcr unit costs - US Airways? costs are Iower due to limited internationai operations and Iesser product offering Mainiine Ex-Fuel Non-Labor Unit Costs Stage-Length Adjusted 6.0C 5.2c American Delta US Airways New American United 5 Year Endmg 2811 5 u. ..I . 12?; Newman/American ?d'uswa? er a see com 121 AA-S HIGHLY - RESTRICTED ONLY increased regiona! flying wiil improve connectivity 3' mereasing regionaE sapacity wiil aHow American to increase frequency, with lower total capacity, at comparable costs Regional flying grows t0 levei prover: successfui and sustainable by United and Delta 8am 9am 10am Mam 1pm 4pm 6pm Competitor HGAP Masnuneuze-zwsaats) RezienaHSW? Seats) Source?nnovma American Airiines 122 CONFIDENTIAL CONFIDENTIAL 2011 ONO 13st data {Domestic and intemationa!) American Airiines 123 123 AA-S Domestic Slot Vaiuation Exercise Ewmw 253% .5, .fi? 'l?v'liNElClleOO We have used two methods to value slots 1) Trades and Swaps Look at recent trades and seasonal swaps to get a market value of slots - "Opportunity Costf" method Example: US Airways/ Delta for LGA and DCA Internal data on swaps/ leases Done as part of the Fresh Start Valuation Process (still under progress) 2) Net Present Value (NPV) 0 Estimate the cash flows . "generated by operating flights to and from these airports Use the Present Value of these future cash flows as a proxy for the value of the slot to AMR 692926008 I 1) Trades and Swaps Airport Lease Rate month Fair Value 4% Slots Per Slot LGA - Peak: $10,000 $160 MM 230 $0.67 MM Off Peak: $5.000 DCA $30,000 $320 MM 122 $2.62 MM JFK Peak: $18,000 $220 MM 182 $1.21 MM Off Peak: $10,000 - EWR $10,000 - $50 MM 54 $0.93 MM SNA . $6,000 $6.6 MM 12 3055 MM Seurce: Fresh Start Vafuation 30/1/2012 Draft ii} WVILNEGHNOO US Airways Swap Sensitivity Analysis SMM BCA LGA Aggregate Pumhase Price 177.6 244.1 Qty Siots Exchanged 84 I 265 Price Per Skit - -- 2,11 - - 0.92 AMR ii Siois . 122 238 implied Vasue as AMR Siots 258' 219: Slots Forfeited 1-6 I '32 Net Siots' Exhhariged 100 I I 233 Price Per Slot ,7 1.78 1.05 AMR?Siots - - 122 - 238 impiiediVaitm of AMR Siots 217 249] "Range s217 258 MM $219 a 249 MM WVILNEGHNOO "04% 2) Net Present Value a) FAE and VAE - b) Hybrid Model Cash flows are calculated Estimate usmg Only i some of the Fixed Overhead costs such as; -- Station Admin Rent lnterest and Equity Expense on Flight Assets and Station Assets -.(excluding slots, routes, gates) Not included: - System .-- Fixed Maintenance interest and Equity Expense on System Assets Account fer 11% - 13% of Fully Allocated Expenses .. using two methods: Fully AllocatedExpenses and Variable Expenses I Gives us the outerf'ibounds of the N-PV of the slots 2139260014 Valuation Summary Metho? Airport Method AA NPV (SMM) AE NFV (32mm) #Siots Value per 5th (SMM) LGA FAE {$3.38 34) MAE $954.86 $227.56 $361 DCA FAE $77.76 $52.85 $1.07 VAE $531.73 $189.85 $5.373 JFK EWR SNA . Total Per Siot Trade $160 MM $0.67 MM 0.99 MM $323 MM $2.62 MM 1.95 MM $220 MM $1.21 MM $50 MM $0.93 MM $6.6 MM $0.55 MM Operati?nai Integratia? maenun~ {Mm Wuzmwn?ml US AIRWAYS CONHDENTSAL . Fix CONFIDENTIAL Exacu?ve Summary - A merger MM and usmn cream the wmd?a Eygesc amine Wm: 1m soaie. breatk? and capahlmes ta wmpsia mom a?aclmiy aim psbf?abty kn ?rs giohai mammals?! dimming mare. grams car-ears sum-5119328: for cusiamgrs and ?nanciai reiums tor ail stakehoims I wmaa Mnking often. suggests lhatfnexgers am e?grumiva cusimnew and anyways and duT?culi to air?na gerformama dam {seems simn-telm Impacts dining ?guration iailawsd 32y maven?; to prim 9r momth m?on?amr? murals, and a rewllan! airline Hui offer: a premier netwo?c and summed Whammy to . US managean Ream has the demonshatmf ail-IRE}! to cansisten?y nm a rc?ahhr urge 9:333 ?Mina opt?afim with past. a? US, AA, TIM 01;. MW Ct), Dapmfmem m" Detanw and uihers, Tm: team led me sauces:le wagmmn U1 US and HE sud "mum-m; have also participat?e'd in the am} M790 mm?gar?s; Thu wam?: expmioma MR be o?eutiveiy (12:99:? and amoum a mamaser Immigration plan for Mam us. :yp?nm operaliana: disruplians and 'Iusia?rsgi a ram;- opm'amms performance amolienc Wlxammwm! Exeeu?ve Summary mm- 114} .k 1 IL The 913mm laatm show?muas? 013mm ammi B, ?manna. ?late, a In mums paint mirth?. ills two ambit?: leb?urd mmam wuwa?onuykmwinw mm whinh led {a tummy mw?ana; Imam; n? '?mwwd . int-33 will Wma?tts- New time WM lo am mm ruinfulying [mm at amp!st and Nam:an any!? in mm A12 af?ne margin! aimnos nan?nua (0 Waiver mum NHd?my Si?ii Hi if 31934 3 ?m mva 5 US AIRWAYS CONHDENTIAL - Executive Sumrruary?~ lntegra?ctn Strategy ?etumzming an integration siral'egy is mum the wareli success GUM meager plan Thu diagram beiow sham a5 ap'proach assigned by unfunny. and b: Mar 1'0 time used by niher lop ?ar cansusi?ng ?rms. ?mis immeme is: raconmended {o d?ve the simctur? am puree)sz of sham-U3 merger I US AIRWAYS CONFIDENTIAL U8 AIRWAYS Executive Summary Merger ?sspirations - Thanawmx wi? be Introduced wifmha realm-wing margin? aspiratiam mpmi?on (ha company in ?w 91mm] markatahce: Create a new mom airline wifh the scale, bmizdm em! cagesb?is?ses in cumming mare ?ffea?vaiy one mma??abiy H: the 953m: emr?rai-gsme - Con?rm cow?ementaw network; musing fhe gap at was air?ngand incraas?ng effrdenesyand practicality mom na?wo?es {especiaky mil-w. Has: Coast; (War cusicmem acces? lo mare cmces Inna mg; seryice 31am: as we? as lha @0355! opportwjiies :ome with a 511mm Ioaworl??'t Mame- Maintain an M23 and whic? to at! ?awm??ns wreath? sawed by us and Edging! restores acne-saw aim eonm?rmies Mae?: 5A Had tramway mneelwdgegme Pro?da empWyees w?h await-Eve 95mp$nsa??on and awaits, gamer adveaxmnm mart-unmet. and improwd job sas??ity; unions mr?s?an?ing A?ml??es haw mead cadeci?m batgaimng; (MEWS w; extend la 1m: empkwaeg MUS Cream Wear: in mm! smer?es, mama sugieaor wink; WM ?ai?mm and US mamhotdezss - . macaw? KKMIettva-kaaumm! If.? US AERWAYS CONFEDENTIAL Exacu?ve $ummary Vania Levers - Cast and mue'nue syisaagies In amass $1.43 have been itiemmd as bane?is of merging ma ?t?nss. Integration plans win he assigned ta ensure umer capaure of bene?ts whim preserving opera?tmai runabliity Mam? Band?! is WM: BONNER: Name cam a sum: Ls;- pasemgw grams rate 52w RM 1m w; '9an as Sir?; camwam 5W2: ?rousccx?wcxgiu maxim Dosammiu a, ?w Executive Summary Vania Levers. - Wegrmlen mods will be {momma mrealim saw revgxnua and east as nmztalea In ma merger pmposai? Below are a {aw n?he quick hit oppanunl?as a?ev ?mnaia? ciase Karma: Eyurzgiu -. Cauwmiy medighmihik fW-?uw 1m? il?z?aml?ub Eh - $0 15(- 515'} E7166 1175?: :23) 12-54} MM I 29w 5 2834 1; :01! (m ?ya?gi}; ?m?gy 5:931?: R-?hl conmhwu-svre-?m 51' 15C- SM 51193 525% I 31%: a :3)va >4 291$ U8 AIRWAYS CONFIDENTIAL US ATRWAYS CONFIDENTIAL Executive Summary - V'afue Levers - Usage baiiavw ma! significant opportunities axisa t'o M?s dmldatmle mfamamca. While: mt exg?cm modeled as marge! synerg?ea mess am 51583 fawn! many Roms (hast us ?hazy mmage di?eren?y wlih ?nancial upside I impmw; Ms Kin-{Vine palf?nmw? tmpim at:me fart!? p? . . {:11me Me: mama!? bag: impva M?au?acmf: manage wrier Sd'seduia Vazia?siuw 5.82:1 haggaga fussy: rm! wx?m?w) $5 $73 $3 56 mg $360, $370 99mm immovade :?dopa?ing mmas c? scheedu??l Aid/waving mm 1-: mqu execuh?ou mil aim rqur aw fast 291$ mm dew ems? . imgmimd Campla?an $316k): MEI Hawk in Ruin: 5:3 magma has and unwell-mm costs Impmvunmel?on Mb 311mm dam? went: re U24: law? 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Re: 0911126: In azmum oi?shwga in? mm yew {east-Kinky (run: hm)? and With?! as; Mme emw?s cm speak ?re?y Md quov'rion a R7M$Rmcedm_. at swam deciskm w: fundameml 5L- mgy for mam gins (M mmwa (mus: 639? wpmam a bias tawmzi seine?ng m? lilipr caviar?: syst?m. wowst am in mm? ?iswp?nn mt! :?angg' ?reman mama as: sin: on z; waf?daxeum?sywm um! mum ?qslag?u?oas mm datum} by iswu?iuml mum-1w trait-mg and acaptmca of changes (Elvaun emu-2c kingzman budgewisin afawsunuwmvg cm! and warm Edwin-c. Hugs ?4y man #xpmm?mi have an mm Imam en {:mstmem "4 .u mum cmwmun subioe?m Mum? mum: ,?mu US Execu?ve Summary~ lmegra?on Approach - Hm ail niamems (mm Dpa?a?ms wiluaqulre changes during mmgranan. Fm [hose dc. mom wl? focus on mhwindzing dismpt'mn to the iarger airline by seiection of systems, faciit?ias. am} policies with :5 Has inwards ?was wishing RA, affew'veiy driving US in absch by me new Amman Atr?ms. Mean-{ion e?ons win tau {our bmats: - Exampi'ss from each buckas Mamie: M1 3377?,msmm 6? 09: mm ashram 5mm mesa mm: {mm (505: - ??L'W?sm?mily? A339 - temsxm mama - ?swam 2? ?heralding: Dawns" ?1 Mair?amw ham: mm F'Wg??au?nwuim SystEm Beg Ws-{mmai mm :ewme swans 9mm mopk?mgvh?p .. memFwa-am - 553nm; pu?em? US AIRWAYS CONFIDENTIAL Executive Summary~ lntegra?an Approach kylegz?ation ac?w?ea m] be organized 3M9 Euwa titswirames arphases to d?va focus on daiivvriwg merger Emerges and control ?sh with chmges tlwqughaut awn-distinct ghasa Annular-pr awn pm I. i-?irsl MIDay-s i Fund'wmd Post. shah: npeulin; ?nk m?on ammo-m cmwAt-?suhpum mttawmml U8 AERWAY-S CONFIDENTSAL Execki?ve Summary Organizationa! Effectiveness sure depend; rm bum rap!? Im?zlwivu LE pmunmn?i leader an we, am! a ram-st .u . 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Wed 3px:th mannatng ?u?umi is sates t6 MIME zr. ?mnf Germaine ?alum? maritime; and than ?86me mops Imuse Wham: in da?y beliawnr; A typical set {newness nuslo mar. Iemsremed, Mud rmeckcf aims. Along was: li?sese 31mm: eon-:99 manwealw abjazc?wi at the nave companym drive 546mm emmwemem, and buy-an. Theseohjeclives medic be: 5,13er upon my me new iead?am?s ?em?swn a?cr wiry-rmIwemew!~ Ema-v an: 3 WW meme - Who Mm?meman M1 hut-av wash-kw;- mama: an 310? ninth-its} in mm; and upm?onai Muha?y mam-5mm?: we! strive the gramm?mmaa) mum the MM Mum; forgive-$1M - The Nozzfmaman m3 om mam ?1 pkg-duets, augm?rsam mm; {:17 wt 9 ?re Mmm?cau tum-Med as the Ea work To: in me af?ne mum cmamuaa-iuwn many-qugmr US AJRWAYS CONFIDENTEAL r. Executive Summary- R?goraus Execution cambine ?le Mn comp nudes; Every . Tut-'54 iunclinna: arenwl? adopf a like Integration mm structure to [rack histam?ian activities and drive level) lo uu; summits! will: a um? a HM wmmitxea wli? mo have (ht-m: r?t?ncl man: 10 msmsucmwul integration of merger mums - Full Mme mam Mmdon wan? was iasuei S?m?ia Dummy, {Isni?crdg mam mummy: as?.me ?aquishipn of 6:119?! Ce?i?ww Synezw gramme rem 1931mm! mice ml weak-.5; and ans umg mat ?rm awaken? swagAERWAYS CONFIDENTIAL Executive Summary? Rigorous Exwu?on A {?imwwum pia? to align?he and priorfdesA ?uicm? unn' nwa?mai?g?tr?s ewmn??-?mw US AFRWAYS . US AIRWAYS Executive Summary? Rigoraus Execution - wmwomtn? mum. mg; 3r he ml?gra?mm with . Mm a. execmloez. Omnibus, ef?ciencieng be (wuceovem?mlmn need-s . Curunt'i'm?M?! - - 'm?memumn 913K mu Monrovia ormpxeyus (Gr-um: Ammamu mm impuginn bulin?gulim mm ~11: m4;ng ?Woman?swine: US-AA-OO186772 US NRWAYS CONFIDENTIAL Emcutive Summary? Potential integration Is?sues Mitigation Activities -. .- and 6.25 to. a mm?: mtma?on [51%le Awareness and en'acme {may ?lion: 9f Ewes and risks: nurmnuagm process is swig-51m ovutw?sucnes; - - 11' . ham-VAN cur-(mum 5mm Matchmonmt US NRWAYS CONFEDENTEAL Executive Summarym ngomus Execution ?ssoanaxw?acticammjow wama!Mand9Cone-act mar-2E gh daa cunm?nam'uw ?mi ammuasin d311th spewing Elm-?1 - Emma comma: mmw?ng air-e132! assimims and hey-Rm, MSW-mam mm mefavn Md WiMsfi k! wimmlirt? saw ml 2mm {mm as: unwary?: W22 lam! 5:31 mm wad ?m wot-Ems; wilfi Faithaskr In rim 12?! WW2 :3 Naming and and mama mam a win madth (mute a? megra?m team N11 I: . h?l Iran 815mm WNW iazgesl and mamwstair?nek mama?Saw" m-mummgm: Jaw?: 3., From: Schobert, Charles [Charlos.Schubert@aa.com1 Sent: Friday, January 11, 2013 10:37 AM To: Marcos, Eduardo Cc: Staohe, Kurt Subject: Re: DOA Valuation Do we want to be as specific to say one is based on fresh start and the other on DL Or shouid we simpiv say that based on both publicly available information and internal vaiuation we think the range is to y? May be just mincing words. Either way we may want to aiso check with jim Burnett that we?re ok to quote fresh start as that?s probably not a public number yet. Last, do we need to raise this legal issue with JetBlue at some point? Probabiy don?t want to get to early February and drop it on them. Sent from my iPad 0n ion 11, 2013, at 10:22 AM, "Marcos, Eduardo? wrote: Kurt/Chuck, Any comments on how the note below is worded before i send it? Thanks, Eduardo Scott, We were able to complete the valuation for our DCA siots. According to our fresh start accounting, which reflects the true economic value of our assets, each slot pair in DCA is worth We also looked at the available information on the slot swap, as away to estimate the value of the slots under the construct of a recent swap deal. Using this method, the impiied market value of a DCA siot pair comes out at Unfortunately, both our own valuation and a recent comparative are way above your proposal of per slot pair. Let me know if you want to discuss. Thanks, Eduardo Edoarde Marcos Managing {tit-actor, Strategic Mitotic-ea Americas 4333 {amen ?atter ?ttest Mi}: 33635 I amt Worth, ?taxes Sail?oivi?t? 1 CONFIDENTIAL Case Document 5 Filed 08/21/13 Page 1 of 1 A0 458 (Rev. 06309) Appearance of Counsel UNITED STATES DISTRICT COURT for the District of Columbia State of Florida Platian v. Case No. Civil Action No. us AIRWAYS GROUP, INC. and AMR CORP Defendant APPEARANCE OF COUNSEL To: The clerk of court and all parties of record I am admitted or otherwise authorized to practice in this court, and I appear in this case as counsel for: The Plaintiff State of Florida Date: {38/21/2013 were {my Attorney ?3 leabeth A. Brady 457991 Printed name and bar number Office of the Attorney General PL-01, The Capitol Tallahassee. FL 32399 Address Liz.Brady@myfloridalegal.com Email address (850) 414?3300 Telephone number (850) 488-9134 FAX number Case 1:13-cv-01236-CKK Document 6 Filed 08/21/13 Page 1 of 1 AO 458 (Rev. 06/09) Appearance of Counsel UNITED STATES DISTRICT COURT for the District of Columbia ) ) ) ) ) United States of America, et al. Plaintiff v. US Airways Group, Inc., et al. Defendant Case No. 1:13-CV-01236-CKK APPEARANCE OF COUNSEL To: The clerk of court and all parties of record I am admitted or otherwise authorized to practice in this court, and I appear in this case as counsel for: . Plaintiff District of Columbia Date: 08/21/2013 /s/ Nicholas A. Bush Attorney’s signature Nicholas A. Bush (D.C. Bar # 1011001) Printed name and bar number Office of the Attorney General for the District of Columbia 441 4th Street, N.W., Suite 600-S Washington, DC 20001 Address nicholas.bush@dc.gov E mail address (202) 442-9841 Telephone number (202) 715-7720 FAX number Case 1:13-cv-01236-CKK Document 7 Filed 08/21/13 Page 1 of 1 AO 458 (Rev. 06/09) Appearance of Counsel UNITED STATES DISTRICT COURT for the District of Columbia ) ) ) ) ) United States of America, et al. Plaintiff v. US Airways Group, Inc., et al. Defendant Case No. 1:13-CV-01236-CKK APPEARANCE OF COUNSEL To: The clerk of court and all parties of record I am admitted or otherwise authorized to practice in this court, and I appear in this case as counsel for: . Plaintiff District of Columbia Date: 08/21/2013 /s/ Bennett Rushkoff Attorney’s signature Bennett Rushkoff (D.C. Bar # 386925) Printed name and bar number Office of the Attorney General for the District of Columbia 441 4th Street, N.W., Suite 600-S Washington, DC 20001 Address bennett.rushkoff@dc.gov E mail address (202) 727-5173 Telephone number (202) 741-0599 FAX number Case Document 8 Filed 08/22/13 Page 1 of 1 A0 45 8 (Rev. 06i09) Appearance of Counsel UNITED STATES DISTRICT COURT for the District of Columbia United States of America, at al. Plaintiff v. Case No. US Airwavs Group, loo, at at. Defendant APPEARANCE OF COUNSEL To: The clerk of court and all parties of record I am admitted or otherwise authorized to practice in this court, and I appear in this case as counsel for: Plaintiff Commonweatth of Virginia Date: 08/2212013 (KM 41144.? Atzomlzy '3 signature Sarah Oxenham Atlen (Va. Bar 33217) Primed name and bar number Of?ce of the Attorney General Consumer Protection Section 900 E. Main Street Richmond, VA 23219 A ddress SOAllen@oag.state.va.us Email address (804) 786?6557 Telephone number (804) 786-0122 FAX number Case 1:13-cv-01236-CKK Document 9 Filed 08/22/13 Page 1 of 4 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, v. Case No. 1:13-cv-01236 (CKK) US AIRWAYS GROUP, INC., 111 W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION, 4333 Amon Carter Boulevard Fort Worth, TX 76155 Defendants. MOTION FOR ADMISSION PRO HAC VICE OF KENNETH R. O’ROURKE Pursuant to Local Rule 83.2(d) of the Rules of the United States District Court for the District of Columbia, the undersigned moves for the admission pro hac vice of Kenneth R. O’Rourke to represent Defendant US Airways Group, Inc. (“US Airways”) and to appear and participate in proceedings in this Court in the above-captioned matter. Mr. O’Rourke is a partner of the firm O’Melveny & Myers LLP, attorneys for US Airways in this matter. He is a member in good standing of the bar of the State of California, as well as the U.S. Supreme Court, the U.S. Courts of Appeal for the Federal Circuit and the Ninth Circuit, and all federal District Courts in California, and has not been subject to disciplinary proceedings as a member of the bar in any jurisdiction, nor are any disciplinary proceedings currently pending against him. Mr. O’Rourke is not a member of the District of Columbia bar. In the past two years, Mr. O’Rourke has been admitted pro hac vice one time in the United States District Court for the District of Columbia. Case 1:13-cv-01236-CKK Document 9 Filed 08/22/13 Page 2 of 4 Date: August 22, 2013 Respectfully submitted, /s/ Courtney Dyer Courtney Dyer (D.C. Bar # 490805) O’MELVENY & MYERS LLP 1625 Eye Street, NW Washington, DC 20006-4001 (202) 383-5300 (telephone) (202) 383-5414 (facsimile) Counsel for Defendant US Airways Group, Inc. 2 Case 1:13-cv-01236-CKK Document 9 Filed 08/22/13 Page 3 of 4 CERTIFICATE OF SERVICE I hereby certify that on this 22nd day of August, 2013, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system, which will send a notice of electronic filing to the counsel of record in this matter who are registered on the CM/ECF system, and that I caused a copy of the foregoing and the notice of electronic filing to be served by email and first class mail to the following non-ECF participants: Nancy M. Bonnell Antitrust Unit Chief Office of the Attorney General 1275 West Washington Phoenix, AZ 85007 (602) 542-7728 (phone) (602) 542-9088 (facsimile) Nancy.bonnell@azag.gov James A. Donahue, III Executive Deputy Attorney General Public Protection Division Office of the Attorney General 14th Floor, Strawberry Square Harrisburg, PA 17120 (717) 787-4530 (phone) (717) 787-1190 (facsimile) jdonahue@attorneygeneral.gov Victor J. Domen, Jr. Senior Antitrust Counsel Office of the Attorney General 500 Charlotte Avenue Nashville, TN 37202 (615) 532-3327 (phone) (615) 532-6951 (facsimile) Vic.Domen@ag.tn.gov Mark Levy Assistant Attorney General Office of the Attorney General 300 W. 15th Street, 7th Floor Austin, TX 78701 (512) 936-1847 (phone) (512) 320-0975 (facsimile) Mark.Levy@texasattorneygeneral.gov Sarah Oxenham Allen Assistant Attorney General Consumer Protection Section Office of the Attorney General 900 East Main Street Richmond, VA 23219 (804) 786-6557 (phone) (804) 786-0122 (facsimile) SOAllen@oag.state.va.us Paul T. Denis Steven G. Bradbury Dechert LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 (phone) (202) 261-3333 (facsimile) paul.denis@dechert.com steven.bradbury@dechert.com Charles F. Rule Cadwalader, Wichersham & Taft LLP 700 Sixth Street, N.W. Washington, DC 20001 (202) 862-2200 (phone) (202) 862-2400 (facsimile) rick.rule@cwt.com John M. Majoras Michael S. Fried Rosanna K. McCalips Jones Day 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (phone) (202) 626-1700 (facsimile) jmmajoras@jonesday.com Case 1:13-cv-01236-CKK Document 9 Filed 08/22/13 Page 4 of 4 msfried@jonesday.com rkmccalips@JonesDay.com Mary Jean Moltenbrey Paul Hastings LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 (phone) (202) 551- 0225 (facsimile) mjmoltenbrey@paulhastings.com Dated: August 22, 2013 /s/ Courtney Dyer Courtney Dyer Case Document 9-1 Filed 08/22/13 Page 1 of 2 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, v. Case No. 1:l3~cvw01236 (CKK) US AIRWAYS GROUP, INC, and AMR CORPORATION, Defendants. DECLARATION OF KENNETH R. SUPPORT OF MOTION FOR ADMISSION PRO HAC VICE Pursuant to Local Rule I declare the following: 1. My full name is KENNETH R. I am a partner of the law ?rm O?Melveny Myers LLP, attorneys for US Airways Group, Inc. Airways?) in this matter. I submit this Declaration in support of a motion for leave to appear and practice before this Court in the above-captioned matter. 2. My office address is O?Melveny Myers LLP, 400 South Hope Street, Los Angeles, CA 900712899, telephone (213) 430-6000. 3. I have been admitted to and am a member in good standing of the bar of the State of California, as well as the US. Supreme Court, the US. Courts of Appeal for the Federal Circuit and the Ninth Circuit, and all federal District Courts in California. 4. have not been subject to disciplinary proceedings as a member of the bar in any jurisdiction, nor are any disciplinary proceedings currently pending against me. 5. In the past two years, I have been admitted pro here vice one time in the United States District Court for the District of Columbia. Case Document 9-1 Filed 08/22/13 Page member of the District of Columbia Bar. 7. I certify that I am generally familiar with this Court?s Local Rules. I declare under penalty of perjury that the foregoing is true and correct. Date: August21,2013 Signed: Kenneth R. O?Rourke MYERS LLP 400 South Hope Street Los Angeles, CA 90071-2899 (213) 430-6000 (telephone) (213) 4306407 (facsimile) Case 1:13-cv-01236-CKK Document 9-2 Filed 08/22/13 Page 1 of 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, v. Case No. 1:13-cv-01236 (CKK) US AIRWAYS GROUP, INC., and AMR CORPORATION Defendants. [Proposed] ORDER Upon consideration of the Motion of Courtney Dyer, active member of the Bar of this Court, for the admission pro hac vice of Kenneth R. O’Rourke, and the Declaration of Kenneth R. O’Rourke in support thereof, ORDERED: The Motion for Amission Pro Hac Vice of Kenneth R. O’Rourke is GRANTED. Mr. O’Rourke is hereby admitted to this Court pro hac vice, to represent Defendant US Airways Group, Inc. and to appear and participate in proceedings in this Court in the abovecaptioned matter under Local Rule 83.2(d) of the Rules of the United States District Court for the District of Columbia . Dated: _________________, 2013 HON. COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE Case 1:13-cv-01236-CKK Document 10 Filed 08/22/13 Page 1 of 4 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, v. Civil Action No. 1:13-cv-01236-CKK US AIRWAYS GROUP, INC., 111 W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION, 4333 Amon Carter Boulevard Fort Worth, TX 76155 Defendants. NOTICE OF JOINT REQUEST FOR TRIAL SCHEDULING CONFERENCE The parties hereby submit the following notice requesting an in-person conference with the Court as soon as practicable to set a discovery and trial schedule for the above-captioned case. Defendants seek to start trial on November 12, 2013, or as soon thereafter as the Court’s calendar permits. Plaintiffs, in response to defendants’ request for a trial date as soon as possible, have proposed that the trial begin on February 10, 2014, or as soon thereafter as the Court’s calendar permits. The parties have met and conferred on the date for commencing trial, but have been unable to resolve their disagreement and jointly request the Court to hold a scheduling conference at the earliest date available on the Court’s calendar, preferably in person, so as to avoid further delay in the resolution of this matter. The parties are available on Wednesday, Case 1:13-cv-01236-CKK Document 10 Filed 08/22/13 Page 2 of 4 Thursday or Friday / August 28, 29, or 30, at the Court’s convenience. In preparation for the scheduling conference, the parties agree to file their competing proposals for a trial scheduling order, and the arguments in support thereof, no later than 5:00 PM two court days before the date on which the conference is set to occur. Dated: August 22, 2013 Respectfully Submitted, /s/ John M. Majoras John M. Majoras (DC Bar # 474267) Michael S. Fried (DC Bar # 458347) Rosanna K. McCalips (DC Bar # 482859) JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (Phone) (202) 626-1700 (Facsimile) jmmajoras@jonesday.com msfried@jonesday.com rkmccalips@jonesday.com /s/ Richard G. Parker Richard G. Parker (DC Bar #327544) Henry Thumann (DC Bar #474499) Courtney Dyer (DC Bar #490805) O’MELVENY & MYERS LLP 1625 Eye Street, N.W. Washington, D.C. 20006 (202) 383-5300 (Phone) (202) 383-5414 (Facsimile) rparker@omm.com hthumann@omm.com cdyer@omm.com Mary Jean Moltenbrey (DC Bar #481127) PAUL HASTINGS LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 (Phone) (202) 551- 0225 (Facsimile) mjmoltenbrey@paulhastings.com Kenneth R. O’Rourke (Pro Hac Vice application Attorneys for Defendant AMR Corporation pending) O’MELVENY & MYERS LLP 400 South Hope Street Los Angeles, CA 90071 (213) 430-6000 (Phone) (213) 430-6407 (Facsimile) korourke@omm.com Paul T. Denis (DC Bar #437040) Steven G. Bradbury (DC Bar #416430) DECHERT LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 (Phone) (202) 261-3333 (Facsimile) paul.denis@dechert.com steven.bradbury@dechert.com 2 Case 1:13-cv-01236-CKK Document 10 Filed 08/22/13 Page 3 of 4 Charles F. Rule (DC Bar #370818) CADWALADER, WICKERSHAM & TAFT LLP 700 Sixth Street, N.W. Washington, DC 20001 (202) 862-2200 (Phone) (202) 862-2400 (Facsimile) rick.rule@cwt.com Attorneys for Defendant US Airways Group, Inc. /s/ Ryan J. Danks Ryan J. Danks U.S. DEPARTMENT OF JUSTICE Antitrust Division 450 5th Street NW Room 4648 Washington, DC 20001 (202) 305-0128 Fax: (202) 514-6525 Email: ryan.danks@usdoj.gov Attorney for Plaintiff United States 3 Case 1:13-cv-01236-CKK Document 10 Filed 08/22/13 Page 4 of 4 CERTIFICATE OF SERVICE I hereby certify that on this 22nd day of August, 2013, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system, which will send a notice of electronic filing to the counsel of record in this matter who are registered on the CM/ECF system, and that I caused a copy of the foregoing and the notice of electronic filing to be served by email and first class mail to the following non-ECF participants: Nancy M. Bonnell Antitrust Unit Chief Office of the Attorney General 1275 West Washington Phoenix, AZ 85007 (602) 542-7728 (phone) (602) 542-9088 (facsimile) Nancy.bonnell@azag.gov James A. Donahue, III Executive Deputy Attorney General Public Protection Division Office of the Attorney General 14th Floor, Strawberry Square Harrisburg, PA 17120 (717) 787-4530 (phone) (717) 787-1190 (facsimile) jdonahue@attorneygeneral.gov Victor J. Domen, Jr. Senior Antitrust Counsel Office of the Attorney General 500 Charlotte Avenue Nashville, TN 37202 (615) 532-3327 (phone) (615) 532-6951 (facsimile) Vic.Domen@ag.tn.gov Mark Levy Assistant Attorney General Office of the Attorney General 300 W. 15th Street, 7th Floor Austin, TX 78701 (512) 936-1847 (phone) (512) 320-0975 (facsimile) Mark.Levy@texasattorneygeneral.gov Sarah Oxenham Allen Assistant Attorney General Consumer Protection Section Office of the Attorney General 900 East Main Street Richmond, VA 23219 (804) 786-6557 (phone) (804) 786-0122 (facsimile) SOAllen@oag.state.va.us Dated: August 22, 2013 /s/ Courtney Dyer Courtney Dyer Case 1:13-cv-01236-CKK Document 11 Filed 08/22/13 Page 1 of 15 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ____________________________________ ) ) ) Plaintiffs ) ) v. ) Civil Action No. 1:13-cv-01236 (CKK) ) US AIRWAYS GROUP, INC., ) 111 W. Rio Salado Parkway ) Tempe, AZ 85281 ) ) and ) ) AMR CORPORATION, ) 4333 Amon Carter Boulevard ) Fort Worth, TX 76155 ) ) Defendants. ) ____________________________________) UNITED STATES OF AMERICA, et al., MOTION TO SET TRIAL DATE Defendants US Airways Group, Inc. and AMR Corporation respectfully move the Court to set the trial date in the above-captioned matter for November 12, 2013, or as soon thereafter as the Court’s calendar permits. Defendants’ trial estimate is ten court days. Pursuant to LCvR 7(m), counsel have met and conferred regarding the trial date and have submitted a Notice of Joint Request for Trial Scheduling Conference asking the Court to hold a trial-setting conference at the earliest date available on the Court’s calendar, preferably in person, so as to avoid further delay in the resolution of this matter. The parties have agreed to file their competing proposals for a trial scheduling order, and the arguments in support thereof, no later than 5:00 PM two court days before the date on which the conference is set to occur. 1 Case 1:13-cv-01236-CKK Document 11 Filed 08/22/13 Page 2 of 15 Defendants seek to set the trial date for November 12, 2013, based on this Motion, the accompanying Memorandum in Support of the Motion, the Joint Request for Trial Scheduling Conference, such additional authority and argument as may be presented in any Reply and at the hearing for this Motion (if such a hearing is held), and such other matters of which this Court may take judicial notice. 2 Case 1:13-cv-01236-CKK Document 11 Filed 08/22/13 Page 3 of 15 Dated: August 22, 2013 Respectfully submitted, /s/ Richard G. Parker Richard G. Parker (DC Bar #327544) Henry Thumann (DC Bar #474499) Courtney Dyer (DC Bar #490805) O’MELVENY & MYERS LLP 1625 Eye Street, N.W. Washington, D.C. 20006 (202) 383-5300 (Phone) (202) 383-5414 (Facsimile) rparker@omm.com hthumann@omm.com cdyer@omm.com Kenneth R. O’Rourke (Pro Hac Vice application pending) O’MELVENY & MYERS LLP 400 South Hope Street Los Angeles, CA 90071 (213) 430-6000 (Phone) (213) 430-6407 (Facsimile) korourke@omm.com Paul T. Denis (DC Bar #437040) Steven G. Bradbury (DC Bar #416430) DECHERT LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 (Phone) (202) 261-3333 (Facsimile) paul.denis@dechert.com steven.bradbury@dechert.com Charles F. Rule (DC Bar #370818) CADWALADER, WICKERSHAM & TAFT LLP 700 Sixth Street, N.W. Washington, DC 20001 (202) 862-2200 (Phone) (202) 862-2400 (Facsimile) rick.rule@cwt.com Attorneys for Defendant US Airways Group, Inc. 3 Case 1:13-cv-01236-CKK Document 11 Filed 08/22/13 Page 4 of 15 /s/ John M. Majoras John M. Majoras (DC Bar #474267) Michael S. Fried (DC Bar #458357) Rosanna K. McCalips (DC Bar #482859) JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (Phone) (202) 626-1700 (Facsimile) jmmajoras@jonesday.com msfried@jonesday.com rkmccalips@jonesday.com Mary Jean Moltenbrey (DC Bar #481127) PAUL HASTINGS LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 (Phone) (202) 551- 0225 (Facsimile) mjmoltenbrey@paulhastings.com Attorneys for Defendant AMR Corporation 4 Case 1:13-cv-01236-CKK Document 11 Filed 08/22/13 Page 5 of 15 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA __________________________________________ ) UNITED STATES OF AMERICA, et al., ) ) Plaintiffs, ) ) v. ) Case No. 1:13-cv-01236 (CKK) ) US AIRWAYS GROUP, INC., ) 111 W. Rio Salado Parkway ) Tempe, AZ 85281 ) ) and ) ) AMR CORPORATION, ) 4333 Amon Carter Boulevard ) Fort Worth, TX 76155 ) ) Defendants. ) __________________________________________) MEMORANDUM IN SUPPORT OF DEFENDANTS’ MOTION TO SET TRIAL DATE The trial schedule proposed by defendants US Airways Group, Inc. (“US Airways”) and AMR Corporation (“AMR” or “American”) (together, the “Airlines”) would afford the government a full 90 days following its complaint to prepare for trial. The government, by contrast, proposes a 180-day schedule that is far longer than any of its other merger trials in this century. Courts routinely try merger challenges promptly in recognition of the steep costs and burdens to the merging parties associated with uncertainties over their futures in dynamic and competitive markets, as is the case here. The Airlines have worked intensively to fashion a merger that would ensure a competitive route network with increased capacity that can successfully attract millions of additional passengers in today’s challenging airline industry and provide vastly better choices for Case 1:13-cv-01236-CKK Document 11 Filed 08/22/13 Page 6 of 15 air travelers while lowering costs. The Airlines conservatively project that they will deliver annual direct net customer benefits of over $500 million by attracting over 2.6 million additional passengers per year. The parties’ urgency to complete their transaction is far greater here than in ordinary merger cases. American’s ongoing bankruptcy proceedings compound the costs and uncertainties associated with the delays caused by the government’s lawsuit, including approximately $500,000 in bankruptcy-related professional fees alone every day that the bankruptcy continues. Both Airlines face additional burdens until this uncertainty is resolved, including uncertainties in winning customers and retaining people when no one knows for sure what the future holds; the loss of the very significant consumer benefits and synergies that this merger would produce, which can never be recouped; and the serious and needless uncertainty over the future business structure and business plans of both Airlines that will continue until the bankruptcy process is concluded. The government cannot justify its unprecedentedly slow trial schedule. There are no unusual burdens that Department of Justice (“DOJ”) will face in preparing for trial. The DOJ has already had over 16 months to investigate (including production by the carriers of hundreds of thousands of documents), it has filed a 56-page complaint with detailed allegations about the evidence, and it stated at a press conference that, “We don’t file lawsuits unless we’re prepared vigorously to defend them, and that’s what we’re doing right now.”1 The Airlines are prepared to defend this case promptly and to prove the procompetitive benefits the merger will bring about, including those that will be lost permanently by further 1 David Ingram, “In Airline Suit, U.S. Antitrust Enforcers Try to Build on Wins,” Reuters, Aug. 13, 2013, available at http://www.reuters.com/article/2013/08/13/amr-usairwayslawsuit-outlook-idUSL2N0GE1BH20130813 (quoting Assistant Attorney General Bill Baer). 2 Case 1:13-cv-01236-CKK Document 11 Filed 08/22/13 Page 7 of 15 delay. This merger is the foundation of American’s plan to exit bankruptcy and is the cornerstone of American’s and US Airways’ plan to form a more competitive and cost-effective airline to take on the country’s largest air carriers―Delta, United Airlines, and Southwest―and a number of fast-growing low-cost carriers, including Virgin America, JetBlue, Spirit, and Allegiant. On this basis, the Airlines move for an Order setting a 10-day trial on the merits beginning Tuesday, November 12, 2013, or as soon thereafter as the Court’s calendar permits.2 Plaintiffs (led by the DOJ) seek to delay trial until February 10, 2014, at the earliest. This motion should be granted for the reasons described in further detail below―including the schedules on which merger challenges are typically tried, the lack of any prejudice to Plaintiffs, the equitable considerations imposed by the American bankruptcy, and the interests of the public and the Airlines. The amount of time requested by the Airlines is demonstrably reasonable and necessary in these circumstances. The delay requested by Plaintiffs, on the other hand, will cause serious harm and cannot be justified. 1. The proposed schedule is significantly more generous than most other schedules in recent government merger trials. The Airlines’ proposed schedule of 90 days to trial is longer than the vast majority of merger trials involving the DOJ or Federal Trade Commission since the turn of the century. Plaintiffs’ proposed schedule of 180 days to trial is, literally, off the chart: 2 The Airlines can be prepared for trial in October 2013, but have proposed the November 12, 2013, trial date to try to accommodate Plaintiffs’ request for additional time to prepare, per the parties’ Local Civil Rule 7(m) discussions. 3 TABLE 1 ACTUAL TIME TO TRIAL 1N DOJ AND FTC MERGER CASES (2000 - PRESENT) Case Document 11 Filed 08/22/13 Page 8 of 15 Oct. 22, 2001 Nov. 8,2001 Nov. 14,2001 Apr. 12, 2007 May 7, 2007 25 5 days May 29, 2007 Jan. 7, 2011 Feb. 10,2011 34 2 days Mar, 29, 2011 Jan. 14, 2002 Feb. 25, 2002 42 1 day Apr. 22, 2002 Nov. 26,2008 Jan. 8, 2009 43 7 days Mar. 18, 2009 Jul. 14,2000 Aug. 30, 2000 47 6 days Oct. 18, 200 Apr. 20,2011 Jun. 13,2011 54 1 day Jun. 27,2011 Apr. 15, 2003 Jun. 9, 2003 55 10 days Jul. 25, 2003 Jun. 6, 2007 Jul. 31, 2007 55 2 days Aug. 16, 2007 May 31, 2000 Aug. 1, 2000 62 5 days Aug. 30, 2000 Dec. 1, 2010 Feb. 3,2011 64 1 day Mar. 11,2011 June 23, 2000 Sept. 5, 2000 74 4 days Dec. 14, 2000 Nov. 18,2011 Feb. 1, 2012 75 3 days Apr. 5,2012 Jun. 21, 2004 Au. 16,2004 Ar. 1, 2004 ug. ov. Feb. 26, 2004 May 23, 2011 Jun. 7, 2004 102 Sept. 6, 2011 106 Sep. 9,2004 Oct. 31, 2011 Table 1 shows the time to trial for all govermnent merger challenges since 2000 that actually went to trial.3 Some of these trials were preliminary injunction hearings, including one 3 The cases cited in the chart are: United States v. SunGard Data Sys., Inc._, 172 F. Supp. 2d 172, 179-80 (D.D.C. 2001); FTC Foster, N0. CIV 07?352 JBACT. 2007 WL 1793441 May 29, 2007); FTC v. ProMedica Health Sys, Inc._. No. 3:11 CV 47, 2011 WL 1219281 (ND. Ohio Mar. 29, 2011); FTC v. Libbey, Inc, 211 F. Supp. 2d 34 (D.D.C. 2002); FTC v. H. J. Heinz Co, 116 F. Supp. 2d 190 2000), rev 246 F.3d 708 (DC. Cir. 2001); FTC v. Holdings, Inc, 605 F. Supp. 2d 26 (D.D.C. 2009); FTC v. Phoebe Putney Health Sys. Inc._, 793 F. Supp. 2d 1356 (MD. Ga. 2011), 663 F.3d 1369 (11th Cir. 2011), rev 133 S. Ct. 1003 (2013); United States v. UPM-Kymmene Oyj, No. 03 2528, 2003 WL 21781902 (ND. 111. July 25, 2003); FTC v. Whole Foods Mkt., Inc. 502 F. Supp. 2d 1 (D.D.C. 2007), rev'd, 533 F.3d 869 (DC. Cir. 2008): United States v. Franklin Elec. 130 F. Supp. 2d 1025 (W .D. Wis. 2000): FTC v. Lab. Corp. of Am. No. SACV 10-1873 AG (MLGX), 2011 WL 3100372 (CD. Cal. Mar. 11, 2011); FTC v. Swedish Match, 131 F.Supp. 2d 151 (D.D.C. 2000); FTC v. OSF 4 Case 1:13-cv-01236-CKK Document 11 Filed 08/22/13 Page 9 of 15 of the five DOJ trials. But the comparison is apropos because each of the cases involved only one trial and the Airlines propose just one trial here. Moreover, four of the five DOJ cases were permanent injunction hearings. Notably, one trial listed above involved a permanent injunction hearing related to the acquisition of a company in bankruptcy. The DOJ tried that case, SunGard Data Systems, within 17 days from the time the complaint was filed after a 3-month investigation. Here, it has asked for about ten times that amount of time to prepare for trial in a matter they have been investigating for five times as long. 2. The proposed trial date does not prejudice Plaintiffs’ ability to prepare for trial. Plaintiffs’ claim that they need six months to prepare for this case is hollow. They have been investigating the merger for over 16 months already. Indeed, Plaintiffs have already investigated this proposed transaction for over twice as long as is typical.4 US Airways first submitted documents to the DOJ relating to a potential combination with American in May 2012, more than 9 months before the public announcement of the merger. The parties filed their Hart-Scott-Rodino (“HSR”) merger notifications in January 2013, and, by May 7, 2013, the Airlines had submitted millions of additional pages of documents, data, and analyses to Plaintiffs, and answered voluminous interrogatories. In addition, seven witnesses were produced for depositions, numerous expert economic analyses were submitted, and multiple meetings were held with Plaintiffs’ staffs to answer questions and concerns and to provide further information responsive to their requests. Healthcare Sys., 852 F. Supp. 2d 1069 (N.D. Ill. 2012); FTC v. Arch Coal, Inc., 329 F. Supp. 2d 109 (D.D.C. 2004); United States v. Oracle, 331 F. Supp. 2d 1098 (N.D. Cal. 2004); United States v. H&R Block, Inc., 833 F. Supp. 2d 36, 44 (D.D.C. 2011). 4 In 2012, all Department of Justice and Federal Trade Commission merger investigations that resulted in a consent order or litigated challenge required on average only 7 months from the announcement of the transaction to the filing of the complaint or consent order. 5 Case 1:13-cv-01236-CKK Document 11 Filed 08/22/13 Page 10 of 15 In fact, some of Plaintiffs’ allegations, and even some of the documents from years ago cited in the complaint, stem from an investigation of US Airways’ proposed trade of take-off and landing slots with Delta Air Lines at Reagan National and LaGuardia Airports. From 2009 to 2011, US Airways responded to multiple demands for documents and information as part of that investigation, made two HSR filings, responded to two requests for additional information, and submitted a witness for a deposition by the DOJ in 2009. Since 2009, US Airways has provided to DOJ millions of pages of documents and other data. Of course, the DOJ has investigated and cleared three prior airline mergers in the last five years, so the general industry context, data sources, and typical analyses are hardly new to it. When the entire record of the DOJ’s review of the issues raised in the complaint is considered, Plaintiffs have an enormous head start on trial preparation relative to the norm for the government in antitrust merger trials. The Airlines propose a two-month discovery period for both sides to ready themselves for trial. Plaintiffs’ attempt to delay commencement of trial beyond November 12, 2013, would seriously harm both the public and private interests at stake in this matter. 3. The circumstances of this case, including American’s bankruptcy, present an unusually strong need for prompt resolution. In addition to the ordinary difficulties and uncertainties inherent in the delay attendant to a merger challenge, the Airlines face unusual and pronounced burdens while they await their day in court. Transformative mergers like this inevitably carry additional uncertainty, which is why such cases get tried particularly quickly. This is especially true here because American remains in bankruptcy, and the proposed merger presents the only extant plan of reorganization. The government’s action has created enormous uncertainty for the employees and customers of both Airlines. The bankruptcy court 6 Case 1:13-cv-01236-CKK Document 11 Filed 08/22/13 Page 11 of 15 has deferred decision on the final confirmation of the plan of reorganization and has called for briefing from American and its creditors by August 23, 2013, on the impact this case has on plan confirmation. American cannot fully implement the plan following confirmation until this case is resolved. The Airlines’ merger agreement includes a termination clause that gives each party the right to terminate the agreement as of December 13, 2013, in the event all necessary regulatory hurdles have not been cleared. See US Airways 8-K/A, Feb. 14, 2013, Agreement and Plan of Merger § 6.2. The fact that the merging parties will have the right to terminate the transaction at any time after that date if there has been no decision from this Court will necessarily introduce even greater uncertainty for the Airlines’ employees and customers if Plaintiffs’ alternative proposal for a later trial date is accepted. All the major American and US Airways stakeholders, including lenders, bondholders, pilots, flight attendants, machinists, and other employees, have poured many months of work into the bankruptcy and merger process and ultimately came together to give their unanimous support to the plan of reorganization. These constituencies have all firmly embraced the New American and are awaiting final resolution of this case so that the plan of reorganization can be implemented. The prospective employees of New American also await final resolution because, for many, their jobs are in a holding pattern and their new compensation and benefits, worth collectively an additional $400 million annually, and which have already been negotiated and are contingent upon the merger, are being delayed. So too is American employees’ receipt of an equity stake that was worth approximately $2 billion before the DOJ suit was filed. Without a prompt resolution in this Court, the increasing uncertainty will inevitably mean the loss of valued employees. Until this lawsuit was filed, many American and US Airways’ 7 Case 1:13-cv-01236-CKK Document 11 Filed 08/22/13 Page 12 of 15 employees were on the cusp of new roles, new assignments, and new locations with a new and improved airline. Simultaneously, other key employees who had announced their departures prepared for new jobs elsewhere. This lawsuit has changed that and is having considerable negative effect on employee energy and morale, two important and perishable assets. The Airlines are eager to demonstrate that this merger is procompetitive and are confident they can do so. Even if Plaintiffs could somehow prevail, however, that outcome, if known sooner to all affected stakeholders (employees and many others), is much less harmful than that same outcome many months later. Thus, the full weight of all these equitable considerations comes down decidedly on the side of the earliest feasible trial date. 4. The public interest strongly favors the Airlines’ proposed schedule. Those with the greatest interest in prompt resolution of this case include the millions of passengers who rely on these airlines and will benefit directly from the increased service levels and network enhancements made possible by the merger, and the tens of thousands of employees who serve both companies and have strongly embraced the promises offered by the New American. Thus, the public interest will be well served by the Airlines’ proposed trial schedule. CONCLUSION In short, the schedule proposed by the Airlines will accommodate the pretrial preparation needs of all sides, enable a fair trial of the issues presented, and permit this Court to render a decision on the merits that will provide a definitive resolution in a timeframe that is most consistent with the public interest and the strong equitable interests discussed above. The Airlines respectfully request that the Court enter the accompanying Proposed Scheduling Order and set this case for trial on Tuesday, November 12, 2013, or as soon thereafter as the Court’s calendar permits. 8 Case 1:13-cv-01236-CKK Document 11 Filed 08/22/13 Page 13 of 15 Dated: August 22, 2013 Respectfully submitted, /s/ Richard G. Parker Richard G. Parker (DC Bar #327544) Henry Thumann (DC Bar #474499) Courtney Dyer (DC Bar #490805) O’MELVENY & MYERS LLP 1625 Eye Street, N.W. Washington, D.C. 20006 (202) 383-5300 (Phone) (202) 383-5414 (Facsimile) rparker@omm.com hthumann@omm.com cdyer@omm.com Kenneth R. O’Rourke (Pro Hac Vice application pending) O’MELVENY & MYERS LLP 400 South Hope Street Los Angeles, CA 90071 (213) 430-6000 (Phone) (213) 430-6407 (Facsimile) korourke@omm.com Paul T. Denis (DC Bar #437040) Steven G. Bradbury (DC Bar #416430) DECHERT LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 (Phone) (202) 261-3333 (Facsimile) paul.denis@dechert.com steven.bradbury@dechert.com Charles F. Rule (DC Bar #370818) CADWALADER, WICKERSHAM & TAFT LLP 700 Sixth Street, N.W. Washington, DC 20001 (202) 862-2200 (Phone) (202) 862-2400 (Facsimile) rick.rule@cwt.com Attorneys for Defendant US Airways Group, Inc. 9 Case 1:13-cv-01236-CKK Document 11 Filed 08/22/13 Page 14 of 15 /s/ John M. Majoras John M. Majoras (DC Bar #474267) Michael S. Fried (DC Bar #458357) Rosanna K. McCalips (DC Bar #482859) JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (Phone) (202) 626-1700 (Facsimile) jmmajoras@jonesday.com msfried@jonesday.com rkmccalips@jonesday.com Mary Jean Moltenbrey (DC Bar #481127) PAUL HASTINGS LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 (Phone) (202) 551- 0225 (Facsimile) mjmoltenbrey@paulhastings.com Attorneys for Defendant AMR Corporation 10 Case 1:13-cv-01236-CKK Document 11 Filed 08/22/13 Page 15 of 15 CERTIFICATE OF SERVICE I hereby certify that on this 22nd day of August, 2013, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system, which will send a notice of electronic filing to the counsel of record in this matter who are registered on the CM/ECF system, and that I caused a copy of the foregoing and the notice of electronic filing to be served by email and first class mail to the following non-ECF participants: Nancy M. Bonnell Antitrust Unit Chief Office of the Attorney General 1275 West Washington Phoenix, AZ 85007 (602) 542-7728 (phone) (602) 542-9088 (facsimile) Nancy.bonnell@azag.gov James A. Donahue, III Executive Deputy Attorney General Public Protection Division Office of the Attorney General 14th Floor, Strawberry Square Harrisburg, PA 17120 (717) 787-4530 (phone) (717) 787-1190 (facsimile) jdonahue@attorneygeneral.gov Victor J. Domen, Jr. Senior Antitrust Counsel Office of the Attorney General 500 Charlotte Avenue Nashville, TN 37202 (615) 532-3327 (phone) (615) 532-6951 (facsimile) Vic.Domen@ag.tn.gov Mark Levy Assistant Attorney General Office of the Attorney General 300 W. 15th Street, 7th Floor Austin, TX 78701 (512) 936-1847 (phone) (512) 320-0975 (facsimile) Mark.Levy@texasattorneygeneral.gov Sarah Oxenham Allen Assistant Attorney General Consumer Protection Section Office of the Attorney General 900 East Main Street Richmond, VA 23219 (804) 786-6557 (phone) (804) 786-0122 (facsimile) SOAllen@oag.state.va.us Dated: August 22, 2013 /s/ Courtney Dyer Courtney Dyer Case 1:13-cv-01236-CKK Document 11-1 Filed 08/22/13 Page 1 of 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ____________________________________ ) ) ) Plaintiffs ) ) v. ) Civil Action No. 1:13-cv-01236 (CKK) ) US AIRWAYS GROUP, INC., ) 111 W. Rio Salado Parkway ) Tempe, AZ 85281 ) ) and ) ) AMR CORPORATION, ) 4333 Amon Carter Boulevard ) Fort Worth, TX 76155 ) ) Defendants. ) ____________________________________) UNITED STATES OF AMERICA, et al., [PROPOSED] ORDER Upon consideration of Defendants’ Motion to Set Trial Date, and IT APPEARING TO THE COURT that the Motion should be granted, it is hereby ORDERED this __ day of _______, 2013 that the trial start for the above-captioned matter shall be set for __ day of _______, 2013. Dated: ______________ ___________________________________ HON. COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE 1 Case 1:13-cv-01236-CKK Document 12 Filed 08/22/13 Page 1 of 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, v. Case No. 1:13-cv-01236 (CKK) US AIRWAYS GROUP, INC., and AMR CORPORATION, Defendants. CERTIFICATE OF RULE LCvR 7.1 I, the undersigned, counsel of record for US Airways Group, Inc. certify that to the best of my knowledge and belief, the following are parent companies, subsidiaries, affiliates, or companies which own at least 10% of the stock of US Airways Group, Inc. which have any outstanding securities in the hands of the public: NONE These representations are made in order that judges of this court may determine the need for recusal. 490805 Bar Identification No. /s/ Courtney Dyer Courtney Dyer 1625 Eye Street, NW Washington, DC 20006-4001 (202) 383-5300 (telephone) (202) 383-5414 (facsimile) Case Document 13 Filed 08/22/13 Page 1 of 1 A0 458 (Rev. Appearance of Counsel UNITED STATES DISTRICT COURT I To: Date: United States of America, et at. .Piaimt??' V. US Aimtave Group, al. Defendant The clerk ofcourt and all parties of record for the District of Columbia v'h/va Case No. OF COUNSEL are admitted or otherwise authorized to practice in this court, and I appear in this case as counsel for: Plaintiff Commonwealth of Virginia 08/22/2013 Matthew R. Huii Attorney Signature ._,Matthew R._..tiull (VA Bar 80500) Printed name and bar number Of?ce of the Attorney General of Virginia Consumer Protection Section 900 East Main Street Richmond, Virqin?a 23219 Address mhull@oag.state.va.us Email address (804) 373-2084 Telephone number (894) 786-0122 FAX'number Case 1:13-cv-01236-CKK Document 14 Filed 08/22/13 Page 1 of 3 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, v. Civil Action No. 1:13-cv-01236-CKK U.S. AIRWAYS GROUP, INC., 111 W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION, 4333 Amon Carter Boulevard Forth Worth, TX 76155 Defendants. CERTIFICATE REQUIRED BY LCvR 7.1 OF THE LOCAL RULES OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA I, the undersigned, counsel of record for Defendant AMR Corporation, certify that to the best of my knowledge and belief, the following are parent companies, subsidiaries, affiliates, or companies which own at least 10% or more of the stock of AMR Corporation which have any outstanding securities in the hands of the public: American Airlines, Inc. These representations are made in order that judges of this court may determine the need for recusal. Case 1:13-cv-01236-CKK Document 14 Filed 08/22/13 Page 2 of 3 Dated August 22, 2013. Respectfully submitted, /s/ Rosanna K. McCalips John M. Majoras (DC Bar # 474267) J. Bruce McDonald (DDC Admission Pending) Michael S. Fried (DC Bar # 458347) Rosanna K. McCalips (DC Bar # 482859) JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (Phone) (202) 626-1700 (Facsimile) jmmajoras@jonesday.com bmcdonald@jonesday.com msfried@jonesday.com rkmccalips@jonesday.com 2 Case 1:13-cv-01236-CKK Document 14 Filed 08/22/13 Page 3 of 3 CERTIFICATE OF SERVICE I hereby certify that on this 22nd day of August, 2013, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system, which will send a notice of electronic filing to the counsel of record in this matter who are registered on the CM/ECF system, and that I caused a copy of the foregoing and the notice of electronic filing to be served by email and first class mail to the following non-ECF participants: Nancy M. Bonnell Antitrust Unit Chief Office of the Attorney General 1275 West Washington Phoenix, AZ 85007 (602) 542-7728 (phone) (602) 542-9088 (facsimile) Nancy.bonnell@azag.gov James A. Donahue, III Executive Deputy Attorney General Public Protection Division Office of the Attorney General 14th Floor, Strawberry Square Harrisburg, PA 17120 (717) 787-4530 (phone) (717) 787-1190 (facsimile) jdonahue@attorneygeneral.gov Victor J. Domen, Jr. Senior Antitrust Counsel Office of the Attorney General 500 Charlotte Avenue Nashville, TN 37202 (615) 532-3327 (phone) (615) 532-6951 (facsimile) Vic.Domen@ag.tn.gov Mark Levy Assistant Attorney General Office of the Attorney General 300 W. 15th Street, 7th Floor Austin, TX 78701 (512) 936-1847 (phone) (512) 320-0975 (facsimile) Mark.Levy@texasattorneygeneral.gov Sarah Oxenham Allen Assistant Attorney General Consumer Protection Section Office of the Attorney General 900 East Main Street Richmond, VA 23219 (804) 786-6557 (phone) (804) 786-0122 (facsimile) SOAllen@oag.state.va.us Dated: August 22, 2013 /s/Rosanna K. McCalips Rosanna K. McCalips 3 Case 1:13-cv-01236-CKK Document 15 Filed 08/22/13 Page 1 of 3 IN THE 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-01236 NOTICE OF APPEARANCE Please take notice that Richard G. Parker enters his appearance as co-counsel in the above-captioned case on behalf of defendant US Airways Group, Inc. He is admitted to and authorized to practice in this court. Dated: August 22, 2013 Respectfully submitted, /s/ Richard G. Parker Richard G. Parker (D.C. Bar No. 327544) O’Melveny & Myers LLP 1625 Eye Street, NW Washington, DC 20006 (202) 383-5300 (phone) (202) 383-5314 (facsimile) rparker@omm.com Counsel for Defendant US Airways Group, Inc. Case 1:13-cv-01236-CKK Document 15 Filed 08/22/13 Page 2 of 3 CERTIFICATE OF SERVICE I hereby certify that on this 22nd day of August, 2013, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system, which will send a notice of electronic filing to the counsel of record in this matter who are registered on the CM/ECF system, and that I caused a copy of the foregoing and the notice of electronic filing to be served by email and first class mail to the following non-ECF participants: Nancy M. Bonnell Antitrust Unit Chief Office of the Attorney General 1275 West Washington Phoenix, AZ 85007 (602) 542-7728 (phone) (602) 542-9088 (facsimile) Nancy.bonnell@azag.gov James A. Donahue, III Executive Deputy Attorney General Public Protection Division Office of the Attorney General 14th Floor, Strawberry Square Harrisburg, PA 17120 (717) 787-4530 (phone) (717) 787-1190 (facsimile) jdonahue@attorneygeneral.gov Victor J. Domen, Jr. Senior Antitrust Counsel Office of the Attorney General 500 Charlotte Avenue Nashville, TN 37202 (615) 532-3327 (phone) (615) 532-6951 (facsimile) Vic.Domen@ag.tn.gov Mark Levy Assistant Attorney General Office of the Attorney General 300 W. 15th Street, 7th Floor Austin, TX 78701 (512) 936-1847 (phone) (512) 320-0975 (facsimile) Mark.Levy@texasattorneygeneral.gov Sarah Oxenham Allen Assistant Attorney General Consumer Protection Section Office of the Attorney General 900 East Main Street Richmond, VA 23219 (804) 786-6557 (phone) (804) 786-0122 (facsimile) SOAllen@oag.state.va.us Paul T. Denis Steven G. Bradbury Gorav Jindal Dechert LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 (phone) (202) 261-3333 (facsimile) paul.denis@dechert.com steven.bradbury@dechert.com gorav.jindal@dechert.com Charles F. Rule Cadwalader, Wichersham & Taft LLP 700 Sixth Street, N.W. Washington, DC 20001 John M. Majoras Rosanna K. McCalips Jones Day 51 Louisiana Avenue, N.W. Case 1:13-cv-01236-CKK Document 15 Filed 08/22/13 Page 3 of 3 (202) 862-2200 (phone) (202) 862-2400 (facsimile) rick.rule@cwt.com Washington, DC 20001 (202) 879-3939 (phone) (202) 626-1700 (facsimile) jmmajoras@jonesday.com rkmccalips@JonesDay.com Mary Jean Moltenbrey Paul Hastings LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 (phone) (202) 551- 0225 (facsimile) mjmoltenbrey@paulhastings.com Dated: August 22, 2013 /s/ Richard G. Parker Richard G. Parker Case 1:13-cv-01236-CKK Document 16 Filed 08/22/13 Page 1 of 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, v. Civil Action No. 1:13-cv-01236-CKK US AIRWAYS GROUP, INC. 111 W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION 4333 Amon Carter Boulevard Forth Worth, TX 76155 Defendants. NOTICE OF APPEARANCE BY JOHN M. MAJORAS PLEASE TAKE NOTICE that John M. Majoras of Jones Day hereby enters his appearance as counsel on behalf of Defendant AMR Corporation in the above-captioned case. Respectfully submitted, this the 22nd day of August, 2013. /s/ John M. Majoras John M. Majoras (D.C. Bar # 474267) Email: jmmajoras@jonesday.com JONES DAY 325 John H. McConnell Boulevard Suite 600 Columbus, Ohio 43216-5017 Tel. (614) 281-3835 Fax (614) 461-4198 51 Louisiana Avenue, N.W. Washington, DC 20001 Tel. (202) 879-3939 Fax (202) 626-1700 Attorney for Defendant AMR Corporation Case 1:13-cv-01236-CKK Document 17 Filed 08/22/13 Page 1 of 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, v. Civil Action No. 1:13-cv-01236-CKK US AIRWAYS GROUP, INC. 111 W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION 4333 Amon Carter Boulevard Forth Worth, TX 76155 Defendants. NOTICE OF APPEARANCE BY MICHAEL S. FRIED PLEASE TAKE NOTICE that Michael S. Fried of Jones Day hereby enters his appearance as counsel on behalf of Defendant AMR Corporation in the above-captioned case. Respectfully submitted, this the 22nd day of August, 2013. /s/ Michael S. Fried Michael S. Fried (D.C. Bar # 458347) Email: msfried@jonesday.com JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 Tel. (202) 879-3939 Fax (202) 626-1700 Attorney for Defendant AMR Corporation Case 1:13-cv-01236-CKK Document 18 Filed 08/22/13 Page 1 of 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, v. Civil Action No. 1:13-cv-01236-CKK US AIRWAYS GROUP, INC. 111 W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION 4333 Amon Carter Boulevard Forth Worth, TX 76155 Defendants. NOTICE OF APPEARANCE BY ROSANNA K. MCCALIPS PLEASE TAKE NOTICE that Rosanna K. McCalips of Jones Day hereby enters her appearance as counsel on behalf of Defendant AMR Corporation in the above-captioned case. Respectfully submitted, this the 22nd day of August, 2013. /s/ Rosanna K. McCalips Rosanna K. McCalips (D.C. Bar # 482859) Email: rkmccalips@jonesday.com JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 Tel. (202) 879-3939 Fax (202) 626-1700 Attorney for Defendant AMR Corporation Case 1:13-cv-01236-CKK Document 19 Filed 08/22/13 Page 1 of 3 IN THE 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-01236 NOTICE OF APPEARANCE Please take notice that Henry C. Thuman enters his appearance as co-counsel in the above-captioned case on behalf of defendant US Airways Group, Inc. He is admitted to and authorized to practice in this court. Dated: August 22, 2013 Respectfully submitted, /s/ Henry C. Thuman Henry C. Thuman (D.C. Bar No. 474499) O’Melveny & Myers LLP 1625 Eye Street, NW Washington, DC 20006 (202) 383-5300 (phone) (202) 383-5314 (facsimile) hthuman@omm.com Counsel for Defendant US Airways Group, Inc. Case 1:13-cv-01236-CKK Document 19 Filed 08/22/13 Page 2 of 3 CERTIFICATE OF SERVICE I hereby certify that on this 22nd day of August, 2013, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system, which will send a notice of electronic filing to the counsel of record in this matter who are registered on the CM/ECF system, and that I caused a copy of the foregoing and the notice of electronic filing to be served by email and first class mail to the following non-ECF participants: Nancy M. Bonnell Antitrust Unit Chief Office of the Attorney General 1275 West Washington Phoenix, AZ 85007 (602) 542-7728 (phone) (602) 542-9088 (facsimile) Nancy.bonnell@azag.gov James A. Donahue, III Executive Deputy Attorney General Public Protection Division Office of the Attorney General 14th Floor, Strawberry Square Harrisburg, PA 17120 (717) 787-4530 (phone) (717) 787-1190 (facsimile) jdonahue@attorneygeneral.gov Victor J. Domen, Jr. Senior Antitrust Counsel Office of the Attorney General 500 Charlotte Avenue Nashville, TN 37202 (615) 532-3327 (phone) (615) 532-6951 (facsimile) Vic.Domen@ag.tn.gov Mark Levy Assistant Attorney General Office of the Attorney General 300 W. 15th Street, 7th Floor Austin, TX 78701 (512) 936-1847 (phone) (512) 320-0975 (facsimile) Mark.Levy@texasattorneygeneral.gov Sarah Oxenham Allen Assistant Attorney General Consumer Protection Section Office of the Attorney General 900 East Main Street Richmond, VA 23219 (804) 786-6557 (phone) (804) 786-0122 (facsimile) SOAllen@oag.state.va.us Paul T. Denis Steven G. Bradbury Gorav Jindal Dechert LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 (phone) (202) 261-3333 (facsimile) paul.denis@dechert.com steven.bradbury@dechert.com gorav.jindal@dechert.com Charles F. Rule Cadwalader, Wichersham & Taft LLP 700 Sixth Street, N.W. Washington, DC 20001 John M. Majoras Rosanna K. McCalips Jones Day 51 Louisiana Avenue, N.W. Case 1:13-cv-01236-CKK Document 19 Filed 08/22/13 Page 3 of 3 (202) 862-2200 (phone) (202) 862-2400 (facsimile) rick.rule@cwt.com Washington, DC 20001 (202) 879-3939 (phone) (202) 626-1700 (facsimile) jmmajoras@jonesday.com rkmccalips@JonesDay.com Mary Jean Moltenbrey Paul Hastings LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 (phone) (202) 551- 0225 (facsimile) mjmoltenbrey@paulhastings.com Date: August ___, 2013 /s/ Henry C. Thuman Henry C. Thuman Case 1:13-cv-01236-CKK Document 20 Filed 08/23/13 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, Civil Action No. 13-1236 v. US AIRWAYS GROUP, INC., et al., Defendants. ORDER (August 23, 2013) Upon consideration of the parties’ [10] Notice of Joint Request for Trial Scheduling Conference, it is, this 23rd day of August, 2013, hereby ORDERED that the Court shall hold an initial scheduling conference in this matter on August 30, 2013 at 9:30 in Courtroom 28A. IT IS FURTHER ORDERED that the parties shall file a joint report as required by Local Civil Rule 16.3 by no later than 5:00 PM on August 28, 2013. IT IS FURTHER ORDERED that the Plaintiffs shall file a response to the Defendants’ [11] Motion to Set Trial Date by no later than 5:00 PM on August 27, 2013. The Defendants may file a reply by no later than 5:00 PM on August 28, 2013. The parties are advised that the Court has a criminal trial set to begin on January 14, 2014 that is expected to last six to eight weeks. SO ORDERED. /s/ COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE Case 1:13-cv-01236-CKK Document 20 Filed 08/23/13 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, Civil Action No. 13-1236 v. US AIRWAYS GROUP, INC., et al., Defendants. ORDER (August 23, 2013) Upon consideration of the parties’ [10] Notice of Joint Request for Trial Scheduling Conference, it is, this 23rd day of August, 2013, hereby ORDERED that the Court shall hold an initial scheduling conference in this matter on August 30, 2013 at 9:30 in Courtroom 28A. IT IS FURTHER ORDERED that the parties shall file a joint report as required by Local Civil Rule 16.3 by no later than 5:00 PM on August 28, 2013. IT IS FURTHER ORDERED that the Plaintiffs shall file a response to the Defendants’ [11] Motion to Set Trial Date by no later than 5:00 PM on August 27, 2013. The Defendants may file a reply by no later than 5:00 PM on August 28, 2013. The parties are advised that the Court has a criminal trial set to begin on January 14, 2014 that is expected to last six to eight weeks. SO ORDERED. [draft] COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE Case 1:13-cv-01236-CKK Document 21 Filed 08/23/13 Page 1 of 9 STEPTOE & JOHNSON LLP 1330 Connecticut Ave., NW Washington, DC 20036 Tel: (202) 429-3000 Facsimile: (202) 261-0658 JAMES & HOFFMAN, P.C. 1130 Connecticut Avenue, NW Suite 950 Washington, D.C. 20036 Attorneys for the Allied Pilots Association GUERRIERI, CLAYMAN, BARTOS & PARCELLI, P.C. 1900 M Street, N.W. Washington, D.C. 20036 (202) 624-7400 (Phone) (202) 624- 7420 (Facsimile) Attorneys for Association of Professional Flight Attendants Edward J. Gilmartin General Counsel Association of Flight Attendants-CWA 501 Third Street, N.W. Washington, D.C. 20001 Attorney for Association of Flight Attendants-CWA O’Donnell, Schwartz & Anderson, P.C. 1300 L Street, N.W., Suite 1200 Washington, DC 20005 David Rosen General Counsel Transport Workers Union of America 501 3rd Street, NW, 9th Floor Washington, DC 20001 Lowenstein Sandler LLP 65 Livingston Avenue Roseland, NJ 07068 Attorneys for Transport Workers Union of America Case 1:13-cv-01236-CKK Document 21 Filed 08/23/13 Page 2 of 9 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA 450 Fifth Street, NW, Suite 8000 Washington DC 20530 STATE OF ARIZONA 1275 West Washington Phoenix, AZ 85007 DISTRICT OF COLUMBIA 441 Fourth Street, NW, Suite 600 South Washington, DC 20001 Case No. 1:13-cv-01236-CKK STATE OF FLORIDA PL-01, The Capitol Tallahassee, FL 32399 COMMONWEALTH OF PENNSYLVANIA 14th Floor, Strawberry Square Harrisburg, PA 17120 STATE OF TENNESSEE 500 Charlotte Avenue Nashville, TN 37202 STATE OF TEXAS 300 W. 15th Street, 7th Floor Austin, TX 78701 and 2 Case 1:13-cv-01236-CKK Document 21 Filed 08/23/13 Page 3 of 9 COMMONWEALTH OF VIRGINIA 900 East Main Street Richmond, VA 23219 Plaintiffs, v. US AIRWAYS GROUP, INC. 111 W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION 4333 Amon Carter Boulevard Fort Worth, TX 76155 Defendants. MOTION OF ALLIED PILOTS ASSOCIATION, ASSOCIATION OF PROFESSIONAL FLIGHT ATTENDANTS, ASSOCIATION OF FLIGHT ATTENDANTS-CWA AND TRANSPORT WORKERS UNION OF AMERICA TO FILE AMICUS CURIAE BRIEF IN SUPPORT DEFENDANT’S MOTION TO SET TRIAL DATE [ECF No. 11] The Allied Pilots Association, the Association of Professional Flight Attendants, The Association of Flight Attendants-CWA, and the Transport Workers Union of America – unions made up of American Airline (“American”) pilots, flight attendants, mechanics and other service employees – hereby move this Court for leave to file an amicus curiae brief in support of Defendants US Airways Group, Inc. and AMR Corporation’s Motion to Set Trial Date [ECF No. 11]. The attached brief, exhibit A hereto, discusses why American Airlines employees believe that an expeditious resolution is necessary if American and the airline industry as a whole is to remain competitive. 3 Case 1:13-cv-01236-CKK Document 21 Filed 08/23/13 Page 4 of 9 I. INTEREST OF THE AMICI The Allied Pilots Association (“APA”), located at 14600 Trinity Blvd., Suite 500, Fort Worth, TX 76155-2512, an unincorporated association, is a labor union founded in 1963 by a group of American Airlines pilots. The APA is the largest independent pilots’ union in the world. The APA is the certified collective bargaining agent for approximately 10,036 American pilots, 100% of its mainline pilots and approximately 76% of its total pilots. The Association of Professional Flight Attendants (“APFA”), located at 1004 West Euless Boulevard, Euless, Texas 76040, is the certified bargaining representative of approximately 16,000 Flight Attendants employed by American Airlines. Today, this workforce is about 36% smaller than it was in May 2002, when almost 25,000 Flight Attendants worked for American. The Association of Flight Attendants-CWA (“AFA”), located at 501 Third Street, NW, Washington, DC 20001, is the certified collective bargaining representative for the approximately 1,800 flight attendants employed by American Eagle Airlines, Inc., the whollyowned subsidiary of American Airlines. AFA is also the certified collective bargaining representative for the approximately 8,000 flight attendants employed by US Airways, Inc. AFA has a direct financial interest in the successful re-organization of American Airlines and its emergence from bankruptcy protection through the consummation of its agreed-to merger with US Airways The Transport Workers Union of America (“TWU”), located at 501 Third Street, NW, Washington, DC 20001, represents over 200,000 employees in the airline industry, railroad industry, and transit sector, as well as employees in other industries. In the airline industry TWU represents employees at American Airlines, Southwest Airlines and a number of other carriers. TWU currently represents about 23,000 employees at American Airlines including aircraft 4 Case 1:13-cv-01236-CKK Document 21 Filed 08/23/13 Page 5 of 9 mechanics (and related employees), fleet service employees (baggage handlers and related employees), Materials Logistics Specialists, Flight Dispatchers, Simulator Pilot Instructors, Maintenance Control Technicians and Flight Simulator Technicians. TWU represents Flight Dispatchers on US Airways. TWU also represents Mechanics & Related, Fleet Service, Dispatchers, and Ground School Instructors at American Eagle. In 2000, TWU represented about 35,000 American Airlines employees. Since 2000, the number of TWU represented employees at American has shrunk to 23,000. The careers of the American employees represented by amici depend heavily on the competitive success of American and the airline industry as a whole. For instance, because of industry-wide seniority rules, pilots and Flight Attendants tend to stay with one carrier for their entire careers. The average tenure of the current APA pilots is almost 18 years. On average Flight Attendants have worked for American for more than 20 years. Thus, it is fair to say that few interested parties care more than the amici’s members about the long-term survival and competitiveness of American. II. ARGUMENT As the principal unions representing American’s pilots, flight attendants and mechanics, amici have a substantial interest in the outcome of this litigation and a viewpoint that will assist the Court in deciding the case. They seek to participate as amicus curiae at this stage to impress upon the Court the need for expeditious consideration of the case. As this Court previously noted, an amicus curiae, “does not represent the parties but participates only for the benefit of the Court.” United States of America v. Microsoft Corp., 2002 WL 319366, *2 (D.D.C. 2002). “District Courts have inherent authority to appoint or deny amici which is derived from Rule 29 of the Federal Rules of Appellate Procedure.” Jin v. Ministry of 5 Case 1:13-cv-01236-CKK Document 21 Filed 08/23/13 Page 6 of 9 State Security, 557 F.Supp.2d 131. 136 (D.D.C. 2008) (citation omitted). It is “solely within the discretion of the Court to determine the fact, extent, and manner of participation by the amicus.” United States of America v. Microsoft Corp., 2002 WL 319366, *2 (D.D.C. 2002). Amicus participation should be permitted, among other reasons, when a party “has unique information or perspective that can help the court beyond the help that the lawyers for the parties are able to provide.” Jin v. Ministry of State Security, 557 F.Supp.2d 131. 136 (D.D.C. 2008) (citation omitted). As explained in the attached brief, the careers of Amici are inextricably linked to the success of American. The pilots and flight attendants, for instance, frequently spend their entire career with American. Their futures will be determined by the long-term viability and competitiveness of American. Whether American is allowed to proceed with the merger or is required to operate as a stand-alone airline will have a drastic impact on the employees represented by Amici. None of the parties to this litigation represent the employee interests. Amici are able to provide unique information and perspective with respect to the impact on employees of delaying the merger. Absent the Amici’s involvement, this Court will not have information regarding the impact on employees, including pilots, flight attendants and mechanics, of allowing or disallowing the merger. The views of Amici will assist the Court in determining the scheduling for this litigation. Amici has consulted with DOJ, American and US Airways regarding the filing of the amicus brief. American and US Airways have consented to APA’s filing of the amicus brief. The Department of Justice does not object to the filing of the amicus brief. Amici sought 6 Case 1:13-cv-01236-CKK Document 21 Filed 08/23/13 Page 7 of 9 permission for this filing from the State parties, but given the urgency of the filing, did not receive such permission before filing this motion. Therefore, Amici respectfully requests that the court grant Amici leave to file the amicus brief. Dated: August 23, 2013 Respectfully submitted, /S/ SHANNEN W. COFFIN _________ Filiberto Agusti (DC Bar No. 270058) Shannen W. Coffin (DC Bar No. 449197) Joshua R. Taylor STEPTOE & JOHNSON LLP 1330 Connecticut Ave., NW Washington, DC 20036 Tel: (202) 429-3000 Facsimile: (202) 261-0658 fagusti@steptoe.com scoffin@steptoe.com jrtaylor@steptoe.com Edgar N. James (DC Bar # 333013) Darin M. Dalmat (DC Bar # 978922) JAMES & HOFFMAN, P.C. 1130 Connecticut Avenue, NW Suite 950 Washington, D.C. 20036 Tel: (202) 496-0500 ejames@jamhoff.com dmdalmat@jamhoff.com Attorneys for the Allied Pilots Association __/S/ ROBERT S. CLAYMAN__________ Robert S. Clayman (DC Bar #419631) N. Skelly Harper (DC Bar #1004509) GUERRIERI, CLAYMAN, BARTOS & PARCELLI, P.C. 1900 M Street, N.W. 7 Case 1:13-cv-01236-CKK Document 21 Filed 08/23/13 Page 8 of 9 Washington, D.C. 20036 Tel: (202) 624-7400 Facsimile: (202) 624- 7420 rclayman@geclaw.com sharper@geclaw.com Attorneys for Association of Professional Flight Attendants __/S/ EDWARD J. GILMARTIN__________ Edward J. Gilmartin (DC Bar # 388361) General Counsel Association of Flight Attendants-CWA 501 Third Street, N.W. Washington, D.C. 20001 Tel: 202-434-0577 egilmartin@afanet.org Attorney for Association of Flight Attendants-CWA __/S/ RICHARD S. EDELMAN__________ Richard S. Edelman (DC Bar # 416348) O’Donnell, Schwartz & Anderson, P.C. 1300 L Street, N.W., Suite 1200 Washington, DC 20005 Tel: (202) 898-1707 Facsimile: (202) 682-9276 REdelman@odsalaw.com __/S/ DAVID ROSEN__________ David Rosen (DC Bar # 181768) General Counsel Transport Workers Union of America 501 3rd Street, NW, 9th Floor Washington, DC 20001 Tel: (202) 719-3839 Facsimile: (202) 347-0454 D-Rosen@TWU.org __/S/ JEFFREY BLUMENFELD__________ Sharon L. Levine Jeffrey Blumenfeld (DC Bar # 181768)* Lowenstein Sandler LLP 65 Livingston Avenue Roseland, NJ 07068 8 Case 1:13-cv-01236-CKK Document 21 Filed 08/23/13 Page 9 of 9 Tel: 973.597.2500 jblumenfeld@lowenstein.com slevine@lowenstein.com * admitted only in DC Attorneys for Transport Workers Union of America 9 Case Document 21-1 Filed 08/23/13 Page 1 of 13 EXHIBIT A Case 1:13-cv-01236-CKK Document 21-1 Filed 08/23/13 Page 2 of 13 STEPTOE & JOHNSON LLP 1330 Connecticut Ave., NW Washington, DC 20036 Tel: (202) 429-3000 Facsimile: (202) 261-0658 JAMES & HOFFMAN, P.C. 1130 Connecticut Avenue, NW Suite 950 Washington, D.C. 20036 Attorneys for the Allied Pilots Association GUERRIERI, CLAYMAN, BARTOS & PARCELLI, P.C. 1900 M Street, N.W. Washington, D.C. 20036 (202) 624-7400 (Phone) (202) 624- 7420 (Facsimile) Attorneys for Association of Professional Flight Attendants Edward J. Gilmartin General Counsel Association of Flight Attendants-CWA 501 Third Street, N.W. Washington, D.C. 20001 Attorney for Association of Flight Attendants-CWA O’Donnell, Schwartz & Anderson, P.C. 1300 L Street, N.W., Suite 1200 Washington, DC 20005 David Rosen General Counsel Transport Workers Union of America 501 3rd Street, NW, 9th Floor Washington, DC 20001 Lowenstein Sandler LLP 65 Livingston Avenue Roseland, NJ 07068 Attorneys for Transport Workers Union of America Case 1:13-cv-01236-CKK Document 21-1 Filed 08/23/13 Page 3 of 13 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA 450 Fifth Street, NW, Suite 8000 Washington DC 20530 STATE OF ARIZONA 1275 West Washington Phoenix, AZ 85007 DISTRICT OF COLUMBIA 441 Fourth Street, NW, Suite 600 South Washington, DC 20001 Case No. 1:13-cv-01236-CKK STATE OF FLORIDA PL-01, The Capitol Tallahassee, FL 32399 COMMONWEALTH OF PENNSYLVANIA 14th Floor, Strawberry Square Harrisburg, PA 17120 STATE OF TENNESSEE 500 Charlotte Avenue Nashville, TN 37202 STATE OF TEXAS 300 W. 15th Street, 7th Floor Austin, TX 78701 and 2 Case 1:13-cv-01236-CKK Document 21-1 Filed 08/23/13 Page 4 of 13 COMMONWEALTH OF VIRGINIA 900 East Main Street Richmond, VA 23219 Plaintiffs, v. US AIRWAYS GROUP, INC. 111 W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION 4333 Amon Carter Boulevard Fort Worth, TX 76155 Defendants. BRIEF AMICI CURIAE OF ALLIED PILOTS ASSOCIATION, ASSOCIATION OF PROFESSIONAL FLIGHT ATTENDANTS, THE ASSOCIATION OF FLIGHT ATTENDANTS-CWA AND TRANSPORT WORKERS UNION OF AMERICA IN SUPPORT OF DEFENDANT’S MOTION TO SET TRIAL DATE The Allied Pilots Association, the Association of Professional Flight Attendants, the Association of Flight Attendants-CWA, and the Transport Workers Union of America – unions made up of American Airline employees whose careers depend on the competitive success of American Airlines and its affiliates (collectively “American”) – respectfully submit this brief amici curiae to express their strong support for Defendants’ Motion to Set Trial Date [ECF No. 11]. In light of the uncertainty cast upon the airline industry as a result of Plaintiffs’ complaint, it is critical to the Defendants, the amici curiae, the industry and the general traveling public that this Court address the merits of Plaintiffs’ claims in an expedited manner. The United States Department of Justice (“DOJ”) brought this injunction action without warning on the eve of the confirmation of a Plan of Reorganization predicated on a merger 3 Case 1:13-cv-01236-CKK Document 21-1 Filed 08/23/13 Page 5 of 13 between American and US Airways Group, Inc. (“US Airways”). Anticipating a closing of the merger in early September, American and its unions had already made substantial preparations for the merger, making significant operational decisions. But as a result of this suit, American suddenly finds itself in competitive limbo. American’s market share, which has declined precipitously since DOJ approved prior mergers that created Delta Airlines (“Delta”) and United Airlines (“United”) in their current form, is likely to erode further while the uncertainty of Plaintiffs’ Complaint hangs over the airline and its customers. At the heart of this dispute is the question of whether American can operate with a network that will compete effectively or whether it will be forced to adopt a stand-alone strategy as a second-tier carrier left to pick over the scraps left behind by its much larger competitors. As explained briefly below, American’s recent experience demonstrates that a stand-alone strategy is unlikely to succeed. But whether or not it can succeed, it is certain that American is an even less effective competitor so long as it must operate without a long-term strategy. And American cannot adopt a long-term strategy until it knows whether or not it is going to be permitted to acquire a network to compete with United and Delta. The damage to competition in the airline industry as a result of a less competitive American must be minimized by a decision on the merits on as prompt a schedule as possible. I. THE AMICUS PARTIES The Allied Pilots Association (“APA”), an unincorporated association, is a labor union founded in 1963 by a group of American Airlines pilots. The APA is the largest independent pilots’ union in the world. The APA is the certified collective bargaining agent for approximately 10,036 American pilots, 100% of its mainline pilots and approximately 76% of its total pilots. 4 Case 1:13-cv-01236-CKK Document 21-1 Filed 08/23/13 Page 6 of 13 The Association of Professional Flight Attendants (“APFA”) is the certified bargaining representative of approximately 16,000 Flight Attendants employed by American Airlines. Today, this workforce is about 36% smaller than it was in May 2002, when almost 25,000 Flight Attendants worked for American. The Association of Flight Attendants-CWA (“AFA”), is the certified collective bargaining representative for the approximately 1,800 flight attendants employed by American Eagle Airlines, Inc., the wholly-owned subsidiary of American Airlines. AFA is also the certified collective bargaining representative for the approximately 8,000 flight attendants employed by US Airways, Inc. AFA has a direct financial interest in the successful reorganization of American Airlines and its emergence from bankruptcy protection through the consummation of its agreed-to merger with US Airways The Transport Workers Union of America (“TWU”) represents over 200,000 employees in the airline industry, railroad industry, and transit sector, as well as employees in other industries. In the airline industry TWU represents employees at American Airlines, Southwest Airlines and a number of other carriers. TWU currently represents about 23,000 employees at American Airlines including aircraft mechanics (and related employees), fleet service employees (baggage handlers and related employees), Materials Logistics Specialists, Flight Dispatchers, Simulator Pilot Instructors, Maintenance Control Technicians and Flight Simulator Technicians. TWU represents Flight Dispatchers on US Airways. TWU also represents Mechanics & Related, Fleet Service, Dispatchers, and Ground School Instructors at American Eagle. In 2000, TWU represented about 35,000 American Airlines employees. Since 2000, the number of TWU represented employees at American has shrunk to 23,000. 5 Case 1:13-cv-01236-CKK Document 21-1 Filed 08/23/13 Page 7 of 13 The careers of the American employees represented by amici depend heavily on the competitive success of American and the airline industry as a whole. For instance, because of industry-wide seniority rules, pilots and Flight Attendants tend to stay with one carrier for their entire careers. The average tenure of the current APA pilots is almost 18 years. On average Flight Attendants have worked for American for more than 20 years. Thus, it is fair to say that few interested parties care more than the amici’s members about the long-term survival and competitiveness of American. II. AMERICAN HAS BEEN AN INEFFECTIVE COMPETITOR TO CARRIERS WITH LARGER NETWORKS In 2008, DOJ approved the merger of Delta Airlines and Northwest Airlines, creating a combined carrier with a national network of flights that easily exceeded American’s capacity. Then, in 2010, following the same antitrust analysis, DOJ approved the merger of United Airlines and Continental Airlines. This created a second national business carrier with a network vastly superior to American’s. The creation of these two large competitors and their superior networks had a devastating effect on American, especially in the critical market for business travelers. The much smaller American faced strategic challenges that eroded its market share. In particular, the more limited size and scope of American’s network – the interconnected web of airline routes through which the airline services its customers – “put it at a competitive disadvantage relative to its largest major network carrier competitors – United and Delta.” Updated Declaration of Andrew Yearley In Opposition to Debtors’ Motion to Reject Collective Bargaining Agreements Pursuant to 11 U.S.C. § 1113 (Bankr. Ct. Dkt. No. 2722-1) at ¶ 10, attached hereto as Exhibit 1, (the “Yearley Declaration”). American’s share in most regions of the United States has “significantly eroded over the last decade as its key network carrier competitors have consolidated and extended their 6 Case 1:13-cv-01236-CKK Document 21-1 Filed 08/23/13 Page 8 of 13 network and scale advantages.” Id. One significant effect has been a steady loss of American’s “high-yield corporate customers and frequent elite travelers to the superior networks of United and Delta.” Id. The loss of market share can be measured in a loss of American employee jobs. The APA has more than 10,000 members because it once took that many pilots and more to fly the American system. Due to its ever diminishing market share, however, only 7,959 pilots are actively flying. Since 2000, active number of TWU employees at American has plummeted from 35,000 to 23,000. The APFA workforce is about 36% smaller than it was in May 2002, when almost 25,000 Flight Attendants worked for American. Without a network similar in scale to Delta and United, American will continue to decline and over the long term might join other airlines with insufficient networks – such as PanAm and TWA – in the ashbin of airline history. The result would be fewer competitive routes for the industry, lessened competition, and a significant loss of jobs for amici’s membership. III. BANKRUPTCY PROCESS RESULTS IN AMERICAN BEING SET TO ACQUIRE A NETWORK EQUAL TO ITS COMPETITORS. Following years of losses in the market dominated by United and Delta, on November 29, 2011, AMR Corporation, American Airlines, Inc. and affiliates were forced to file Chapter 11 reorganization proceedings in the United States Bankruptcy Court for the Southern District of New York, Case No. 11-15463 (the “Bankruptcy Case”). Early in those proceedings, American’s incumbent management sought to reorganize based upon a stand-alone plan for emergence. The problems with this approach were apparent from the outset and ultimately American’s creditors opted for a more competitive approach and one followed by other industry players – building American’s network to equal its competitors through a merger. 7 Case 1:13-cv-01236-CKK Document 21-1 Filed 08/23/13 Page 9 of 13 American sought a merger partner in U.S. Airways, whose routing network is almost entirely complementary to its own. On February 14, 2013, American and US Airways announced that both companies had approved a merger agreement and that the “combination is expected to be completed in the third quarter of 2013.” See American Airlines And US Airways To Create A Premier Global Carrier – The New American Airlines at p. 4, dated February 14, 2013, available at http://phx.corporate-ir.net/phoenix.zhtml?c=117098&p=irol-IRHome. To achieve a merger by the end of the third quarter, on February 22, 2013, American sought Bankruptcy Court approval to enter into the Merger Agreement. See Motion to Approve Merger Agreement (Bankr. Ct. Dkt. No. 6800).1 The Bankruptcy Court entered an Order Approving the Merger Agreement on May 10, 2013 (Bankr. Ct. Dkt. No. 8096).2 American then filed a Plan of Reorganization based upon the merger of American and US Airways. All classes of creditors voted in favor of the Plan. To facilitate closing in the third quarter, the Bankruptcy Court set a confirmation hearing for August 15, 2013. See Order Setting Confirmation Hearing (Bankr. Ct. Dkt. No. 8614).3 1 Motion of Debtors for Entry of Order Pursuant to 11 U.S.C. §105(a), 363(b) and 503(b) Authorizing and Approving (I) Merger Agreement Among AMR Corporation, AMR Merger Sub, Inc., And US Airways Group, Inc., (II) Debtors’ Execution of And Performance Under Merger Agreement, (III) Certain Employee Compensation and Benefit Arrangements, (IV) Termination Fees, and (V) Related Relief (Bankr. Ct. Dkt. No. 6800). 2 Order Authorizing and Approving (I) Merger Agreement Among AMR Corporation, AMR Merger Sub, Inc., And US Airways Group, Inc., (II) Debtors’ Execution of And Performance Under Merger Agreement, (III) Certain Employee Compensation and Benefit Arrangements, (IV) Termination Fees, and (V) Related Relief (Bankr. Ct. Dkt. No. 8096) 3 Order (I) Approving Notice of Disclosure Statement Hearing; (II) Approving Disclosure Statement; (III) Establishing a Record Date; (IV) Establishing Notice and Objection Procedures for Confirmation of the Plan; (V) Approving Solicitation Packages and Procedures For Distribution Thereof; (VI) Approving the Forms of Ballots and Establishing Procedures for Voting on the Plan; and (VII) Approving the Form of Notice to Non-Voting Classes Under the Plan (Bankr. Ct. Dkt. No. 8614). 8 Case 1:13-cv-01236-CKK Document 21-1 Filed 08/23/13 Page 10 of 13 IV. THE DOJ SUIT PLACES AMERICAN AND ITS EMPLOYEES IN COMPETITIVE LIMBO Amici were hopeful that the combination of American and U.S. Airways would significantly enhance American's ability to compete with Delta and Northwest, thus increasing competition in the domestic and international airline markets and enabling American’s continued viability. In the last few months, for instance, hundreds of pilots have been called in off the furlough lists in anticipation of increased flying upon consummation of the merger. Increased American flights means more competitive routes and increased competition in the industry. Unfortunately, DOJ waited until the eve of the anticipated merger to file the Complaint, placing American in an even more precarious position. Anticipating that the closing would occur shortly after the confirmation hearing, American and US Airways had undertaken a selection process for management at the merged company. Many of American’s upper management, some by their own choice, were not to continue and were to be replaced by U.S. Airways personnel.4 As a result, on the management side, American is little more than a shell. Understandably, the management that remains, many of whom are slated to be replaced, naturally lack the same incentives as the proposed management team to aggressively protect American and its diminishing market share during any delay in closing the merger. Nor is it possible to recruit new management in light of the uncertainty hanging over the company. Lacking motivated incumbent leadership, American’s competitive position is likely to erode further during the pendency of this case. As a result, employees whose job outlook had 4 See Terry Maxon, Management Team at New American Airlines looks a lot like US Airways’, Dallas News, June 10, 2013, available at http://www.dallasnews.com/business/airlineindustry/20130610-management-team-at-new-american-airlines-looks-a-lot-like-us-airways.ece; see also Jay Boehmer, US Airways Vets Dominate New AA Senior Management Team, Business Travel News, http://www.businesstravelnews.com/More-News/US-Airways-VetsDominate-New-AA-Senior-Management-Team/?ida=Airlines&a=proc; Management Shake-Up at American Airlines, available at http://dfw.cbslocal.com/2013/06/10/shake-up-planned-for-aamanagement-team/. 9 Case 1:13-cv-01236-CKK Document 21-1 Filed 08/23/13 Page 11 of 13 looked more certain in light of the proposed merger are facing further delays, more furloughs, and the great uncertainty regarding their future with the airline. In these circumstances, the competitive position of American and the industry as a whole will be damaged while American is unable to undertake initiatives because of the uncertainty regarding its future. Amici respectfully submit that this Court will inevitably deny the relief sought by Plaintiff, once it reviews the evidence in this case. But critically, these issues must be resolved sooner rather than later. Amici understand the many demands made on a federal judge on a daily basis, but respectfully request that the Court grant the relief sought by American in its motion in order to give American (and its employees) the chance it deserves to survive as one of America’s great airlines and enhance the overall competitiveness of the U.S. airline industry. The DOJ injunctive action is having a real, immediate adverse impact on the lives of ordinary hard-working employees of American Airlines. We recognize this is unavoidable to some extent. We ask the Court to minimize that impact to the extent possible by granting Defendants’ motion to set a trial date. Dated: August 23, 2013 Respectfully submitted, __/S/ SHANNEN W. COFFIN__________ Filiberto Agusti (DC Bar No. 270058) Shannen W. Coffin (DC Bar No. 449197) Joshua R. Taylor STEPTOE & JOHNSON LLP 1330 Connecticut Ave., NW Washington, DC 20036 Tel: (202) 429-3000 Facsimile: (202) 261-0658 fagusti@steptoe.com 10 Case 1:13-cv-01236-CKK Document 21-1 Filed 08/23/13 Page 12 of 13 scoffin@steptoe.com jrtaylor@steptoe.com Edgar N. James (DC Bar # 333013) Darin M. Dalmat (DC Bar # 978922) JAMES & HOFFMAN, P.C. 1130 Connecticut Avenue, NW Suite 950 Washington, D.C. 20036 Tel: (202) 496-0500 ejames@jamhoff.com dmdalmat@jamhoff.com Attorneys for the Allied Pilots Association __/S/ ROBERT S. CLAYMAN__________ Robert S. Clayman (DC Bar #419631) N. Skelly Harper (DC Bar #1004509) GUERRIERI, CLAYMAN, BARTOS & PARCELLI, P.C. 1900 M Street, N.W. Washington, D.C. 20036 Tel: (202) 624-7400 Facsimile: (202) 624- 7420 rclayman@geclaw.com sharper@geclaw.com Attorneys for Association of Professional Flight Attendants __/S/ EDWARD J. GILMARTIN__________ Edward J. Gilmartin (DC Bar #388361) General Counsel Association of Flight Attendants-CWA 501 Third Street, N.W. Washington, D.C. 20001 Tel: 202-434-0577 egilmartin@afanet.org Attorney for Association of Flight Attendants-CWA /S/ RICHARD S. EDELMAN _________ Richard S. Edelman (DC Bar # 416348) O’Donnell, Schwartz & Anderson, P.C. 11 Case 1:13-cv-01236-CKK Document 21-1 Filed 08/23/13 Page 13 of 13 1300 L Street, N.W., Suite 1200 Washington, DC 20005 Tel: (202) 898-1707 Facsimile: (202) 682-9276 REdelman@odsalaw.com __/S/ DAVID ROSEN__________ David Rosen (DC Bar # 181768) General Counsel Transport Workers Union of America 501 3rd Street, NW, 9th Floor Washington, DC 20001 Tel: (202) 719-3839 Facsimile: (202) 347-0454 D-Rosen@TWU.org __/S/ JEFFREY BLUMENFELD__________ Sharon L. Levine Jeffrey Blumenfeld (DC Bar # 181768)* Lowenstein Sandler LLP 65 Livingston Avenue Roseland, NJ 07068 Tel: 973.597.2500 jblumenfeld@lowenstein.com slevine@lowenstein.com * admitted only in DC Attorneys for Transport Workers Union of America 12 Case Document 21-2 Filed 08/23/13 Page 1 of 46 EXHIBIT 1 Bg??i?i??t 2 Exhibit 100a: Declaration of Andrew Yearley Pg 1 of 45 APA Exhibit 100a 'Bgii?i?lf??t Z?fiergllells?lf?jfof?gi 3 gilg? Exhibit 100a: Declaration of Andrew Yearley Pg 2 of 45 Filiberto Agusti Joshua R. Taylor (admitted pro hac vice) STEPTOE JOHNSON LLP 1330 Connecticut Avenue, NW Washington, DC 20036 Tel: (202) 429-3000 Facsimile: (202) 429-3902 Edgar N. James (admitted pro hac vice) Kathy L. Krieger (admitted pro hac vice) David P. Dean (admitted pro hac vice) Darin M. Dalmat (admitted pro hac vice) Daniel M. Rosenthal (admitted pro hac vice) JAMES HOFFMAN, RC. 1130 Connecticut Avenue, NW, Suite 950 Washington, DC 20036 Tel: (202) 496-0500 Facsimile: (202) 496-0555 Charles R. Hairston (admitted pro hac vice) Staff Attorney - .. ALLIED PILOTS ASSOCIATION 14600 Trinity Boulevard, Suite 500 Fort Worth, TX 76155?2512 Tel: (817) 302-2178 Facsimile: (817) 302-2187 Counsel for Allied Pilots Association UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK -- In re Chapter 1 AMR CORPORATION, er al. Case Debtors. (Jointly Administered) UPDATED DECLARATION OF ANDREW YEARLEY IN OPPOSITION TO MOTION TO REJECT COLLECTIVE BARGAINING AGREEMENT PURSUANT TO 11 U.S.C. 8 1113(0) ligdgv?9iggf'c?i?d EagereF?l?EquEi/?e?g??iigf 4 $5135? Exhibit 100a: Declaration of Andrew Yearley Pg 3 of 45 Table of Contents I. INTRODUCTION ..1 II. BUSINESS PLAN RESULTS IN THE MOST PROFITABLE AIRLINE IN THE INDUSTRY BY USING LABOR COSTS AS THE TO ACHIEVE UNPRECEDENTED AND UNNECESSARY PROFIT MARGIN ..7 RAPIDLY CHANGING QUANTIFICATION OF ITS LABOR SAVINGS NEED AND ITS ASSERTED VALUATIONS OF COUNTERPROPOSALS ARE NOT CREDIBLE AND NOT CONSISTENT WITH BARGAINING . . 7 IV. THE CREDIT AND LEVERAGE METRICS, FINANCIAL AND FINANCIAL METRICS FOR PREVIOUS AIRLINE BANKRUPTCIES CITED BY MR. RESNICK DO NOT DEMONSTRATE THAT THE RELIEF REQUESTED BY THE MOTION IS ..19 V. AS PROPOSED, 1113 MOTION EFFECTIVELY REQUIRES LABOR TO SUBSIDIZE THE LARGEST AIRCRAFT PURCHASE IN US. AVIATION HISTORY WITHOUT DEMONSTRATING TO STAKEHOLDERS THAT THE SIZE OR TIMING OF THAT PURCHASE IS OR OPTIMAL ..25 VI. THE APA HAS NEGOTIATED A CONSENSUAL LABOR AGREEMENT WITH US AIRWAYS THAT EVIDENCES ITS COMMITMENT TO SUPPORTING MARKET-BASED CONTRACT CONCESSIONS ..32 VII. THE MOTION IS PREMATURE AND AMR HAS SUFFICIENT TIME TO ENSURE IT HAS THE BUSINESS PLAN AND IDENTIFIED THE TRULY LABOR SAVINGS NEED ..33 CONCLUSION ..33 APPENDIX A: Andrew Yearley - Biography ..36 APPENDIX B: History of Lazard Diligence Requests AMR Re-Fleeting and Aircraft Purchases ..38 APPENDIX C: Materials Relied Upon ..41 114546563339: [rigii?il?f??t 5 0/1143 Exhibit 100a: Declaration of Andrew Yearley Pg 4 of 45 Exhibit List 101 Historlcal EBITDAR Slnce 00 .S. etwork arrlers 102 Frequency of EBITDAR Margins (2001-2011) US. Network Carriers 103 2013B and 2017B Projected Comparable Airline EBITDAR and EBITDAR Margin 104 Comparison of AMR Pre- and Post-Labor Savings Operating Cash Flow with Aircraft Financing Costs 2012?2017 (33 in Millions) 105 US. Network Carrier Mainline Fleet Age in Years (2009-2011) ii 6 Exhibit 100a: Declaration of Andrew Yearley Pg 5 of 45 1, Andrew Yearley, under penalty of perjury and in lieu of af?davit as permitted under 28 U.S.C. 1746, declare and state as follows: I. INTRODUCTION 1. I am a Managing Director of Lazard Freres Co. LLC (?Lazard?), which maintains of?ces at 30 Rockefeller Plaza, New York, NY 10020. I also lead the ?rm?s restructuring practice in North America and am a member of the ?rm?s Investment Banking Committee. 2. Lazard is the US operating subsidiary of a preeminent international ?nancial advisory and asset management ?rm. Lazard, together with its predecessors and af?liates, has been advising clients around the world for over 150 years. Lazard has dedicated professionals who provide advisory services to its clients. Lazard has extensive experience working with ?nancially troubled companies in complex ?nancial restructurings out?of?court and in Chapter 11 proceedings. Lazard and its principals have been involved as advisor to companies, as well as creditor, labor and equity constituencies and government agencies in many high-pro?le restructuring engagements. Since 1990, Lazard?s professionals have been involved in over 250 restructurings, representing over $1 trillion in assets. Lazard also has extensive experience in the airline sector, having advised on some of the largest and most complicated strategic transactions in the industry. 3. Since joining Lazard in 1999, I have advised companies, as well as creditor, labor and equity constituencies and government agencies in numerous in-court and out-of?court restructurings, recapitalizations, and reorganizations, as well as capital raises, mergers and acquisitions. Prior to joining Lazard, I was a Vice President in Deutsche Bane Alex Brown?s Restructuring Group and spent ?ve years in the Restructuring and Reorganization Group at Ernst 7 Qi?? Exhibit 100a: Declaration of Andrew Yearley Pg 6 of 45 Young LLP. I began my career in 1989 at Chase Manhattan Bank in the Structured Finance Division, and spent two years in the Leveraged Transactions Group at BZW, at the time the investment banking arm of Barclays PLC. I have a Bachelors of Arts degree (Phi Beta Kappa) from Duke University and a Master of Business Administration degree (with honors) from Columbia University. My quali?cations and experience are more fully summarized in my biography, attached hereto as Appendix A. 4. I have testi?ed at trial, in writing, by deposition or by proffer in a wide range of Chapter 11 cases including Trump Entertainment Resorts, Inc., Wellman Inc., Washington Construction, Stone Webster, Radnor Holdings, Plastech, NorthWestern Corporation, Delphi Corporation, National Steel, Huffy Corporation, Derby Cycle, Conseco and ACT Manufacturing. In addition, I was the designated expert in US. District Court for the Eastern District of Michigan in support of the labor and retiree medical agreement reached between the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (the and Ford Motor Company in 2007. 5. My restructuring experience in the context of labor negotiations, litigations under Section 1113 of the Bankruptcy Code and pension-related matters includes advising the the structuring and negotiation of the VEBA trusts for General Motors Corporation (?General Motors?), Ford and Corporation advising the UAW VEBA trusts in the Chapter 11 bankruptcies of General Motors and advising the UAW in the Section 1113 litigations in the Delphi Corporation bankruptcy and advising National Steel and the Huffy Corporation in the distress termination of their respective quali?ed de?ned bene?t pension plans. I also currently advise the National Association of Letter Carriers in their ongoing collective bargaining and restructuring negotiations with the United States Postal Service. 11t?68V29??3FC?l?d Bg?il?f??t antiwar/21a 8 91ile Exhibit 100a: Declaration of Andrew Yearley Pg 7 of 45 6. The Lazard team under my supervision includes seasoned industry bankers with over 30 years of airline sector banking experience, providing advice with regard to mergers and acquisitions, restructurings and capital raising transactions. Selected major transactions in which our airline industry team has been involved include advising Continental Airlines on its merger with United Airlines in 2010; advising the creditors? committee of Northwest Airlines during its Chapter 11 restructuring; advising the creditors? committee of Continental Airlines during its Chapter 11 restructuring; advising an unsecured creditor during the United Airlines restructuring; advising the Air Transportation and Stabilization Board on its investments in US Airways, ATA and Aloha Airlines and its approval of the US Airways merger with America West; advising American Airlines on its acquisition of advising Northwest Airlines on its proposed entrance to the Wings Alliance; advising United Airlines on the sale of a majority of its equity to .its employees; advising US Airways on a sale of a minority interest to British Airways; advising Boeing on its acquisition of the defense business of Rockwell; Boeing?s acquisition of McDonnell Douglas; the strategic alliance between Continental Airlines and Northwest Airlines; advising Piedmont Airlines on its sale to US Airways; advising Northwest Airlines on its acquisition of Republic Airlines; advising the Government of Australia on the privatization of Australian Airways and the sale of a minority interest of Qantas to British Airways and later its subsequent privatization; advising United Airlines on its recapitalization and special dividend through the sale of Hilton International, Westin Hotels and Hertz; the raising of equity capital by Volotea and Virgin America; Cerberus Capital Management?s strategic investment in Air Canada and the securing of debtor in possession ?nancing for US Airways. Members of Lazard?s airline team have also testi?ed before Congress on various business and ?nancial issues facing the US. airline industry. 9 Qil?? Exhibit 100a: Declaration of Andrew Yearley Pg 8 of 45 7. Lazard serves as ?nancial advisor to the Allied Pilots Association (the Lazard has been working with the APA since November 2011. Lazard was retained by the APA to conduct due diligence of business and operations, to provide advice with respect to restructuring alternatives for the Debtors (collectively, or the ?Company?) and the implications of thoSe alternatives on APA and to evaluate the impact and necessity of any proposals made by AMR to APA seeking labor concessions. Such work, among other things, requires Lazard to review historical and current ?nancial performance and future projections, analyze business plan and supporting ?nancial models and analyses, and assess the necessity of various preposals for labor cost relief. 8. In forming the opinions set forth in this Declaration, I have relied upon and/or considered the following: my experience; (ii) review of business plan, projections, ?nancial statements, reports and other information made available in connection with this Chapter 11 case; meetings and discussions with leadership and Board; (iv) meetings and discussions with certain of management employees and advisors; meetings and discussions with the members and advisors of the AMR Of?cial Unsecured Creditors Committee (the ?Creditors? Committee?); (vi) meetings and discussions with Lazard employees under my supervision; (vii) review of Wall Street research, rating agency reports, and various other third party analysis of the airline industry and AMR in particular; and review of the pleadings ?led in this bankruptcy case. 9. Summarv of Opinions: Based on the scope of work performed to date (as outlined in the preceding paragraph), I believe that the proposed contract modi?cations and the Z?'riel?bed?fiif?lfs??gi lORlD?BExhibit 100a: Declaration of Andrew Yearley Pg 9 of 45 $370 million in average1 annual labor savings sought by the Debtors from the pilots represented by APA, as reflected in the Business Plan2 and the 1113 proposal underlying the Debtors? Motion to Reject Collective Bargaining Agreements Pursuant to 11 U.S.C. ?l 13 (the ?Motion?) are not necessary and the APA has good cause to reject the 1113 proposal. The following is a summary of my reasoning and conclusions, which are detailed further in this Declaration: The Business Plan seeks labor concessions that are neither market-competitive nor necessary for AMR to reorganize and emerge with a healthy and competitive ?nancial pro?le but, rather, are ?backsolved? to make AMR the most pro?table airline in the industry. Simply stated, rather than addressing its competitive and strategic disadvantages as a standalone airline, AMR is seeking to create a new competitive advantage for itself on the backs of labor by demanding new long-term collective bargaining agreements that, in the case of pilots, lock in unnecessarily deep labor concessions, including extensive cutbacks in contractua ?scope? provisions. 1 1113 proposal for the APA is based on a six-year average (2012?2017) savings of $370 million but this number is misleading in two important ways: (1) a large component of the APA concessions relate to productivity gains and work rule changes which AMR projects will be realized over time and, therefore, while the six-year average savings from the APA concessions is targeted at $370 million, AMR projects that concessions are actually worth $470 million by 2017 and (2) APA disputes many of valuation methods and conclusions and believes the alleged six-year savings of $370 million is signi?cantly higher. See APA Exhibit 400a, Declaration of Neil Roghair (?Roghair Decl.?) at 1111 46?53, 56-57, 60, 61, 69, 71, 72, 80; APA Exhibit 200a, Declaration of Allison Clark (?Clark Decl.?) at 1] 4. Zkae??dsgi?i?liezgm 11 RWExhibit 100a: Declaration of Andrew Yearley Pg 10 of 45 As evidence of tactics, just two months after its bankruptcy ?ling, the Company increased its allegedly ?necessary? labor savings by almost 40%, from $800 million to nearly $1.1 billion.3 0 The assertions of ?nancial expert, David L. Resnick of Inc. that labor cost reductions are the ?minimum necessary for a successful reorganization?4 and for AMR to attract capital and have suf?cient liquidity and ?nancial ?exibility are premised on incomplete and ?awed analytics and as a result do not support the labor savings now sought in the Debtors? Motion to Reject Collective Bargaining Agreements Pursuant to 11 U.S.C. ?1113 as it relates to the APA. 1113 proposal is in large part a function of the Company?s plans to purchase over 460 mainline aircraft - the largest aircraft purchase in aviation history on an accelerated timeframe. This re-?eeting plan, which entails the purchase of 35% more aircraft than is contained in the entire mainline ?eet of US Airways, results in a massive and rapid increase in debt obligations. These ?eet?related debt obligations limit free cash ?ow and negatively impact the Company?s ?nancial pro?le. APA and other unions are effectively being asked to subsidize this re-?eeting plan through unnecessarily deep labor concessions? Based on Lazard?s work to date, it appears that experts did not consider alternative approaches to the nature, size or timing of the re-?eeting program. Further, the Company did not provide Lazard or APA with the relevant information needed to evaluate this major component of the Business Plan that purportedly requires the labor concessions demanded in the 1113 proposal. Despite repeated requests, and despite testimony suggesting that management prepared a detailed ?business case? for the re-?eeting plan,5 AMR and its experts have not provided Lazard with such documentation or any other supporting analysis of 3 The Business Plan targets $1.5 billion of labor costs savings by 2017, of which an estimated $1.1 billion relates to concessions demanded of the APA, APFA and TWU. See AA Exs. 914 and 919 (APA), 1004 (APFA), 1140-1143 (TWU). 4 Updated Declaration of David L. Resnick in Support of Debtors? Motion to Reject Collective Bargaining Agreements Pursuant to 11 U.S.C. 1113 (the ?Resnick Declaration?) at 11 12. 5 See 1113 Transcript (276:9 27623) (Apr. 25, 2012) (Mr. Vahidi testifying ?When we make a signi?cant purchase and we have to go to our boards of directors to request authority to spend money for the purchase or to sign an agreement even though in this speci?c case the deal was pre-?nanced by the manufacturer we build What I would refer to as a ?business case? for whether that project made sense, either based on the return on investment or return on the capital invested in the project. So, there was a business case developed and built as to why that those aircraft agreements that were signed made economic sense?). No such ?business case? has been shared with Lazard despite numerous requests, as is further discussed in paragraph 35 below. 6 12?E>A65xhibit 100a: Declaration of Andrew Yearley Pg 11 of 45 the ?nancial returns associated with the re-?eeting plan. - willingness to agree to meaningful and competitive labor and scope concessions that will facilitate a realistic, successful restructuring is demonstrated by the fact that APA negotiated and concluded an agreement 0n the terms of a new labor pact with US Airways, based on serious evaluation of the pros and cons of potential consolidation as a means of exiting Chapter 11. Importantly, the APA agreement with US Airways includes a mechanism whereby future pilot compensation, bene?ts and productivity will be indexed to closest competitors, Delta and United. 0 The Motion is premature. rush to seek rejection of its labor agreements under Section 1113 and its refusal to consider alternatives potential merger proposals) prior to such rejection belies its current ?nancial picture. AMR is not in crisis. It has nearly $5 billion of cash, no DIP ?nancing agreements that subject AMR to covenant or liquidity tests, and, according to its own expert, Mr. Resnick, will apparently not need exit ?nancing or seek a revolving credit facility upon emergence from bankruptcy.6 Further, Mr. Resnick is not taking a position at this time as to Whether raising? is even required for AMR to exit bankruptcy.7 Indeed, according to most recent ?nancial update presentation to the Creditors? Committee, American is performing better than it has in recent history. With union leadership representing over 50,000 American Airlines employees having made a demonstrated commitment to competitive labor concessions (notwithstanding the lack of any near?terrn crisis), the Company cannot establish at this time that its own ?standalone? 1113 proposal, which refuses to consider strategic alternatives and is premised on a top?down and unduly aggressive pro?t target, is either necessary or based on the most complete and reliable information available. 11. BUSINESS PLAN RESULTS IN THE MOST PROFITABLE AIRLINE IN THE INDUSTRY BY USING LABOR COSTS AS THE TO ACHIEVE UNPRECEDENTED AND UNNECESSARY PROFIT MARGINS 10. court pleadings and Business Plan materials acknowledge its strategic challenges including a network whose size and reach put it at a competitive disadvantage relative See 11 13 Transcript (1 19:2 119:7) (Apr. 25, 2012); Resnick Declaration 23. mismanageth 13 AW Exhibit 100a: Declaration of Andrew Yearley Pg 12 of 45 to its largest major network carrier competitors - United and Delta.8 As a result, share in most regions of the US. market, including its so?called ?cornerstone? cities, has signi?cantly eroded over the last decade as its key network carrier competitors have consolidated and extended their network and scale advantages. Equally troubling has been the steady defection of share of high?yield corporate customers and elite travelers to the superior networks of United and Delta a development that has caused AMR, which once enjoyed a ?premium? in relative RASM9 to the rest of the industry, to now suffer from a RASM ?discount.? most recent Strategy to arrest this decline the so-called ?Cornerstone Strategy? has not, to date, shown obvious signs of success.10 11. Business Plan largely re?ects the same (generally speaking, unsuccessful) ?Cornerstone Strategy,? paired with a historically unprecedented and costly aircraft purchase whose size and timing (as discussed below) has not been justi?ed by any disclosed business case or other supporting ?nancial analysis. AMR also proposes a package of take?it?or-leave-it labor concessions designed to ?patch? lagging network using a mix of upgauged regional jets and hypothetical ?iture domestic codeshare agreements and to impose unnecessarily extensive 8 The Memorandum in Support of the Debtors? Motion to Reject the Collective Bargaining Agreements Pursuant to 11 U.S.C. 1113 acknowledges scale and network problem. For example, it acknowledges inability to ?grow the airline to be competitive? (Memorandum at 26) has been a crucial driver of its strategic problems and concedes that its network carrier competitors have ?been able to use the increased network scale created by their mergers to maintain a healthy premium over fares charged by lower cost carriers [while] American?s revenue premium . . . has shrunk dramatically? (Memorandum at 30). 9 Revenue per available seat mile represents the revenue generated per fundamental ?unit? of production (seat miles equals the number of seats available multiplied by the number of miles) for a passenger?carrying airline. 10 The ?Cornerstone Strategy,? which was ?rst unveiled by AMR three years ago, emphasizes a revenue turnaround through the maximization of market share among high-value corporate customers in ?ve major markets Chicago, Dallas, Los Angeles, Miami and New York. 14A?M65xhibit 100a: Declaration of Andrew Yearley Pg 13 of 45 modi?cations to the pilot contract modi?cations that were determined on a ?top down? basis with no relation to the market. To better understand this last point, it is useful to review my understanding of how the Business Plan was developed. In summary, the Business Plan was constructed as follows: Step 1: Assume $1.0 Billion of Revenue Improvements by 201711 Begin with the Cornerstone Strategy, largely unchanged: The Business Plan relies on the Cornerstone Strategy, unmodi?ed except for three network?related modifications: (1) expanded use of domestic codesharing with hypothetical future partners, (2) expanded use of joint business agreements with competitors and (3) re-gauging of ?eet in order .to better match capacity with demand. See Plan for Success at 27- 38. Assume the terms, size and timing of the July 2011 aircraft purchase are unaltered and the re-?eeting proceeds as planned: In July 2011, AMR agreed to the largest aircraft purchase in aviation history, purchasing over 460 aircraft from both Boeing and Airbus at a total cost of over over the next six years. Additionally, AMR plans to re??eet its regional aircraft ?eet at a cost of more than over the same time period. Although I discuss in greater detail below the lack of business analysis or support that has been provided to explain the size and timing of this purchase, for now it is suf?cient to note that the Business Plan assumes that the re??eeting will result in both revenue and cost improvements for AMR. See Plan for Success at 37, 50. Add modest improvement in services: The Business Plan assumes AMR will make a number of improvements to its service offerings in order to make them market?competitive. These changes include installation of in? ?ight WiFi, entertainment-on?demand, mobile boarding passes and a variety of other improvements. See id. at 39. 11 Plan for Success by Beverly Goulet (February 1, 2012) (AA Ex. 1505) (the ?Plan for Success?) at 40. 12 9 ZE?eI??t?dal?ia??l?s?aaq 15 AMGExhibit 100a: Declaration of Andrew Yearley Pg 14 of 45 Step 2: Assume $625 Million of Non-Labor In-Court Savings by 2017 0 Use Chapter 11 to reduce non-labor costs: The Business Plan assumes that, during the pendency of the bankruptcy, AMR will use the tools of Chapter 11 to realize savings from (1) rejecting aircraft leases and/or restructuring aircraft ?nance debt, (2) renegotiating executory contracts with vendors and (3) rejecting and/or renegotiating leases at airports and elsewherethe Plan for Success, AMR states summarily that generate competitive earnings, and otherwise execute our Business Plan, we need $3.1 billion in annual improvements by 2017.? Id. at 52. Although the Plan for Success document does not explicitly explain the derivation of the $3.1 billion of ?needed? annual improvements (and therefore does not explicitly explain the $1.1 billion of allegedly ?necessary? savings from unionized labor), it was generally represented to our team by AMR management (both at the February 3 unveiling of the Business Plan in Fort Worth and at subsequent meetings between Lazard and AMR management) that this 10 16A?M%xhibit 100a: Declaration of Andrew Yearley Pg 15 of 45 annual improvement target was generally sized using a target EBITDAR Margin13 of- by 2017.14 U.) 14. Mr. Resnick?s conclusion that projected EBITDAR Margins under its Business Plan are reasonable relative to comparable airlines is based on ?awed analyses and is not supportable. On its face, the Resnick Declaration simply presumes the 1113 proposal will be imposed by the Court and shows that the resultant pro?tability is better than the status quo. Indeed, as he candidly conceded in his live testimony, he did not attempt to test Whether a more 13 Margin? is a ?nancial metric that consists of the ratio of (Earnings Before Interest, Taxes, Depreciation, Amortization and Rent) to total revenue. EBITDAR is a common metric for measuring operating pro?tability in the airline industry. 14 See 1113 Transcript (114:2?116z9) (Apr. 24, 2012) (Beverly Goulet describing the process by which the ?top down? labor savings ?need? was derived based on a pro?tability target). 15 Resnick Decl. at EX. 306A. 11 11-1540?1?119wm?C1??emqmat ZE?te?lrin/iai?liezeam 17 AWExhibit 100a: Declaration of Andrew Yearley Pg 16 of 45 moderate savings number would be suf?cient to return AMR to ?nancial health.16 Therefore, it is unclear how Mr. Resnick has any basis for describing the 1113 proposal as ?necessary.? 15. In my opinion, to support an asserted labor savings need that is truly ?necessary,? AMR must be targeting a pro?tability level that, among other things, is consistent with the norms of the US. airline industry. In this case, AMR has targeted an EBITDAR Margin of- by 2017. As APA Exhibit 101 illustrates, in the post-9/11 environment, that level of pro?tability has male; been achieved by a US. network carrier. Indeed, in only fo_ur distinct instances since 2001 has any major network carrier achieved EBITDAR Margins of-or higher. The average EBITDAR Margin for closest competitors Delta, United and US Airways over the last two years has been approximately 13%. 16. To provide a better sense for the EBITDAR Margin that better approximates ?normalcy,? Lazard has prepared APA Exhibit 102, a frequency histogram that shows various EBITDAR Margin ranges and the frequency that those ranges have been achieved by network carriers in the US. airline industry since 2001. 16 See 1113 Transcript (68:4 68:15) (Apr. 25, 2012) (Mr. Resnick conceding that he did not ?select? or ?recommend? labor savings target, nor did he ?independently cost out what [other] labor cost reductions were available?). l2 18/9M65xhibit 100a: Declaration of Andrew Yearley Pg 17 of 45 APA Exhibit 102: Frequency of EBITDAR Margins (2001-2011) U.S. Network Carriers* 1 - r. . . Source: Public ?lings. Excludes one-time special items. network carriers include AMR, Delta, Northwest, United, Continental and US Airways. 17. In order for Mr. Resnick to assert that the EBITDAR Margins targeted by the Business Plan are ?in-line with, or exceeded? by comparable airlines, Resnick Dccl. at 1] 27, Mr. Resnick chooses a ?comparable? airline group that is, at best, misleading. To ?nd airlines with projected 2013 EBITDAR Margins that ?exceeded? projected 2013 EBITDAR Margin 11~154?s?hil1 lend/29712223613 Zt?tel??il?d?liiai?lie?rm 19 RWExhibit 100a: Declaration of Andrew Yearley Pg 18 of 45 under the 1113 proposal, Mr. Resnick stretches the universe of ?comparables? to include the following companies: Alaska Airlines Alaska operates in a niche regional market within the US. airline industry, with a small network largely focused on the Paci?c Northwest and West Coast. This limited market is served from hubs in Seattle, Portland, Los Angeles and Anchorage. While Alaska offers ?mainline? service (Boeing 7373, dual first/economy classes), it is a regional carrier in terms of its footprint. As such, it is not comparable to AMR, which is much larger and operates a nationwide network across the US. and internationally. Allegiant Airlines Allegiant Air is a low-cost point-to-point carrier that offers scheduled and chartered air service. Its ?eet consists entirely of older aircraft and 757-2003), purchased at lower cost than newer narrowbody aircraft. Allegiant focuses exclusively on leisure travelers, providing low frequency service from small cities with no connections or codeshares. Allegiant is Wholly owned by Allegiant Travel Company, a leisure travel company. Its business model (low-cost scheduled and charter ?ights to leisure travelers) differs substantially from AMR, which serves large cities in a comprehensive network across the US. and internationally using a hub-and?spoke model, targeting high-value business customers a very different market segment than Allegiant?s. etBlue Airlines JetBlue is a low-cost carrier that primarily offers point-to?point service. Its aircraft ?eet (consisting of Airbus A3205 and Embraer 1905) offers a single service class, with leather seats and free in?ight entertainment systems targeted at the leisure passenger. etBlue?s product and service offering (new planes, single cabin with high quality products and services), network (primarily and business model (limited ?eet types, low-cost) are entirely different from traditional network carrier model. Spirit Airlines Spirit Airlines is an ultra low-cost carrier that targets non-corporate customers and unbundles components of air travel using a la carte pricing. Describing itself as a ?frills for a fee? airline, Spirit charges passengers a fee for all services including baggage handling, telephone booking, premium seat or advance seat selection, food and beverages and other onboard items. In 2011, Spirit?s average base fare was approximately $81.19 Spirit?s business model (single aircraft type, a la carte pricing, ultra-low base fares, primarily point-to-point, no alliances) is not simply different from it is entirely different from any other major US. airline in operation today. 19 Spirit Airlines, Annual Report (Form 10-K), at 4 (Feb. 22, 2012). 14 100a: Declaration of Andrew Yearley Pg 19 of 45 For the reasons stated above, I believe that Alaska, Allegiant, etBlue and Spirit which tpgetl? have total 2011 revenues that are less than half of 2011 revenues20 are not comparable airlines to AMR. Furthermore, it is important to note that until the ?ling of this Motion, there were generally only thri airlines cited by AMR management as ?comparable? airlines in the many presentations it regularly provided to Wall Street pre-petition: Delta, United and US Airways.21 9? 20 2011 revenues of Alaska billion), Allegiant ($779 million), JetBlue billion) and Spirit billion) total to $10.7 billion, which is 44.5% of 2011 revenues ($24.0 billion). 21 See, e. g, AMR Corp, Corporation Transformational Agreements Presentation? at 8 (Jul. 20, 2011) (comparing AMR ?eet age to Delta, United and US Airways), AMR Corp., ?Presentation to PMorgan Aviation, Transportation Defense Conference? at 13 (Mar. 22, 2011) (comparing AMR liquidity to Delta, United and US Airways), AMR Corp., ?High Yield Leveraged Finance Conference? at 13 (Mar. 1, 2011) (same), AMR Corp, ?Bank of America Merrill Global Transportation Conference Presentation? at 36 (AMR CEO benchmarking unit costs to Continental (now United), Delta, Northwest (now Delta), United and US Airways) (Jun. 15, 2010), AMR Corp, PMorgan Aviation, Transportation Defense Conference Presentation? at 35, 42 (then EVP Finance Flaming and CFO Tom Horton comparing AMR capacity and revenue to Continental (now United), Delta, Northwest (now Delta), United and US Airways) (Mar. 9, 2010), AMR Corp., ?Next Generation Equity Research Airlines Conference Presentation? at 5 (Dec. 9, 2009). 15 Zk?te?bewwi?l?e?mq 21 RWExhibit 100a: Declaration of Andrew Yearley Pg 20 of 45 22 AMR has not been consistent in its public statements and pleadings as to whether it considers Southwest Airlines a ?comparable? airline. Historically, public investor presentations have not included Southwest as a comparable. Ms. Goulet and Mr. Kasper, in their Declarations, describe Southwest as a ?low cost carrier? (apparently non?comparable) that has transformed the modern U.S. airline industry at the expense of large network carriers such as AMR. See Declaration of Beverly K. Goulet in Support of Debtors? Motion to Reject Collective Bargaining Agreements Pursuant to 11 U.S.C. 1113 at 1i 13; Declaration of Daniel M. Kasper in Support of Debtors? Motion to Reject Collective Bargaining Agreements Pursuant to 11 U.S.C. 1113 (the ?Kasper Declaration?) at 11 15. In his own Declaration, Mr. Resnick appears to consider Southwest a ?comparable? airline to AMR, although in his in?court testimony, he described them as a ?straddler? airline. See 1113 Transcript (178:4; 178:16) (Apr. 25, 2012). 16 11-154sdsn?t 1666? 2E3tefelfd??ii??lfag?gi 100a: Declaration of Andrew Yearley Pg 21 of 45 RAPIDLY CHANGING QUANTIFICATION OF ITS LABOR SAVINGS NEED AND ITS ASSERTED VALUATIONS OF COUNTERPROPOSALS ARE NOT CREDIBLE AND NOT CONSISTENT WITH BARGAINING 19. By way of background, since Lazard?s retention by APA in November 2011, I have, with the help of my team, conducted due diligence on the history of negotiations between AMR and APA in the period leading up to Chapter 11 petition. After the 1113 proposal to APA was unveiled in early February, my team received regular updates from Negotiating Team onthe status of negotiations, including counterproposals and the valuation that each side?s contract assigned to the various items. I was also present at, and participated in, the negotiations between APA and US Airways that ultimately culminated in the agreement announced on April 20, 2012. 20. In my opinion, as an experienced restructuring banker who has advised unions in negotiations both inside and outside of Chapter 11, the ?uctuating labor savings target that AMR has publicly asserted is ?necessary? to return itself to competitiveness calls into question the veracity of the alleged ?need? and creates a challenging negotiating dynamic, given ?moving goal posts.? For instance, in February 2011, in its 2010 10K ?ling, AMR stated that it ?estimates that American?s labor cost disadvantage (the amount by which its labor costs exceed What such costs would be if they were determined based on the average of other network carrier ?23 A mere seven months later, on labor contracts) is approximately $600 million per year. November 29, 2011 (the very day of the Chapter 11 petition) CEO Tom Horton stated to the press that ?If you look at our labor costs and compare it roughly to the average of the other big legacy carriers, the difference between our contracts and theirs is about $800 million a 23 AMR Corp., Annual Report (Form 1049, at 29 (Feb. 16, 2011) (emphasis added). 17 ??ft?'cb?emm?t RWExhibit 100a: Declaration of Andrew Yearley Pg 22 of 45 year.?24 Two months after this statement, alleged savings ?need? from its unions, as described in its 1113 proposal, had increased to $1.1 billion a year by 2017. 21. Not surprisingly, the APA Negotiating Committee has made minimal progress with AMR in the post-petition period as the Company?s stated labor savings ?need? has increased by nearly 40% (despite other cost?saving opportunities offered by Chapter 11) and the rationale for the change in demands is now tied to a management?derived pro?tability target. It is my understanding that post-petition labor negotiations have been further hampered by changing valuations of the parties? proposals. See Roghair Decl., 111] 41-50. As one example, I have been informed by APA that, during its recent negotiations with AMR on the value of certain proposals, negotiating team has insisted on valuing certain contract modi?cations using a ?weighted average cost of capital?25 of 13.79%. See Clark Decl., 1] 48. use of such a high WACC had the practical effect of attaching a much lower total value to concessions offered by APA, thereby creating an arti?cial justi?cation for additional concessions in order to reach the $370 million ?savings target? that AMR has set for APA. As the ?nancial adviser to APA, I would ?rst observe that such a high discount rate is not supportable.26 In my team?s own internal analyses, we have generally used a weighted average cost of capital for AMR, depending on the particular facts and market conditions at the time, of 24 PBS Newshour, segment by Judy Woodmff (PBS television broadcast, November 29, 2011) (emphasis added). 25 The ?weighted average cost of capita (or is a calculation of a ?rm?s cost of capital in which the costs of debt and equity are proportionately weighted to determine a blended required rate of return to use in order to discount cash ?ows. 26 Among the many incorrect assumptions embedded in this alleged discount rate are (1) a risk-free rate of based on an ?average? 10?year historical ?gure (this is over twice the current 10-Year Treasury Rate of 1.92%) and (2) an assumed cost of debt of 13.5% (this is also far too high as discussed in Section IV, most airlines issue secured debt which would generally imply a cost of debt for AMR of between 4% and 18 2%?en??lleds9?lif?lfe??gi 100a: Declaration of Andrew Yearley Pg 23 of 45 between 8% and 10%.277 own witness testifying in support of the Motion uses a weighted average cost of capital of 10.6% for valuation of AMR cash ?ows.28 In my Opinion, the fact that labor relations team has wasted negotiating capital on positions directly contradicted by own testifying economist in the Section 1113 litigation sheds light on why APA has so far been unable to reach consensual agreement with AMR management. IV. THE CREDIT AND LEVERAGE METRICS, FINANCIAL AND FINANCIAL METRICS FOR PREVIOUS AIRLINE BANKRUPTCIES CITED BY MR. RESNICK DO NOT DEMONSTRATE THAT THE RELIEF REQUESTED BY THE MOTION IS 22. In addition to the estimated $1.1 billion of annual unionized labor savings that AMR claims to need by 2017 in order to meet target EBITDAR Margins, AMR also argues that it needs these labor concessions in order to attract capital and have suf?cient liquidity and ?nancial ?exibility to operate after emergence. In the Resnick Declaration, Mr. Resnick introduces a number of ?nancial metrics all of which include the same non-comparable airlines used to skew Mr. Resnick?s EBITDAR Margin analysis to attempt to justify alleged labor savings need. Mr. Resnick only mentioned one of these metrics liquidity29 in his in- court testimony. In my opinion, none of these ?nancial metrics clearly demonstrates the supposed ?necessity? of current 1113 proposal to the APA as further detailed below. 27 Based on standard methodology for calculating WACC utilizing current lO-year Treasury yield of 1.92% and cost of debt of which represents the likely range which American can raise secured ?nancing. For comparison, in March 2012, United completed a ?nancing secured by newer generation 73 73 (similar to the AMR aircraft on current order) and to -be? delivered 7875 at a blended rate of Business Plan itself assumes an 8% cost of secured debt for the ?nancing of its widebody aircraft and the Company has no plans for unsecured debt ?nancing. 28 See Kasper Declaration at 1] 34. 29 See 1113 Transcript (31 221?372) (Apr. 25, 2012). 19 15196! was-Crawling RWExhibit 100a: Declaration of Andrew Yearley Pg 24 of 45 23. Credit Metrics and Leverage: Mr. Resnick states that ?credit ratings are a key indicator used by the capital markets in assessing a company?s overall ?nancial and operating situation and to satisfy its future ?nancial obligations.? Resnick Decl. at 11 28. While this is certainly true as a general matter, this statement is misleading as applied to an airline. The reason for this is because, as Mr. Resnick himself acknowledges is true for AMR, most of the debt issued by major network carriers (and all of the debt AMR apparently plans to issue in the future30) is debt, backed by speci?c collateral (most commonly aircraft) with the credit quality of the debt tied far more to the quality and condition of the equipment than to a speci?c airline?s ?nancial condition. Indeed, Moody?s Investor Service (?Moody?s?) own introduction to its airline rating methodology explicitly states that, in determining credit ratings, its focus is on unsecured debt: ?Our objective is for users to be able to estimate the likely credit rating (senior unsecured rating for investment-grade issuers [and] Corporate Family rating for speculative-grade issuers . . .) for a passenger airline within two alpha- numeric rating notches?.31 Since AMR has not issued straight unsecured bond debt in years,32 and according to AMR and Mr. Resnick himself, see Resnick Declintention to issue anything other than secured aircraft debt in the near future, it is not obvious, nor is it explained by Mr. Resnick, why the hypothetical ratings of Moody?s or Standard Poor?s for unsecured AMR bond debt (or the criteria for determining them) is directly relevant to whether 1113 proposal is ?necessary,? Whether considered alone or in comparison with potential alternatives. 30 See Resnick Decl. at 1] 14. 31 Moody?s Global Corporate Finance Global Passenger Airlines Rating Methodology at 1 (Mar. 2009) (?Moody?s Airline Methodology?). 32 The 9.00% Senior Notes due 2012 were issued on July 29, 1992. This was last issuance of nonconvertible senior unsecured bond debt. 20 26)Ri??i?SExhibit 100a: Declaration of Andrew Yearley Pg 25 of 45 24. However, even assuming that rating agency criteria are directly relevant to whether 1113 proposal is ?necessary?, the Resnick Declaration does not apply them consistently or comprehensively. Moody?s, for instance, lists eleven ratings criteria each with a pre-deterrnined weighting totaling to 100% that it considers in determining the credit rating it would apply to a senior unsecured debt issuance by a passenger airline.33 The substance of the metrics in the Resnick Declaration only re?ects Eur of those eleven Moody?s criteria EBITDA Margin, Cash Liquidity, EBIT/Interest, Net which collectively represent only of the analytical weighting in Moody?s methodology. Id. Moreover, the Resnick Declaration makes no attempt to tie pro forma performance under these four metrics to any hypothetical credit rating at all. Thus, it is unclear how Mr. Resnick?s truncated analysis is relevant even to future credit rating; much less whether 1113 proposal is I ?necessary.?34 25. Liquidity: The Resnick Declaration also contains an analysis that attempts to quantify projected liquidity (cash balance and projected revolver availability) as a percentage of revenues in 2013 and compares that ratio to the projected liquidity (as estimated by Wall Street of other asserted airline ?cornparables.?35 As before, this analysis includes 33 Moody?s Airline Methodology at 3. 34 With respect to the relevance of Mr. Resnick?s ?credit rating metric? analysis to whether the 1113 proposal is ?necessary? is even less clear. rating methodologies, as revised in recent years, are considerably broader and more holistic than Moody?s and, although they do encompass ?nancial metrics such as they decline to assign a weight to this or any other metric, in favor of a comprehensive approach that emphasizes a Wide range of qualitative and quantitative considerations. See Standard Poor?s Key Credit Factors: Criteria For Rating The Airline Industry (Oct. 22, 2010). 35 It is worth noting that this approach to measuring ?liquidity? deviates signi?cantly from the approach used by Moody?s, which instead measures liquidity as ?cash and cash equivalents divided by gross unadiusted debt.? Moody?s Methodology at 10. Mr. Resnick does not explain 21 Zt?tel?itrd?liiai?lisgmq? RWExhibit 100a: Declaration of Andrew Yearley Pg 26 of 45 the same non-comparable airlines used by in its other exhibits. This approach is curious since only 13 months ago current AMR CRO, Beverly Goulet, in a public presentation to Wall Street on the very topic of ?liquidity? in the airline industry described comparable companies as being Delta, United and US Airways.36 Review of Investor Relations site reveals several other instances of Ms. Goulet describing Delta,? United and US Airways as liquidity comparators.? Using this proper comparable company set shows that liquidity, as measured by Mr. Resnick pro forma for the 1113 proposal, is expected to be greater than all but one of these three competitors, see Resnick Decl. at Ex. 310A, and Mr. Resnick?s analysis presumed that AMR does not raise a new revolving credit facility, which would further improve its liquidity. I 26. In addition, in arriving at the conclusion that labor concessions are the minimum required to attain requisite levels of liquidity at exit, Mr. Resnick leaves open the question of the size of, or even the need for, a hypothetical? that could materially impact the amount of liquidity available to AMR.38 Further, as noted earlier, Mr. Resnick, without explanation, assumes that AMR will not have access to a revolving credit why the Moody?s methodology that he appears to cite favorably in paragraphs 28 and 29 of his Declaration was disregarded altogether in paragraph 35 of his Declaration. 36 ?Presentation to PMorgan Aviation, Transportation Defense Conference? at 13 (March 22, 2011). - 37 See, 8. AMR Corp, ?Presentation to JPMorgan Aviation, Transportation Defense Conference? at 13 (Mar. 22, 2011) (Ms. Goulet comparing AMR liquidity to Delta, United and US Airways), AMR Corp, ?High Yield Leveraged Finance Conference? at 13 (Mar. 1, 2011) (same), AMR Corp., ?Next Generation Equity Research Airlines Conference Presentation? at 5 (Dec. 9, 2009) (same). 38 Mr. Resnick states that he is ?presently not taking a position as to whether or not the billion rights offering described in the current Business Plan] is either required or suf?cient for emergence.? Resnick Decl. at ?11 23. 22 11-154??-?s9ni11 16198 28RE?6Exhibit 100a: Declaration of Andrew Yearley Pg 27 of 45 facility upon emergence from bankruptcy which could be a material additional source of liquidity to AMR. See Resnick Decl. at 1] 35. Finally, the analysis in the Resnick Declaration makes no effort to compare alternatives or show pro forma 2013 liquidity for any labor savings scenarios other than own 1113 proposal including, for example, the agreed US Airways terms. For all of these reasons, the projected liquidity analysis is insuf?cient evidence of the supposed ?necessity? of 1113 proposal. 27. Other ?Additional Financial Metrics?: The Resnick Declaration also includes discussion of three additional ?nancial metrics none of which is commonly used as a comparative measure by research Moody?s or As such, I will not focus on these metrics other than to make a few brief comments as to why it is unreasonable for Mr. Resnick to use them to justify the 1113 proposal: 0 ?Pre-Tax Income Margin?: This metric is speculative at best at this stage in the Chapter 11 process. Among other things, this metric is measured after Depreciation Amortization a line item that cannot be quanti?ed until closer to emergence after adjustments for, among other things, ?fresh start? accounting under GAAP and a variety of restructuring decisions that AMR concedes have not yet been made, including decisions to reject or assume pre-petition aircraft ?nancings as well as the interest costs associated with any new ?nancings or leases. 39 23 Zg?lBAGExhibit 100a: Declaration of Andrew Yearley Pg 28 of 45 28. Other Airline Bankruptcies: Finally, the Resnick Declaration also attempts to justify the ?necessity? of 1113 proposal by pointing the Court to the various ?nancial metrics and ratios that were targeted by other US. network carriers in earlier Chapter 11 proceedings and noting that those targeted ?nancial metrics were ?generally consistent with those of Business Plan.? Resnick Decl. at 1] 41. I ?nd this assertion unpersuasive. In the ?rst place, it is important to remember the historical context of many of the airline bankruptcies that are cited by Mr. Resnick as ?precedents? most of them occurred post?9/1 1, an event that transformed the modern U.S. airline industry. At the time of those bankruptcies, it was not clear to most industry experts or ?nancial advisors What pro?t targets were appropriate for major network carriers and airlines therefore often targeted historical margins from the 19908 margins that have subsequently proven unachievable in the post-9/11 environment. Put simply, these so-called ?precedents? are not truly precedents. In the second place, as I stated above and as own pleadings explicitly acknowledge, the US. airline industry has changed tremendously over the last decade as a result of, among other things, unprecedented consolidation. Since the dates that each of the plans of reorganization cited in the Resnick Declaration US Airways I, UAL, Delta Air Lines, and Northwest Airlines were con?rmed, the industry has experienced no fewer than transformative merger transactions America West/US Airways, Delta/Northwest, United/Continental and Southwest/AirTran. For both of 24 Z?riierEEeGBQ?if??lfas??gt 100a: Declaration of Andrew Yearley Pg 29 of 45 these reasons, I believe it is much more accurate and analytically sound to judge whether a proposal under Section 1113 is ?necessary? based on market conditions and on the ?nancial performance of comparable companies as they exist my. V. AS PROPOSED, 1113 MOTION EFFECTIVELY REQUIRES LABOR TO SUBSIDIZE THE LARGEST AIRCRAFT PURCHASE IN U.S. AVIATION HISTORY WITHOUT DEMONSTRATING TO STAKEHOLDERS THAT THE SIZE OR TIMING OF THAT PURCHASE IS OR OPTIMAL 29. In July 2011, just four months before its Chapter 11 ?ling, AMR announced the largest aircraft purchase in aviation history, including over 460 mainline aircraft from Boeing and Airbus at a cost of more than? in the next six years (and more thereafter). To put the size of this order in context, the total number of aircraft purchased would be- larger than the entire mainline ?eet of US Airways, the next largest network carrier in the U.S. At the time of the announ?ement, AMR described the purchase to investors as game?changing and one that would ?transform American?s narrowbody ?eet over ?ve years.?40 Additionally, AMR plans to re-?eet its regional aircraft ?eet at a cost of more than_.41 Post?petition, AMR management continues to describe this unprecedentedly large and rapid aircraft purchase to stakeholders (with minimal analytical support), as transformative and essential to the Business Plan. For instance, in the Plan for Success, the re-?eeting is depicted, rather summarily, by AMR as essential to its efforts to ?Win the High Value Customer? and ?Achieve Competitive Costs? through reduced fuel and maintenance costs. Id. at 37-3 8, 50. 40 Press Release, AMR Corporation Announces Largest Aircraft Order in History with Boeing and Airbus (July 20, 2011) at Archives/ edgar/data/ 6201 /000 1 1931251 1191877/dex992.htm 41' 25 ZE?elal?d??i??lisBamBl AWExhibit 100a: Declaration of Andrew Yearley Pg 30 of 45 30. The rapid (and so far unexplained) timeline for re??eeting plan is a key driver of current 1113 proposal. Put simply, unions are being asked to help fund large and rapid re-?eeting plan through their labor concessions. ?So framed, it should hardly be surprising that the APA and Lazard are focused on understanding whether the Boeing/Airbus purchase (and, equally importantly, the highly aggressive timing of the proposed deliveries) are well-considered they are, in a sense, direct drivers of 1113 proposal. 42 ?Fleet?related costs? de?ned as mainline and regional aircraft and aircraft?related rent, capital expenditure and interest expense. 26 Z??e?eds?i?i??l?s??gi 32/Wx6Exhibit 100a: Declaration of Andrew Yearley Pg 31 of 45 31. While I do not dispute that the introduction of new aircraft should generally result in reduced maintenance costs and improved fuel ef?ciency, the size, timing, and resultant ?nancial impact of this massive and rapidly delivered aircraft order on liquidity, cash ?ow and ?nancial metrics demands careful study and, at a minimum, an evaluation of potential alternatives. For instance, do high-value airline passengers care more about the age of a plane or in the age and condition of the interior and the breadth and quality of the amenities of that plane? Does it make sense for AMR to order current generation aircraft only to upgrade to ?next generation? aircraft only a few years later? Would it make better sense to retro?t certain older planes in its ?eet as an interim step to taking delivery of ?next generation? aircraft? What would be the overall ?nancial impact of a more gradual introduction of new ?eet? Does the ?eet order?s projected return on investment exceed cost of capital and thus represent a positive net present value? None of these questions have been answered by AMR or its advisors despite repeated attempts to better understand the rationale for the order and the associated massive increase in aircraft debt. 32. Moreover, while it be true that the accelerated purchase of new mainline aircraft will help AMR ?win the high value customer,? comparison with other US. network carriers suggests that the evidence for this View is mixed. For instance, as APA Exhibit 105 illustrates, Delta Air Lines, which has been gaining market share from AMR for years especially among ?high value customers? and has a higher RASM than AMR has a mainline ?eet that is actually than mainline ?eet. Delta also recently announced the purchase and interior renovation of additional used MD-9OS a fact that begs the question of 27 33 RWExhibit 100a: Declaration of Andrew Yearley Pg 32 of 45 whether airline customers really care about the age of a particular aircraft.? Moreover, as was demonstrated in the previous analysis of comparator EBITDAR Margins, even with this older ?eet (and any fuel and maintenance inef?ciencies that stem from them), Delta?s pro?tability, without such a correspondingly large or accelerated aircraft order, is quite comparable to the projected pro?tability of AMR with its new aircraft. APA Exhibit 105: U.S. Network Carrier Mainline Fleet Age in Years (2009-2011) 2009A 2010A 2011A AMR 15.0 15.0 15.0 Delta 15.6 15.7 16.1 United 11.1 12.0 12.4 US Airways 11.6 12.3 12.4 Source: Public ?lings. 33. On many occasions since the Chapter 11 petition, Lazard has requested analytics from AMR management that justify the re-?eeting plan. To date, Lazard has received minimal data and support. In addition, and its advisors? testimony on the subject of the re-?eeting plan has been high?level and summary. For instance, in his. deposition, Mr. Resnick disclaimed any knowledge or independent review of this fundamental component of the Business Plan: Q: [D]id you ever see any kind of a business analysis that underlay or justi?ed the proposed capital expenditures for re-?eeting? A: I can recall some presentations talking about the re-?eeting plan, but I can?t personally recall something -- a presentation that looked at alternatives to What the company had agreed, although my team might have reviewed it as part of their diligence on the business plan. But you have not been informed that that happened? I don't know. 4: [D]o you have any understanding of Whether the return on investment exceeds cost of capital? I believe the company has analyzed that for its ?eet plan, but I ?cannot recall that analysis. 43 Andrew Compart, ?Delta Acquires Seven More MD-90s for Fleet Replacement Strategy,? Aviation Week (Apr. 18, 2012). 28 Z??er?li??is?i?i??lfezs??gi 34x9i??i65xhibit Q: 6? 100a: Declaration of Andrew Yearley Pg 33 of 45 Would you expect them to have made that type of analysis in constructing a business plan? In constructing a ?eet plan, yes. But you have never seen it? I have not seen it, but again, we have nine people on our team so they might have seen it as part of their diligence on a business plan. And has itself conducted any analysis, to your knowledge, that Supports the belief that this will have a positive return on investment? A: You're referring to the ?eet plan speci?cally with that question? Q: Yes. A: We have not conducted that analysis. Resnick Dep. 47:4 50:11 (Apr. 13, 2012). In his own deposition, Alexander Dichter of McKinsey dismissed the need for detailed review of this historically large aircraft purchase and accelerated six-year re-?eeting plan, indicating that it was justi?able based on ?simple math?: Q: I want to talk about the re-?eeting plan of AMR. You indicate I think that you did review American?s decision to invest in new aircraft? That's correct. Can you tell us exactly the analysis that you performed It was a very quick and simple analysis. Okay. And did you personally look at it? I had a discussion with the team and talked through the numbers. I did not see any output. Q: Are you here testifying and vouching for, if you will, all of the work that Q: A: McKinsey did in connection with its engagement? Yes. There are areas Where we went very deep because it was necessary to go very deep in order to validate the plan. On other areas, the plan stood quite ?rmly on logic and what I would call simple math, which is just I can walk you through that simple math if you would like. On the re??eeting, did you have to go deep or did you do it on simple math? Simple math. Dichter Dep. 65:20 67:8 (Apr. 20, 2012). 34. Given the unprecedented size and cost of the re-?eeting program and its impact on the Business Plan (and, therefore, on the 1113 proposal), I have been surprised by and 29 meantime 35 AWExhibit 100a: Declaration of Andrew Yearley Pg 34 of 45 its advisors? lack of responsiveness to my team?s repeated requests for information and analysis concerning this program. For the reasons discussed above, shortly after being retained, the Lazard team identi?ed the business and ?nancial rationale for re-?eeting plan as one of the key areas of focus for its business diligence at AMR. On February 9, 2012, once the Business Plan was released and a diligence protocol agreed,44 Lazard submitted its ?rst diligence list to This list included questions on the size, nature and timing of aircraft purchases as well as a request for sensitivities of the Business Plan relating to aircraft purchases. The history of diligence requests, responses and the relative timing of the sharing of purportedly responsive material by AMR is more fully summarized in Appendix of this Declaration. 35. In general, the substance of Lazard?s diligence questions on re??eeting have focused on two major avenues of inquiry: Diligence Area AMR Response Current Status Understanding the impact of the On March 7, 2012 (27 days a?er the Lazard was subsequently orally informed by re-?eeting on AMR if the aircraft request was submitted) that AMR was not planning to purchases were characterized as advisors informed APA and Lazard prepare this analysis and did not see utility ?nanced capital expenditures, that AMR had not performed such an in exploring the issue further. instead of as aircraft leases. illustrative analysis. Since the Business Plan generally characterizes the new aircraft purchases as ?leases,? the request above would have allowed Lazard to understand two things: (1) the actual impact of the purchases on AMR future leverage (as opposed to making imprecise and general assumptions as to how those leases should be ?capitalized?) and (2) the effective cost to AMR of having shorter, 10-year leases instead of more standard 20- or 25- year leases that are more consistent with the average life of the aircraft. 44 In general, it was agreed by all advisors that business diligence requests should be submitted through with subsequent responsive diligence material provided to union and Creditors? Committee advisors through the Intralinks electronic data room. 30 Z??er??beds??if?lf?ef??i 35Ri>?55xhibit 100a: Declaration of Andrew Yearley Pg 35 of 45 Diligence Area AMR Response Current Status Receipt and review of all analyses On April 25, 2012 (Day 3 of the Lazard has requested supporting materials (including management and board Section 1113 trial and 76 days after for the ?one page? analysis, excluding the presentations) performed by AMR Lazard?s ?rst re-?eeting diligence impact of Section 1113 labor savings, as or its advisors that relate to the request), posted to well as presentations or Board materials projected return on investment and Intralinks a one-page document that used to support the re-?eeting decision. net present value associated with purported to summarize the returns on all planned widebody and investment the aircra? purchases. Notably, in the depositions of Mr. Dichter narrowbody aircraft purchases in These return estimates were unhelpful and the in?court testimony of Ms. Goulet the Business Plan. because they were calculated inclusive and Mr. Vahidi it was represented that of assumed labor savings ?om the analyses similar to the ones requested by 1113 proposal. Lazard exist.45 If so, it is unclear why AMR has not shared them. 36. By own admission, the re-?eeting plan is a key foundation of its Business Plan, a key use of operating cash ?ows during the projection period of the Business Plan and therefore a key driver of the 1113 proposal. Although it may be the case that this re-?eeting, its underlying economics, its planned timing and the analyses that support it are reasonable, my team and I have been provided insuf?cient information or analysis by AMR and its advisers to conclude that this is so. Absent a full vetting of the re-?eeting plan and consideration of ?eet alternatives, the 1113 proposal is premature and should be rejected. 45 See 1113 Transcript (134: 16 134: 1 7) (Apr. 24, 2012) (Ms. Goulet testifying that the purchase was ?approved by our board of directors and they were provided with a ?nancial analysis? of the re-?eeting plan this analysis has not, to date, been shared with unions); Dichter Dep. 68:20 68:23 (Apr. 20, 2012) (Mr. Dichter describing having been shown ?presentations? that analyzed the re-?eeting plan none of which have, to date, been shared with unions); 1113 Transcript (276:9 27623) (Apr. 25, 2012) (Mr. Vahidi testifying ?When we make a signi?cant purchase and we have to go to our boards of directors to request authority to spend money for the purchase or to sign an agreement even though in this speci?c case the deal was pre-?nanced by the manufacturer we build what I would refer to as a ?business case? for whether that project made sense, either based on the return on investment or return on the capital invested in the project. So, there was a business case developed and built as to Why that those aircraft agreements that were signed made economic sense?); Resnick Dep. 47:9 47:13 (Apr. 13, 2012) (Mr. Resnick indicating he can ?recall some presentations talking about the re- ?eeting plan? but none that explored ?alternatives? to the re-?eeting plan). 31 37 AWExhibit 100a: Declaration of Andrew Yearley Pg 36 of 45 VI. THE APA HAS NEGOTIATED A CONSENSUAL LABOR AGREEMENT WITH US AIRWAYS THAT EVIDENCES ITS COMMITMENT TO SUPPORTING CONTRACT CONCESSIONS 37. I believe that the evidence shows that 1113 labor proposal was not developed based on the labor terms of most relevant competitors but rather derived from a target pro?tability level. The fact that this approach resulted in a signi?cant increase of the alleged labor savings ?need? from the one AMR had publicly described only days before its bankruptcy ?ling is further evidence of the lack of credibility of 1113 proposal.46 For me, however, the most persuasive evidence that the relief sought in the Motion lacks credibility is the real-time ?market test? of proposal that was provided by arms-length negotiations with US Airways. I was present in Tempe, Arizona during the APA team? negotiations with US Airways and was struck by the ability of the APA and US Airways to consensually resolve a_11 of the very same collective bargaining issues (scope, wages and bene?ts, pension, pro?t sharing, work rules, etc.) on which AMR management has consistently refused to compromise and now describes to the public and this Court as intractable. Notably, the APA agreement with US Airways includes a mechanism whereby future pilot productivity (after Year 3) and future pilot wages and bene?ts (after Year 5) will be indexed to closest competitors, Delta and United. In contrast, in post-petition negotiations between APA and American, I understand that the Company was unwilling to consider a much more limited 46 A well?respected Wall Street analyst of the airline sector has been outspoken in his skepticism about ?new? alleged labor savings need, its relation to the ?market? and the propriety of any 1113 proposal that ignores the ?market? and instead focuses on making AMR more pro?table than its peers. See Jamie Baker, v4.0: Thoughts on 2013 EBITDAR Potential and Exit Multiples,? .P. Morgan (Dec. 15, 2011) (?What we do n_ot envision is an AMR with margins superior to those of Delta and United, as some have suggested. Bankruptcy is not a means by which entities achieve economic superiority, rather it is a process designed to broadly achieve economic parity. Hence, we would strenuously disagree with any suggestion that AMR will emerge with meaningful, relative competitive bene?ts?) (emphasis in original) 32 Z??er?l'neds?iif?lfeg?gi 38Ri>?6Exhibit 100a: Declaration of Andrew Yearley Pg 37 of 45 version of indexing that would have tied hourly pay rates to the market. I believe this highlights both willingness to accept ?market? terms and lack of interest in ?market? terms as a result of the negotiating leverage it believes it has over APA under Section 1113. VII. THE MOTION IS PREMATURE AND AMR HAS SUFFICIENT TIME TO ENSURE IT HAS THE BUSINESS PLAN AND IDENTIFIED THE TRULY LABOR SAVINGS NEED 38. Finally, I believe it is important to remember the bigger picture context of this Chapter 11 case and the current state of ?nances. Unlike most bankrupt network carriers of recent years, AMR does not face any sort of exigent circumstances that require an expedited Section 1113 process. AMR ?led for Chapter 11 without a DIP facility and therefore is not governed by the standard ?nancial covenants or tests that are typically contained in such agreements (and which often have driven the rapid pace of Section 1113 proceedings in other airline bankruptcies). On the contrary, AMR ?led for bankruptcy with over $4 billion of cash a balance that has since the petition date to nearly $5 billion. AMR management recently reassured the Creditors? Committee that AMR performance has been better than management?s expectations. As a result, I believe that this Court should view the professed urgency of the Motion with healthy skepticism. In fact, AMR management has more than suf?cient time to ?get it right? particularly given the well?publicized interest of US Airways (and possibly others) in merger-based business plans that may well generate materially better value for all AMR stakeholders, as well as the commitment to market-based bargaining. CONCLUSION 39. During the course of Lazard?s engagement with APA, it has assisted APA in (1) evaluating Business Plan across a number of different ?nancial metrics both relative to the norms of the US. airline industry and against comparable U.S. network carriers, (2) its 33 11-154gg-Ssehll: RWExhibit 100a: Declaration of Andrew Yearley Pg 38 of 45 negotiations with AMR and (3) the consideration of potential strategic alternatives for AMR. Having reviewed the Motion and the various AMR expert declarations that purport to support it, it is my judgment that the Motion does not satisfy the standards of Section 1113 of the Bankruptcy Code and seeks relief that is far beyond What is ?necessary? for AMR to successfully reorganize and emerge from bankruptcy as a viable competitor. I believe that the Motion should be denied. 34 Z?t?er'??ed??tf??lfeg?gi ?Rij?aExhibit 100a: Declaration of Andrew Yearley Pg 39 of 45 I declare under the penalty of perjury that the forgoing is true and correct to the best of my knowledge and upon information from documents I have reviewed, including those in my custody and control. Executed day of Mayo, RWExhibit 100a: Declaration of Andrew Yearley Pg 40 of 45 Appendix A: Andrew Yearley - Biography Mr. Yearley is a Managing Director and leads Lazard Freres Company?s Restructuring Group in North America. Mr. Yearley joined Lazard Freres in July 1999. Mr. Yearley has been practicing in the restructuring arena for over 18 years. Prior to joining Lazard, Mr. Yearley was a Vice President in Deutsche Banc Alex Brown?s Restructuring Group (originally BT Alex Brown). Before joining BT Alex. Brown, he spent ?ve years in the Restructuring and Reorganization Group at Ernst Young LLP as a senior consultant, manager, and senior manager. Mr. Yearley began his career in 1989 at the Chase Manhattan Bank in the Structured Finance Division, and spent two years as an Assistant Vice President in the Leveraged Transactions Group at BZW, the investment?banking arm of Barclays PLC. During these years, Mr. Yearley developed skills in credit analysis, ?nancial modeling, and structuring loans. While at Chase, Mr. Yearley completed Chase?s credit training program involving an intensive study of ?nance, accounting, valuation, and credit analysis. Mr. Yearley has experience in a Wide range of corporate ?nance activities including restructurings and reorganizations, mergers and acquisitions, and capital raising. Over the past 15 years, Mr. Yearley?s work has focused entirely on working with companies and creditor groups involved in out-of-court and in?court restructurings. Mr. Yearley has provided investment banking services including advising and negotiating consensual restructurings, assisting companies in the sale of businesses or assets, and raising debt and equity capital. Mr. Yearley has been involved in a broad range of in-court and out-of court ?nancial advisory assignments including representing Boston Chicken, Buster Brown Apparel, Conseco, Daewoo, Delphi Automotive, Derby Cycle, Fannie Mae, Finova, Loews Cineplex Entertainment, Masonite, McCrory Stores, Medical Resources, Meridian Automotive, NorthWestern Energy, Perini Corporation, Plastech Automotive, Rickels Home Centers, Shoney?s, Sterling Chemical, 36 Ztri?tefeiieds?iilgi?liezg?g? 42 RMGExhibit 100a: Declaration of Andrew Yearley Pg 41 of 45 Stone Webster, Inc., TI Automotive, Trism, TV Filme, USN Communications, Washington Group, and WLR Foods. In addition, Mr. Yearley advised Conseco Finance in its sale to Fortress Investments and GE. Capital and National Steel in its sale to US. Steel, representing two of the largest cash bankruptcy sale transactions ever completed. Among other assignments, Mr. Yearley has represented the United Autoworkers in their negotiation with GM, Ford, and in their respective restructuring efforts, the National Association of Letter Carriers in its restructuring discussions with the US. Postal Service, and the US. Treasury in its divestment of its investment in GM and Mr. Yearley graduated with a BA. in Political Science from Duke University magna cum laude in 1989 and received his MBA. from Columbia University with honors in 1999. He has been licensed by the NASD and New York Stock Exchange with a Series 7 General Securities license. Mr. Yearley has been a guest lecturer at the Columbia Business School and New York University?s Stern School of Business teaching case studies on the topic of restructuring and is a frequent speaker at industry seminars and conferences. 37 1 i I 2eaeat9dn?ma?esm43 AWExhibit 100a: Declaration of Andrew Yearley Pg 42 of 45 Appendix B: History of Lazard Diligence Requests AMR Re-Fleeting and Aircraft Purchases Lazard Diligence Request Response Material Provided Date Requested Item Date Response Date Item Cum. 2/9 12 Seven-page general 2/9/12 M. Chou (R) business diligence list 6- responds Via e?mail, mailed by A. Yearley indicating that (L) to D. Resnick (R) will that included: begin assembling 0 Questions pertaining the requested to ?eet strategy, 2/ 13/1 information including type, 2 number and timing of M. Chou contacts new deliveries A. Chang (L) for A request for clari?cation on Business Plan model certain itemS with aircraft purchases recharacterized as capital expenditures 2/ 16/12 B. Tisdell (L) contacts 2/16/1 M. Chou responds M. Chou via email for 2 indicating that other update on status and ?priority? items timing of 2/9/12 request designated by Lazard/APA (pertaining to scope-related diligence) will be given higher attention by AMR and its advisors 2/17/12 Meeting between Lazard 2/17/1 B. Goulet (AMR) team and AMR 2 and team agree to management in Dallas, at which request for Business Plan model with aircraft purchases recharacterized as capital expenditures is reiterated as a ?priority? item investigate status of this request 38 (L) Lazard (R) I Z?hiergiieds9fiifilfe:??gi 44RIg?GExhibit 100a: Declaration of Andrew Yearley Pg 43 of 45 Lazard Diligence Request Response Material Provided Date Requested Item Date Response Date Item Cum. Time Ela sed 2/22/12 A. Chang contacts M. 2/23/1 M. Chou emails A. Chou Via email to again 2 Chang seeking emphasize importance clari?cation on of recast Business Plan reason for request model A. Chang replies to 2/23/1 provide rationale 2 for request 3/7/12 Item 25 of AMR 27 days First Supplemental since Set of Responses ?rst advises that ?eet ?American does not request have documents regarding a 6-year model with new aircraft as capital expenditures instead of operating leases? 3/9/12 B. Tisdell phones J. 3/ 13/1 J. Queen con?rms Queen (R) to con?rm 2 AMR is unwilling that 3/7/ 12 response to comply with the means that AMR does request not intend to entertain the request. J. Queen indicates he will consult with AMR. 3/26/12 B. Tisdell emails M. 3/26/1 In follow-up phone Chou and J. Queen 2 conversation M. (copying counsel) APA Supplemental Diligence List, which includes requests for: ?all analyses (including management and board presentations) that relate to the projected return Chou indicates to B. Tisdell that responsive material exists (if not precisely in the form requested) and will be provided as soon as possible 39 pr?lf Exhibit 100a: Declaration of Andrew Yearley Pg 44 of 45 Lazard Diligence Request Response Material Provided Date Requested Item Date Response Date Item Cum. on investment associated with planned widebody and narrowbody aircraft purchases? 4/4/12 B. Tisdell emails M. (L) Lazard (R) . Chou and J. Queen Tisdell indicating (copying counsel) that ?company is A a following up on status working to ?nalize ii i 3.15 of the request its responses so 33; a i hope to have i :3 something to you as i? I soon as possible? . . 4/10/12 B. Tisdell emails M. 4/10/1 M. Chou phones i Chou and J. Queen 2 and emails B. i (copying counsel) Tisdell and j; . following up on status indicates company - i 1 of request and noting the will have a i i lack of responsiveness response soon to all prior requests ti 3?5 4/25/1 l-page document 76 ays 2 posted to Intralinks since purporting to be first (Day 3 responsive to ?eet ?eet of return on request 1113 investment request, Trial) but improperly 30 days including the since impact of Section supp. 1113 savings ?eet request 40 Zb'?e?gd?i?igiezg?i?? 46 100a: Declaration of Andrew Yearley Pg 45 of 45 (L) Lazard (R) Appendix C: Materials Relied Upon I have considered the following categories of documents in forming the conclusions and opinions contained in this declaration: 1. 8. 9.- Public ?lings including SEC ?lings such as 10-K, 8-K ?lings and press releases AMR Business Plan model and ?nancial projections . AMR Investor Presentations on Investor Relations web site? Wall Street research reports from ?nancial institutions and research Disclosure Statements and Plans of Reorganization of other airline bankruptcies Moody?s: Global Passenger Airlines report (Mar. 2009) Key Credit factors: Criteria For Rating The Airline Industry (Oct. 2010) News articles Other American Airlines and Allied Pilots Association 1113 Declarations 10. American Airlines Witness deposition and court testimony transcripts 1 1. Bloomberg 47 Available at 41 Case 1:13-cv-01236-CKK Document 21-3 Filed 08/23/13 Page 1 of 2 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA 450 Fifth Street, NW, Suite 8000 Washington DC 20530 STATE OF ARIZONA 1275 West Washington Phoenix, AZ 85007 DISTRICT OF COLUMBIA 441 Fourth Street, NW, Suite 600 South Washington, DC 20001 STATE OF FLORIDA PL-01, The Capitol Tallahassee, FL 32399 COMMONWEALTH OF PENNSYLVANIA 14th Floor, Strawberry Square Harrisburg, PA 17120 STATE OF TENNESSEE 500 Charlotte Avenue Nashville, TN 37202 STATE OF TEXAS 300 W. 15th Street, 7th Floor Austin, TX 78701 and COMMONWEALTH OF VIRGINIA 900 East Main Street Richmond, VA 23219 Plaintiffs, v. Case No. 1:13-cv-01236-CKK Case 1:13-cv-01236-CKK Document 21-3 Filed 08/23/13 Page 2 of 2 US AIRWAYS GROUP, INC. 111 W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION 4333 Amon Carter Boulevard Fort Worth, TX 76155 Defendants. ORDER GRANTING MOTION OF ALLIED PILOTS ASSOCIATION, ASSOCIATION OF PROFESSIONAL FLIGHT ATTENDANTS, ASSOCIATION OF FLIGHT ATTENDANTS-CWA AND TRANSPORT WORKERS UNION OF AMERICA TO FILE AMICUS CURIAE BRIEF IN SUPPORT DEFENDANT’S MOTION TO SET TRIAL DATE This matter came before the court on the motion of the Allied Pilots Association, Association of Professional Flight Attendants, Association of Flight Attendants-CWA and Transport Workers Union of America for leave to file an amicus curiae brief in support of Defendants US Airways Group, Inc. and AMR Corporation’s Motion to Set Trial Date [Docket No. 11]. On consideration of the motion and other papers filed in this case, IT IS HEREBY ORDERED that the motion is GRANTED, and The brief amicus curiae shall be FILED on the docket of this proceeding. Dated: ______________________ _____________________________ United States District Court Judge 2 Case 1:13-cv-01236-CKK Document 23 Filed 08/23/13 Page 1 of 1 AO 458 (Rev. 06/09) Appearance of Counsel UNITED STATES DISTRICT COURT for the District of Columbia ) ) ) ) ) Plaintiff v. Defendant Case No. APPEARANCE OF COUNSEL To: The clerk of court and all parties of record I am admitted or otherwise authorized to practice in this court, and I appear in this case as counsel for: . Date: Attorney’s signature Printed name and bar number Address E mail address Telephone number FAX number Case Document 24 Filed 08/23/13 Page 1 of 1 A0 458 (Rev. 06/09) Appearance ofCounsel UNITED STATES DISTRICT COURT for the United States of America, ,e_t Plaintiff v. Case No. 1 US Ain/vavs Grouo. Inc.. et al. Defendant APPEARANCE OF COUNSEL To: The clerk of court and all parties of record I am admitted or otherwise authorized to practice in this court, and I appear in this case as counsel for: Plaintiff State of Tennessee Date: 98/22/2911 3 Victor J. Domen, Jr. Attorney '5 signature Victor J. Domen, Jr. (TN BPR #015803) Printed name and bar number Of?ce of the Tennessee Attorney General and Reporter 500 Charlotte Avenue Nashville. TN 27202 Address E-mail address (615) 253-3327 Telephone number (615) 532-6951 FAX number Case 1:13-cv-01236-CKK Document 28 Filed 08/23/13 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, v. US AIRWAYS GROUP, INC., et al., Defendants. ) ) ) ) ) ) ) ) ) ) Civil Action No. 13-1236 (CKK) APPEARANCE OF COUNSEL To: The clerk of court and all parties of record. I am admitted or otherwise authorized to practice in this Court, and I appear in this case as counsel for Allied Pilots Association. Date: August 23, 2013 Respectfully submitted, /s/ Darin M. Dalmat Darin M. Dalmat D.C. Bar No. 978922 JAMES & HOFFMAN, P.C. 1130 Connecticut Avenue, NW, Suite 950 Washington, DC 20036 Tel.: (202) 496-0500 Fax: (202) 496-0555 dmdalmat@jamhoff.com Attorney for Allied Pilots Association Case 1:13-cv-01236-CKK Document 29 Filed 08/26/13 Page 1 of 3 IN THE 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-01236 NOTICE OF APPEARANCE Please take notice that Paul T. Denis enters his appearance as co-counsel in the above-captioned case on behalf of defendant US Airways Group, Inc. He is admitted to and authorized to practice in this court. Dated: August 26, 2013 Respectfully submitted, /s/ Paul T. Denis Paul T. Denis (D.C. Bar No. 437040) Dechert LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 (phone) (202) 261-3333 (facsimile) paul.denis@dechert.com Counsel for Defendant US Airways Group, Inc Case 1:13-cv-01236-CKK Document 29 Filed 08/26/13 Page 2 of 3 CERTIFICATE OF SERVICE I hereby certify that on this 26th day of August, 2013, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system, which will send a notice of electronic filing to the counsel of record in this matter who are registered on the CM/ECF system, and that I caused a copy of the foregoing and the notice of electronic filing to be served by email and first class mail to the following non-ECF participants: Nancy M. Bonnell Antitrust Unit Chief Office of the Attorney General 1275 West Washington Phoenix, AZ 85007 (602) 542-7728 (phone) (602) 542-9088 (facsimile) Nancy.bonnell@azag.gov James A. Donahue, III Executive Deputy Attorney General Public Protection Division Office of the Attorney General 14th Floor, Strawberry Square Harrisburg, PA 17120 (717) 787-4530 (phone) (717) 787-1190 (facsimile) jdonahue@attorneygeneral.gov Victor J. Domen, Jr. Senior Antitrust Counsel Office of the Attorney General 500 Charlotte Avenue Nashville, TN 37202 (615) 532-3327 (phone) (615) 532-6951 (facsimile) Vic.Domen@ag.tn.gov Mark Levy Assistant Attorney General Office of the Attorney General 300 W. 15th Street, 7th Floor Austin, TX 78701 (512) 936-1847 (phone) (512) 320-0975 (facsimile) Mark.Levy@texasattorneygeneral.gov Sarah Oxenham Allen Assistant Attorney General Consumer Protection Section Office of the Attorney General 900 East Main Street Richmond, VA 23219 (804) 786-6557 (phone) (804) 786-0122 (facsimile) SOAllen@oag.state.va.us John M. Majoras Rosanna K. McCalips Jones Day 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (phone) (202) 6261700 (facsimile) jmmajoras@jonesday.com rkmccalips@JonesDay.com Charles F. Rule Cadwalader, Wichersham & Taft LLP 700 Sixth Street, N.W. Washington, DC 20001 Case 1:13-cv-01236-CKK Document 29 Filed 08/26/13 Page 3 of 3 (202) 862-2200 (phone) (202) 862-2400 (facsimile) Mary Jean Moltenbrey Paul Hastings LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 (phone) (202) 551- 0225 (facsimile) mjmoltenbrey@paulhastings.com Dated: August 26, 2013 /s/ Paul T. Denis Paul T. Denis Case 1:13-cv-01236-CKK Document 35 Filed 08/27/13 Page 1 of 3 IN THE 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-01236 NOTICE OF APPEARANCE Please take notice that Steven G. Bradbury enters his appearance as co-counsel in the above-captioned case on behalf of defendant US Airways Group, Inc. He is admitted to and authorized to practice in this court. Dated: August 26, 2013 Respectfully submitted, /s/ Steven G. Bradbury Steven G. Bradbury (D.C. Bar No. 416430 ) Dechert LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 (phone) (202) 261-3333 (facsimile) steven.bradbury@dechert.com Counsel for Defendant US Airways Group, Inc Case 1:13-cv-01236-CKK Document 35 Filed 08/27/13 Page 2 of 3 CERTIFICATE OF SERVICE I hereby certify that on this 26th day of August, 2013, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system, which will send a notice of electronic filing to the counsel of record in this matter who are registered on the CM/ECF system, and that I caused a copy of the foregoing and the notice of electronic filing to be served by email and first class mail to the following non-ECF participants: Nancy M. Bonnell Antitrust Unit Chief Office of the Attorney General 1275 West Washington Phoenix, AZ 85007 (602) 542-7728 (phone) (602) 542-9088 (facsimile) Nancy.bonnell@azag.gov James A. Donahue, III Executive Deputy Attorney General Public Protection Division Office of the Attorney General 14th Floor, Strawberry Square Harrisburg, PA 17120 (717) 787-4530 (phone) (717) 787-1190 (facsimile) jdonahue@attorneygeneral.gov Victor J. Domen, Jr. Senior Antitrust Counsel Office of the Attorney General 500 Charlotte Avenue Nashville, TN 37202 (615) 532-3327 (phone) (615) 532-6951 (facsimile) Vic.Domen@ag.tn.gov Mark Levy Assistant Attorney General Office of the Attorney General 300 W. 15th Street, 7th Floor Austin, TX 78701 (512) 936-1847 (phone) (512) 320-0975 (facsimile) Mark.Levy@texasattorneygeneral.gov Sarah Oxenham Allen Assistant Attorney General Consumer Protection Section Office of the Attorney General 900 East Main Street Richmond, VA 23219 (804) 786-6557 (phone) (804) 786-0122 (facsimile) SOAllen@oag.state.va.us John M. Majoras Rosanna K. McCalips Jones Day 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (phone) (202) 6261700 (facsimile) jmmajoras@jonesday.com rkmccalips@JonesDay.com Charles F. Rule Cadwalader, Wichersham & Taft LLP 700 Sixth Street, N.W. Washington, DC 20001 Case 1:13-cv-01236-CKK Document 35 Filed 08/27/13 Page 3 of 3 (202) 862-2200 (phone) (202) 862-2400 (facsimile) Mary Jean Moltenbrey Paul Hastings LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 (phone) (202) 551- 0225 (facsimile) mjmoltenbrey@paulhastings.com Dated: August 26, 2013 /s/ Steven G. Bradbury Steven G. Bradbury Case 1:13-cv-01236-CKK Document 32 Filed 08/27/13 Page 1 of 1 AO 458 (Rev. 06/09) Appearance of Counsel UNITED STATES DISTRICT COURT for the District of Columbia United States of America, et al. Plaintiff v. US Airways Group, Inc. and AMR Corporation Defendant ) ) ) ) ) Case No. 13-cv-01236 APPEARANCE OF COUNSEL To: The clerk of court and all parties of record I am admitted or otherwise authorized to practice in this court, and I appear in this case as counsel for: . United States of America Date: 08/27/2013 /s/ Attorney’s signature Mark W. Ryan (D.C. Bar #359098) Printed name and bar number 450 Fifth Street Northwest Suite 8000 Washington, DC 20530 Address mark.w.ryan@usdoj.gov E mail address (202) 532-4753 Telephone number (202) 307-2784 FAX number Case Document 33 Filed 08/27/13 Page 1 of 1 A0 458 (Rev, 06f_09) Appearance of Counsel UNITED STATES DISTRICT COURT for the DISTRICT OF COLUMBIA UNITED STATES OF et 8L. Plaintw" US AIRWAYS GROUP, WC. and AMR CORP Defendant Case No. 1 APPEARANCE OF COUNSEL To: The clerk of court and all parties of record I am admitted or otherwise authorized to practice in this court, and I appear in this case as counsel for: the Plaintiff. STATE OF FLORIDA Date: 0812712013 4/ Attorney ?5 Signature Christopher R. Hunt 083201 Printed name and bar number Office of the Florida Attorney General PL-01, The Capitol Tallahassee, FL 323.99 Address E?mafi address (850) 414-3300 Telephone number (850) 438~9134 FAXnumber Case Document 34 Filed 08/27/13 Page 1 of 1 A0 458 (Rev. 06109} Appearance ofCounsel UNITED STATES DISTRICT COURT for the District of Columbia United States of America. et at. Plaimi? V. Case No. 1213-61-01 US Airwavs Group. inc. and AMR Corporation Defendant APPEARANCE OF COUNSEL To: The clerk of court and all parties of record I am admitted or otherwise authorized to practice in this court, and I appear in this case as counsel for: The State of Arizona Date: 08/2?/2013 At: mey?s signature Nancv EVE. Bonneii. AZ Bar No. 016382 Printed name and bar number Office of the Attorney Genera? 1275 West Washington Phoenix, Arizona 85007 A ddre ss nanoy.bonneli@ezag.gov E?maz?l address (602) 542?7728 Telephone number (602) 54238088 FAX number Case Document 36 Filed 08/27/13 Page 1 of 1 A0 458 (Rev. 06/09) Appearance of Counsel UNITED STATES DISTRICT COURT for the District of Columbia UNITED STATES OF AMERICA. et aL__ Piai'im'ff v. Case No. US AIRWAYS GROUP, and AMR CORPORAT Defendant APPEARANCE OF COUNSEL To: The clerk of court and all parties of record I am admitted or otherwise authorized to practice in this court, and I appear in this case as counsel for: The State of Arizona Date: A Norway ?3 Susan V. Myers. AZ Bar No. 021949 Printed name and bar nmnbei- Office of the Arizona Attorney General 1275 West Washington Phoenix, AZ 85007 - Address suaan.myers@azag.gov E?mair? address (602) 542-7768 T'eiephone number (602) 542-9088 FAX number Case 1:13-cv-01236-CKK Document 37 Filed 08/27/13 Page 1 of 12 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, v. Civil Action No. 1:13-cv-01236-CKK US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants. MEMORANDUM OF THE UNITED STATES AND PLAINTIFF STATES IN OPPOSITION TO DEFENDANTS’ PROPOSED SCHEDULING ORDER The proposed merger of American Airlines and US Airways, which would create the world’s largest airline, presents a substantial threat to competition in air travel in local markets throughout the United States and will likely result in hundreds of millions of dollars in harm to consumers annually. All this is at a time when both American and US Airways are reporting record earnings and American is set (absent the merger) to embark on a period of procompetitive expansion. Given what is at stake, this Court should allow both sides a full opportunity to develop the relevant evidence in discovery and to present that evidence at trial. See, e.g., FTC v. Whole Foods Market, Inc., 548 F.3d 1028, 1041 (D.C. Cir. 2008) (Brown, J.) (explaining, in a government merger challenge, that the district court should take “whatever time it needed to consider the [] evidence fully”). Defendants’ attempt to rush this matter to a trial on the merits in fewer than 75 days following the initial Scheduling Conference creates the very real risk that a challenge to a $14 billion merger—in dollar terms one of the largest merger challenges ever adjudicated—will be resolved on less than an appropriate record. 1 Case 1:13-cv-01236-CKK Document 37 Filed 08/27/13 Page 2 of 12 Antitrust cases typically involve a host of “complicated legal, factual and technical (particularly economic) questions” and therefore require “extensive discovery.” Manual For Complex Litigation (Fourth) § 30 (2004). Plaintiffs’ proposed trial-ready date of March 3, 2014, with trial starting thereafter at the Court’s convenience, would leave four months for party and non-party document discovery and fact depositions, a month for expert reports and depositions, and then a month for pretrial motions and briefs. This schedule, while expeditious for a case of this magnitude, seeks to ensure that the Court will have an appropriate record. 1. American’s Ongoing Bankruptcy Proceedings Do Not Justify Trying this Case on an Incomplete Record. Defendants rely heavily on the American bankruptcy proceedings to justify their truncated schedule. They argue in this Court that “[t]he government’s action has created enormous uncertainty for the employees and customers of both Airlines” (Def. Mem. at 6) without offering any specific examples of harm or evidence to support their assertions. Their suggestions of undue surprise and resulting uncertainty because of this lawsuit are unfounded. Just this past Friday, American argued to the bankruptcy court that the proposed plan of reorganization, which is based on the February 2013 merger agreement, should be confirmed because the parties had specifically accounted for a potential government antitrust challenge: In fact, this potential scenario [a government antitrust challenge] is contemplated by the express terms of the Merger Agreement, the Disclosure Statement, and the Plan, and these documents set forth the procedures to be followed in the event such a scenario were to arise. Accordingly, the circumstances before the Court are fully within the expectation of the Debtors’ stakeholders, employees, business partners, and other parties in interest . . . . 1 American described to the bankruptcy court the procedures to be followed and the 1 Debtors’ Memorandum of Law Regarding Impact of Department of Justice Action on Entry of Order Confirming Debtor’s Third Amended Joint Chapter 11 Plan, at 3 (available at http://www.amrcaseinfo.com/pdflib/9924_15463.pdf). 2 Case 1:13-cv-01236-CKK Document 37 Filed 08/27/13 Page 3 of 12 parties’ respective rights if there were such a challenge, and explained that the “delay attendant to the DOJ Action does not in any way undermine the Plan’s feasibility.” 2 Defendants were also well aware of the Antitrust Division’s competition concerns and the likely timing of any lawsuit. 3 In short, from day one, interested parties knew what should have been clear: that a merger of two large firms competing in already highly concentrated markets might draw an antitrust challenge. It was Defendants’ desire to pursue a highly problematic merger that created the problem they are now seeking to blame on others. Defendants further suggest that any delay in American closing the merger and formally emerging from bankruptcy may mean a weaker American due to uncertainty and the potential loss of employees and customers. See, e.g., Def. Mem. at 6-7. 4 This argument, however, ignores the fact that American’s restructuring efforts have been extraordinarily successful and have positioned the company to compete as a strong and vibrant standalone firm. American reported record profits in the second quarter of this year 5 and just yesterday announced that July 2013 was the most profitable month in the company’s history. In a letter to employees announcing the recent results, American’s CEO wrote: 2 Id. at 4-5, 13. In a May 28, 2013 letter to the Antitrust Division, the parties insisted that the government make its antitrust enforcement decision prior to the scheduled August 15 bankruptcy court plan confirmation hearing. At the August 15 hearing, the bankruptcy court closed the official record on all issues except the impact of this case on plan confirmation. It has set a hearing on that issue for August 29, 2013. (Defendants previously agreed not to close the merger until thirty days after filing of the antitrust Complaint; Plaintiffs and Defendants are discussing whether Defendants will extend that agreement during the pendency of this Court’s proceedings.) 4 See also Brief of Amicus Curiae Allied Pilot’s Ass’n et al. in Support of Defendants’ Motion to Set Trial Date at 9 (arguing that American does not have motivated leadership and that its “competitive position is likely to erode further during the pendency of this case”). 5 Press Release, “AMR Corporation Reports Net Profit of $357 Million, Excluding Reorganization and Special Items – AMR’s Best Second Quarter Result in Company History,” July 18, 2013 (available at http://hub.aa.com/en/nr/pressrelease/amr-corporation-reports-net-profit-of-357million-excluding-reorganization-and-special-items---amrs-best-second-quarter-result-in-company-history ). 3 3 Case 1:13-cv-01236-CKK Document 37 Filed 08/27/13 Page 4 of 12 Today is a very good day. This morning we reported our financial results for July and here’s the headline: we are completing one of the most successful turnarounds in aviation history. We are building a strong, competitive and profitable new American poised to lead again. 6 He further described in the letter how American is launching new routes (including new routes planned for 2014), buying new aircraft to allow American to “better match supply and demand with the right amount of schedule frequency as our competitors do,” and importantly, “hiring hundreds of new flight attendants and recalling and training pilots at an accelerating pace.” In fact, for many months American management resisted a US Airways takeover in large part because the prior restructuring efforts had been so successful. Shortly after entering bankruptcy in November 2011, American management – as debtor in possession – undertook numerous actions to restore American’s profitability. By the end of 2012, the restructuring was “near complete,” with management recognizing that the “end result is a company that is wellpositioned for long term success.” 7 American now has a “competitive cost structure and strong balance sheet” with over $6 billion in available cash, hubs in desirable locations (“in the right place for the most valuable customers”), a base of “high value customers,” revenue growth that has been consistently “at or near the top of the industry” over the past year, and an increasing number of corporate accounts. 8 On January 16, 2013— a month before the merger agreement with US Airways—American’s CEO could not have been more optimistic: It is remarkable what the American team has been able to accomplish, including generating record revenues and a return to an operating profit for the year while restructuring every aspect of the company. I want to thank all of our people for 6 “A Message from Chairman and CEO Tom Horton,” Aug. 26, 2013 (Attached as Exhibit 1) (emphasis added). 7 American Airlines, “The New American,” Dec. 12, 2012, at 8 (Exh. 2). American noted that it was completing “one of the fastest restructuring efforts of all the major global carriers in the past decade.” Id. (United Airlines was in bankruptcy for 38 months, Northwest Airlines for 20 months, and Delta Airlines for 19 months). 8 Id. at 45, 4. 4 Case 1:13-cv-01236-CKK Document 37 Filed 08/27/13 Page 5 of 12 their dedication, hard work and commitment to serving our customers during this time. Our momentum is growing toward emerging as a strong, healthy and vibrant competitor. 9 American continues to thrive. It will offer more flights and more seats both domestically and internationally in 2013 than it did in 2012; it has placed the largest aircraft order in aviation history to give itself one of the youngest, most fuel efficient fleets in the industry; it is implementing customer service enhancements in its airplanes and its passenger facilities; and it has bolstered its network and alliances “by expanding service from its hubs to the domestic and international cities most desirable to high value customers.” 10 American accomplished all this well before its proposed merger with US Airways. Its momentum has not slowed since. And, as yesterday’s earnings announcement demonstrates, there is no evidence it will slow during the pendency of this litigation. The government does not discount that American may incur costs 11 and that the airlines’ employees will face some uncertainty while this lawsuit is pending. This is true in every merger challenged by the government. As noted above, however, the possibility of such a challenge was contemplated and planned for by all stakeholders. The short-term costs and uncertainties must be balanced against American’s current success, the need for a full and fair exploration of the claims at issue, and the merger’s potential for long-term harm to consumers. 9 Press Release, “AMR Corporation Reports Fourth Quarter 2012 Net Profit of $262 Million, a $1.4 Billion Improvement Over Fourth Quarter 2011” (Jan. 16, 2013) (available at http://hub.aa.com/en/nr/pressrelease/amr-corporation-reports-fourth-quarter-2012-net-profit-of-262-million-a-14billion-improvement-over-fourth-quarter-2011). 10 Id. at 5. Defendants report (Mem. at 2) that American spends $500,000 per day in ongoing “professional fees” to remain in bankruptcy proceedings that appeared to be on the cusp of ending. This figure translates to one hundred professionals billing ten hours a day at $500 per hour, a pace that appears out of line with American’s current posture in bankruptcy and that court’s recent decision to close the record. In any event, the continuing size of those fees is more appropriately the subject of discussions between American and those outside professionals. 11 5 Case 1:13-cv-01236-CKK Document 37 Filed 08/27/13 Page 6 of 12 Further, any claim of urgency based on the December 13, 2013 merger agreement termination date that Defendants negotiated between themselves should carry little weight. They can change this self-imposed deadline with the stroke of a pen. Indeed, Defendants do not claim that the transaction will be abandoned after December 13; they state only that they “will have the right to terminate the transaction at any time after that date.” Def. Mem. at 7. Faced with similar arguments, the Court of Appeals explained: [A]lthough the appellees state that if an injunction pending appeal is granted they may abandon the merger, they do not unequivocally state that they will do so. . . . Moreover, even if the current merger plans were abandoned, the evidence does not establish that the efficiencies the appellees urge could not be reclaimed by a renewed transaction following success on appeal. FTC v. Heinz, 2000 WL 1741320, at *2 (D.C. Cir.) (emphasis in original). 2. The Government’s Pre-Filing Investigation Is No Substitute for Full Discovery on Both the Allegations in the Complaint and the Airlines’ Defenses. Defendants’ suggestion that the government’s pre-complaint investigation is a substitute for or limits the government’s post-complaint discovery rights is contrary to settled authority. 12 Investigations may extend to any number of issues that have no bearing on eventual litigation. Moreover, the filing of a lawsuit does not mean that the investigation itself was used to prepare for trial. Here, for example, Defendants planned to close the merger immediately upon the expected August 15 bankruptcy plan confirmation, thereby requiring the government to make an 12 See, e.g., SEC v. Sargent, 229 F.3d 68, 80 (1st Cir. 2000) (“Here, even though the [agency] had already conducted a pre-filing investigation, . . . ‘there is no authority which suggests that it is appropriate to limit the [agency]’s right to take discovery based upon the extent of its previous investigation into the facts underlying its case.’”) (quoting SEC v. Saul, 133 F.R.D. 115, 118 (N.D. Ill. 1990)); Saul, 133 F.R.D. at 118–19 (“[T]he Court finds considerable merit in the [agency]’s contention that once it has completed its investigation and filed suit, it is entitled to review its investigation and avail itself of its discovery rights in order to prepare its case for trial. . . . Once the complaint has been filed and the defendants have answered, the issues requiring resolution have been clarified, and all parties must be afforded the opportunity to conduct discovery and prepare for trial with those issues in mind.”). 6 Case 1:13-cv-01236-CKK Document 37 Filed 08/27/13 Page 7 of 12 enforcement decision by that date. They made a calculated decision to force the government’s hand. They had that right, but they have no right to limit post-complaint discovery. Nor was Plaintiffs’ investigation as lengthy in real terms as Defendants assert. While Defendants have engaged in merger discussions at various times with each other and with other entities, they did not sign their merger agreement until February 13, 2013. They then delivered approximately 3 million pages of documents to the government in early May. Time was needed to review documents, take a limited number of investigative depositions (seven party, zero nonparty), engage in substantive discussions with the parties, and make an enforcement decision. In the end, it was only six months between the merger agreement and the filing of this case. In a situation like this, post-complaint discovery is particularly necessary as the Complaint and Defendants’ Answer (not yet filed as of this submission) frame the issues to be litigated. Discovery is not just about obtaining evidence so that the government may carry its burden of proof at trial. The government also has the right to take full discovery as to any defenses to the Complaint. See Fed. R. Civ. P 26(b)(1) (“Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense.”). Here, for example, Plaintiffs need additional deposition and document discovery from Defendants and other entities regarding: pricing and other competitive interactions between Defendants and their airline competitors; competitive effects in the markets at issue; smaller airlines identified by Defendants as allegedly being able to replace the competition lost as a result of the proposed merger (Def. Mem. at 3); any business customers Defendants identify as supporting the merger; the economic analysis upon which Defendants are likely to rely in support of their efficiencies claims; and the “real world” support for the assumptions used in that analysis. Plaintiffs also need to depose party witnesses in order to perfect admissible evidence 7 Case 1:13-cv-01236-CKK Document 37 Filed 08/27/13 Page 8 of 12 and cross examination material needed to establish factual inconsistencies with the Defendants’ assertions; obtain and submit expert discovery, including expert reports and depositions; and engage in pre-trial motions practice to narrow and clarify the issues for trial. A March 3, 2014 trial-ready date allows for four months of document discovery and fact depositions, a month for expert discovery, and then a month for pretrial motions and briefs. In a case of this magnitude, that is hardly a leisurely schedule. 3. Six Months to A Full Trial on the Merits Is in Keeping with Timetables in Comparable Merger Cases. Defendants rely heavily on their assertion that they are being held to a different litigation schedule than were parties to other government merger challenges over the last thirteen years (or, as they put it, “since the turn of the century”). But Defendants reach that erroneous conclusion based on improper comparisons and highly selective data. Comparing apples to apples produces a much different perspective. To begin with, eleven of the cases appearing on Defendants’ Table 1 (Def. Mem. at 4) were preliminary injunction proceedings brought by the Federal Trade Commission under section 13(b) of the FTC Act. 15 U.S.C. § 53(b). Unlike here, the courts in those cases were not being asked to make a determination on the antitrust merits of the FTC claim: “Critically, the district court’s task is not ‘to determine whether the antitrust laws have been or are about to be violated. That adjudicatory function is vested in the FTC in the first instance.’” Whole Foods, 548 F.3d at 1048 (quoting FTC v. H.J. Heinz Co., 246 F.3d 708, 714 (D.C. Cir. 2001)). Thus, the trial on the merits would follow only after the section 13(b) preliminary injunction ruling. Trial occurs before an administrative law judge (who ultimately recommends a decision to the five-member Commission) and typically involves a process that takes a year or more, including months of pretrial discovery. Here, in contrast, this Court will decide the merits. It is therefore 8 Case 1:13-cv-01236-CKK Document 37 Filed 08/27/13 Page 9 of 12 similarly entitled to have the benefit of full exploration of the issues in dispute. In short, the FTC cases listed in Defendants’ Table 1 are completely inapposite. Second, Defendants’ Table 1 is highly selective and omits a number of recent merger challenges. Table A below shows the scheduled time to trial in representative merger cases brought by the United States (including three from “this century”) that did not find their way onto Defendants’ Table 1 because they were ultimately settled or abandoned: TABLE A SCHEDULED TIME TO TRIAL IN REPRESENTATIVE UNITED STATES MERGER CASES OMITTED FROM DEFENDANTS’ TABLE 1 CASE NAME AT&T/T-Mobile Dean Foods JBS Compuware Northwest Airlines 13 Primestar Lockheed Martin FILING OF COMPLAINT Aug. 31, 2011 (D.D.C) Jan. 22, 2010 (E.D. Wisc.) Oct. 20, 2008 (N.D. Ill.) Oct. 29, 1999 (D.D.C.) Oct. 23, 1998 (E.D. Mich.) May 12, 1998 (D.D.C.) Mar. 23, 1998 (D.D.C.) DAYS TO TRIAL 166 545 200 157 740 263 168 When judged against this more complete set of benchmarks, Plaintiffs’ proposed schedule is not in any way extraordinary. For example, Defendants ignore one of the most recent merger cases filed by the United States in this Court—U.S. v. AT&T, T-Mobile USA, Inc., and Deutsche Telekom AG, No. 11-cv-01560 (D.D.C., filed Aug. 31, 2011). In that case, Judge Huvelle set a schedule that provided 166 days from the filing of the complaint to trial. Finally, Defendants’ comparison of this case to U.S. v. SunGard Data Sys., Inc., 172 F. Supp. 2d 172, 179-80 (D.D.C. 2001), is also inapt. SunGard was a far smaller merger—$825 13 U.S. v. NW Airlines Corp. et al, No. 98-74611 (E.D. Mich. Filed Oct. 23, 1998) was the last litigated government challenge to a transaction that would combine the interests of two airlines. In that case, the United States challenged a partial stock acquisition that would have linked the competitive interests of the fourth and fifth largest airlines, leading to anticompetitive effects in numerous nonstop and connect routes throughout the United States. 9 Case 1:13-cv-01236-CKK Document 37 Filed 08/27/13 Page 10 of 12 million compared to the $14 billion here—and the firm being acquired was in imminent danger of losing substantial value prior to trial. American, however, is a successful company generating record profits. This case bears no resemblance to the situation in SunGard. 14 4. The Public Interest Strongly Favors Plaintiffs’ Proposed Schedule. Defendants claim that the public interest favors a rush to judgment because the transaction will bring benefits to millions of passengers. Def. Mem. at 2. A different perspective—and the one motivating the lawsuit—is that the merger threatens significant consumer harm. That harm and any asserted benefits flowing from the merger should be carefully evaluated. As the Court of Appeals explained in FTC v. H.J. Heinz Co., 246 F.3d 708, 720-21 (D.C. Cir. 2001): [T]he high market concentration levels present in this case require, in rebuttal, proof of extraordinary efficiencies . . . . Moreover, given the high concentration levels, the court must undertake a rigorous analysis of the kinds of efficiencies being urged by the parties in order to ensure that those “efficiencies” represent more than mere speculation and promises about post-merger behavior. The public interest here is similarly served by a rigorous analysis of Defendants’ alleged efficiencies and consumer benefits. CONCLUSION Plaintiffs respectfully request that the Court deny Defendants’ Proposed Scheduling Order and enter the schedule Plaintiffs will submit later this week in the proposed Case Management Order. 14 At a hearing in U.S. v. Echostar, No. 02-2138 (D.D.C. 2002) (Huvelle, J.), the court rejected defendants’ reliance on SunGard in support of a truncated discovery schedule: “there was really only one issue there on how you define the relevant market, and I can say that that was a backbreaking experience for everybody concerned . . . it was certainly not something that anyone would consider the ordinary or desirable way for a judicial proceeding to proceed.” Exh. 3 at 54. 10 Case 1:13-cv-01236-CKK Document 37 Filed 08/27/13 Page 11 of 12 FOR THE UNITED STATES Respectfully submitted on Aug. 27, 2013. /s/ Mark W. Ryan (D.C. Bar # 359098) Director of Litigation Antitrust Division U.S. Department of Justice 450 Fifth Street Northwest, Suite 8000 Washington, DC 20530 Telephone: 202- 532-4753 Facsimile: 202- 307-2784 E-mail: mark.w.ryan@usdoj.gov FOR THE STATE OF ARIZONA /s/ Nancy M. Bonnell Antitrust Unit Chief Arizona Bar No. 016382 1275 West Washington Phoenix, Arizona 85007 Telephone: 602-542-7728 Facsimile: 602-542-9088 Email: nancy.bonnell@azag.gov FOR THE DISTRICT OF COLUMBIA /s/ Bennett Rushkoff (D.C. Bar # 386925) Chief, Public Advocacy Section /s/ Nicholas A. Bush (D.C. Bar # 1011001) Assistant Attorney General Office of the Attorney General 441 Fourth Street, N.W., Suite 600-S Washington, DC 20001 Telephone: 202-442-9841 Facsimile: 202- 715-7720 E-mail: nicholas.bush@dc.gov 11 Case 1:13-cv-01236-CKK Document 37 Filed 08/27/13 Page 12 of 12 FOR THE STATE OF FLORIDA FOR THE STATE OF TEXAS /s/ Lizabeth A. Brady Chief, Multistate Antitrust Enforcement Christopher Hunt Associate Attorney General PL-01, The Capitol Tallahassee, Florida 32399-1050 Telephone: 850-414-3300 Facsimile: 850-488-9134 /s/ Mark A. Levy Kayna Stavast-Piper Assistant Attorney General Texas Bar No. 24014555 Office of the Attorney General of Texas 300 W. 15th Street, 7th Floor Austin, Texas 78701 Telephone: 512-936-1847 Facsimile: 512-320-0975 Email:mark.levy@texasattorneygeneral.com FOR THE COMMONWEALTH OF PENNSYLVANIA FOR THE COMMONWEALTH OF VIRGINIA /s/ James A. Donahue, III Executive Deputy Attorney General PA Bar No. 42624 Jennifer A. Thomson Deputy Attorney General Public Protection Division 14th Floor, Strawberry Square Harrisburg, PA 17120 Telephone: 717-787-4530 Facsimile: 717-787-1190 Email: jdonahue@attorneygeneral.gov /s/ Sarah Oxenham Allen (Va. Bar # 33217) Matthew R. Hull (Va. Bar # 80500) Assistant Attorneys General Office of the Attorney General Consumer Protection Section 900 East Main Street Richmond, VA 23219 Telephone: 804-786-6557 Facsimile: 804 786-0122 Email: SOAllen@oag.state.va.us FOR THE STATE OF TENNESSEE /s/ Victor J. Domen, Jr. Senior Antitrust Counsel Tennessee Bar No. 015803 500 Charlotte Avenue Nashville, TN 37202 Telephone: 615-253-3327 Facsimile: 615-532-6951 Email: Vic.Domen@ag.tn.gov 12 Case 1:13-cv-01236-CKK Document 37-1 Filed 08/27/13 Page 1 of 3 EXHIBIT 1 “A Message from Chairman and CEO Tom Horton,” Aug. 26, 2013, as found at http://blogs.star-telegram.com/sky talk/2013/08/amr-posts-292million-profit-in-july.html Case 1:13-cv-01236-CKK Document 37-1 Filed 08/27/13 Page 2 of 3 Sky Talk Airlines, travel and aerospace August 26, 2013 AMR posts $292 million profit in July American Airlines' parent company, AMR Corp., reported a $292 million profit in July, according to a court document filed on Monday. Excluding $57 million in reorganization fees, the Fort Worth-based carrier posted a monthly operating profit of $349 million. The financial disclosure is part of the monthly operating reports AMR is required to file with the bankruptcy court. "We are completing one of the most successful turnarounds in aviation history," AMR chief executive Tom Horton said in a letter to employees. "We are building a strong, competitive and profitable new American poised to lead again." The company said it spent $28 million on aircraft financing renegotiations and rejections and $27 million on professional fees during the month. It also spent $2 million on "other" reorganization items which are not detailed in the report. AMR also said that its mainline carrier, American Airlines, had passenger revenues of $1.9 billion with its regional affiliates, including American Eagle, bringing in $270 million in revenues. Total revenues for the month were $2.48 billion. The company ended the month with $611 million in cash and $5.2 billion in short-term investments for a total of about $5.8 billion on hand. That number does not include $933 million in restricted cash. Keep reading for the full letter from Horton. -Andrea Ahles Dear American Team, Over the past twenty months, we’ve been working through a difficult but very successful restructuring. Along the way, there were new routes to launch, products to introduce and dozens of new aircraft to bring into the system. There were tough days and good days, and there were plenty of days when our destination on this journey seemed very far away. Today is a very good day. This morning we reported our financial results for July and here's the headline: we are completing one of the most successful turnarounds in aviation history. We are building a strong, competitive and profitable new American poised to lead again. Thanks to your hard work, American earned a net profit of $352 million in July, excluding reorganization and special items – a record for any month in our history. In fact, our July profit alone nearly equals the $357 million record profit we reported for the entire second quarter. Our consolidated, passenger and unit revenues also set all-time highs for any month. That’s extraordinary – congratulations! In addition to our strong financial performance, momentum is building throughout American. We're growing our formidable international network with both new routes and expanded partnerships. This month we announced expansion of our partnership with LATAM to increase our network connectivity in Brazil and Colombia, our lead in the increasingly Case 1:13-cv-01236-CKK Document 37-1extending Filed 08/27/13 Page 3 of 3 important Latin American market. Our industry-leading fleet renewal is accelerating. We reached a major milestone in July when we welcomed our first Airbus A319 at the Airbus factory in Hamburg – the first of 260 planned Airbus aircraft on the way. The A319 offers better fuel efficiency with state of the art interiors and inflight entertainment. It’s a great aircraft for our customers. We launched our first service with the 76-seat Embraer E-175. This large regional aircraft is a great product that allows us to better match supply and demand with the right amount of schedule frequency as our competitors do. And there is more to come. In November we are scheduled to take delivery of our first specially configured Airbus A321T, which will start flying JFK-LAX and JFK-SFO in January 2014. Best of all, with this progress comes opportunity for our people. We are hiring hundreds of new flight attendants and recalling and training pilots at an accelerating pace. Finally, and most importantly, we are focused on completing our merger with US Airways. You probably saw last week’s news that we are seeking a November trial date, and the American team is standing strong together with US Airways to get this merger closed. I appreciate that so many of you have asked how you can help, and in the coming days we’ll be sharing ways you can get involved to express your support. We’re ready to make our case in court for the merger's significant benefits to all of our stakeholders and the communities we serve. As I travel around the system, I hear from lots of you and lots of our customers. What's clear to me is that the people of American are doing a great job for our customers every day and the results speak for themselves. In the coming weeks, I look forward to sharing with you the latest developments and more news about the new American moving ahead. Thanks for all you do! Tom Aug 26, 2013 8:38:00 AM Permalink Comments (0) TrackBack (0) TrackBack TrackBack URL for this entry: http://www.typepad.com/services/trackback/6a00d8341c2cc953ef0192acc4173a970d Listed below are links to weblogs that reference AMR posts $292 million profit in July: Comments Verify your Comment Previewing your Comment Posted by: This is only a preview. Your comment has not yet been posted. Post Edit Your comment could not be posted. Error type: Your comment has been saved. Comments are moderated and will not appear until approved by the author. Post another comment The letters and numbers you entered did not match the image. Please try again. As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments. Having trouble reading this image? View an alternate. Continue Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 1 of 46 EXHIBIT 2 American Airlines, “The New American,” Dec. 12, 2012, available at http://aviationblog.dallasnews.com/files/2012/12/Hortonpresentation-to-APA-Dec.-13-2012.pdf). (Redactions in web-posted version) HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 2 of 46 The New American December 13, 2012 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 3 of 46 2012 REVIEW 2 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 4 of 46 American has been developing a strong foundation for success Network and Alliances  Hubs in the “right” places for High Value Customers  Increased network strength through broad Latin American reach  Enhanced premium customer experience Products and Services  New aircraft and leading onboard products  Ability to be productive and connected Fleet Deal  Largest order in aviation history  $13B in committed financing American Airlines 3 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case Document 37-2 Filed 08/27/13 Page 5 of 46 As a result, revenue growth has been outpacing the industry I Since January, our unit revenue growth has been at or near the top of the industry every month I Since we began restructuring, we have renewed or won more corporate account agreements than over the same period last year Consolidated Unit Revenue Growth Ranking Adjusted for Weather and Operational Disruptions sioRig?) 8? Sit. ?33 4..-. I American Airlines HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case Document 37-2 Filed 08 27/13 Page 6 of 46 American has performed the best of all airlines after filing for bankruptcy protection Mainline Year-over-Year Unit Revenue Performance Following Bankruptcy Filing Carrier versus the Industry Ist After Filing 2nd After Filing (8.3) (9.1) Carrief 0.8% 1.3% 1.5% CapacntyA Source: IRDB, Industry includes AAl?l HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 7 of 46 We continue to close the margin gap to the industry  For the 3rd consecutive quarter, we have narrowed our margin gap to the industry year over year American Airlines Corporate Pre-Tax Margins 1.5% 4Q11 1Q12 2Q12 1.7% 3Q12 (3.5%) (4.1%) Margin Gap to Industry 4Q11 1Q12 2Q12 3Q12 YOY B/(W) (pts) (1.6) 2.0 4.1 4.9 Industry Margins are Weighted on Total Revenue and exclude special items Industry includes DAL, UAL, LCC, & LUV American Airlines 6 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 8 of 46 RESTRUCTURING 7 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 9 of 46 We are completing a highly successful restructuring…  One of the fastest restructuring efforts of all the major global carriers in the past decade – United: 38 months – Northwest: 20 months – Delta: 19 months  End result is a company that is well-positioned for long term success – Sustained profitability – Labor stability with all groups for the first time in 30 years – Management, labor, and owners are all financially aligned and invested in the company’s success  With the restructuring near complete, our plan is on track American Airlines 8 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 10 of 46 …which will pay dividends for everyone over the long term Actions taken Results  Rejected or renegotiated aircraft financing of >400 aircraft  [Redacted] in non-labor cost savings over 5 years  Rejected or renegotiated >9000 vendor contracts, and addressed > 500 real estate leases  Leading non-labor cost position among the US Majors  Compromised [Redacted] of debt in addition to aircraft leases  [Redacted]  Flexible fleet structure allows change as market conditions warrant – [Redacted]  Planned refinancing for [Redacted] of equipment backed debt – [Redacted]  Reduced over 1,500 management and support positions, saving approximately 17%  Highly-nimble decision making structure with flexibility  Restructured the top Leadership Team  Best management productivity of the majors  Renegotiated and ratified next generation labor contracts  New growth flying American Airlines 9 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 11 of 46 The New American: Redesigned for long-term success  Expanded global network that, in conjunction with oneworld partners, drives a differential share of the most valuable customer segments  Modernized products and services that elevates American to an industry leadership position  New and expanded fleet that will significantly grow pilot ranks and promotions  Lower cost structure and debt profile that will generate highly attractive, long term financial results and allow us to reinvest in the business and provide career opportunities for our people American Airlines 10 HIGHLY CONFIDENTIAL - Case Document 37-2 Flled 08/27/American?s revenue comes from just 25% of customers Global Network 0 Hubs in cities with the largest concentration of high value customers An expanding international network designed around the cities the most important customers want to fly 0 Deeper and broader partnerships with the world?s premium airlines Customer Experience and Investment in products and services that high value customers desire Brand Superior passenger productivity and connectivity through technology A seamless and comfortable travel experience for high value customers Broad portfolio of aircraft creates a convenient schedule pattern Fleet and Rejuvenated fleet offers modern experience and best fuel efficiency among Facilities peers 0 Moving to youngest, most efficient fleet among U.S. peers Premium terminals in hub cities Increasing share of the high value customer spend will increase profitability American Airlines 11 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case Document 37-2 Filed 08/27/13 Page American: Preferred global carrier for Investors Operational Flexibility Capital Structure 0 Among the lowest non-labor costs of any major U.S. carrier Competitive labor costs Retirement and medical benefits in line with the industry Fleet flexibility to adapt to changing market conditions Broad portfolio of aircraft choices to address network opportunities - Market-based scope clauses to expand regional operations and codesharing with domestic partners Ability to outsource maintenance and airport operations [Redacted] [Redacted] [Redacted] EBITDAR margin and balance sheet strength American Airlines HIGHLY CONFIDENTIAL - Case Document 37-2 Filed 08/27/13 Pag 14 of 46 - [Redacted] new routes planned, with a focus on long-haul flying 0 560 new aircraft on firm order with 537 aircraft on option Focus on global growth inline with traffic projections We expect to add approximately 1650 pilots by 2017 Opportunity for advancement 0 Average time in seat will significantly decrease Immediate path to industry standard pay Compensation Equity stake in the new American 0 Retirement and medical benefits in line with industry Collaborative approach to freezing pensions Significant Pilot growth and advancement at the new American American Airlines HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 15 of 46 Current Network 14 HIGHLY CONFIDENTIAL - Case Document 37-2 Filed 08/27/13 Pag RESTRICTED DISSEMINATION ONLY 16 of 46 American?s hubs are in the right locations and poised for growth U.S. Metropolitan Population (millions) Fortune 500 Corporations 68 19 29 18 139 New York Los Angeles Chicago Dallas Miami Population Rank #1 18-9 Population Rank #2 Population Rank #3 Population Rank #4 Population Rank #8 - Corporate travel contracts are won based on fit of network and account travel patterns - Since December, corporate account wins and renewals have accelerated year over year Source: US Census, 2010, Fortune 2012 American Airlines HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 17 of 46 Presence in top corporate markets  American has substantial service from its hubs to the top corporate markets Service to Top 10 Corporate Markets by Hub AA Service oneworld Service 10 10 10 10 10 10 ORD DFW MIA 9 8 1 1 8 NYC 7 LAX Source: Diio NYC includes EWR, JFK and LGA American Airlines 16 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 18 of 46 American’s network provides competitive coverage which will only improve with growth prospects Top 100 Global City Pairs Served 79 58 49 22 UA AA Top Dom & Int’l city pairs based on passengers for all carriers Source: 2012 DIIO DL American Airlines US 17 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 19 of 46 American and our JB Partnerships are strong in the most important markets  We continue to exceed these expected corporate shares with both a positive revenue and passenger share gap in all of our hubs Fair Share of Corporate Revenue Top 50 Global Markets 36% 31% 13% 4% AA+ JB Source: YE June 2012 QSI weighted for YE Jul 2012 travel All companies in PRISM were used for industry revenue UA + JB DL + JB American Airlines US + JB 18 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 20 of 46 oneworld is the preferred alliance for High Value Customers and generates disproportionate revenue share  Outsized revenue share validates oneworld’s positioning as the premium global alliance and its resonance with the High Value Customers Largest Worldwide Premium Markets Revenue Premium International Premium Passengers Per Day Each Way London versus Seat Share (pts) Top 100 global cities 4,200 4.0 Tokyo 2,500 New York 2,500 Hong Kong 2,300 Singapore 2,300 Paris 1.0 1,700 (5.0) Seoul Frankfurt 1,400 oneworld Star Skyteam 1,300 oneworld Data Source: IATA Airport-IS, 12 months ended July 2012, includes members-elect . Top 100 cities from Mastercard study American Airlines 19 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 21 of 46 We have an enviable position in Latin America  Latin America is one of the fastest growing economic regions  [Redacted] [Redacted] American Airlines 20 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 22 of 46 Product 21 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 23 of 46 American is investing in the product, both in facilities…  Our ‘Next Generation Airport’ will open at DFW Terminal A this February [Redacted] American Airlines 22 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 24 of 46 …And in the aircraft  In January we start service with our new 777-300ER which will have best in class products and service in all cabins American Airlines 23 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 25 of 46 Our narrow-body product will be industry leading A321 Transcon First Class A320 Family & B737 Main Cabin A321 Transcon Business Class A320 Family & B737 Main Cabin American Airlines 24 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 26 of 46 With the introduction of the 777-300ER and the A321T we will have the best product flying Video showing new 777-300ER interior and A321T American Airlines 25 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 27 of 46 Modernizing our Brand We have an iconic brand that our customers and people love  It has represented us for 40+ years and is a competitive asset  However, our competitors are not standing still, and neither can we We have been thoughtful and rigorous in our approach to updating our brand:  2+ years in the making  Built on customer and employee input Our new brand promise and identity will continue to guide our investments throughout the airline This is a symbol of change, not simply a change of symbol American Airlines HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 28 of 46 NEW AMERICAN PLAN 27 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case Document 37-2 Filed 08/27/13 Page 29 of 46 With a competitive cost structure and a growing fleet, American will grow capacity in high-growth international markets Cross Geography Passenger Growth 2012 International Capacity RPM Growth shown as CAGR Percent Percent of ASMs AMR forecast IATA (2012-17) (2011-15) 43% 43% 40% 37% [Redacted] United Delta American US American Airways 2017 plan Source: FY2012 Diio Schedule Data A a rl 2 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case Document 37-2 Filed 08/27/13 Page 30 of 46 Our new network expands our domestic and international reach through both organic growth and partnerships Current Network Future Network I Our focus is on building spoke strength organically to our [Redacted] hubs I Strategic partners help create spoke breadth Buffalo I [Redacted] [Redacted] I [Redacted] Bogota American Airlines HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 31 of 46 What it means for pilots: Growth in international flying  Growth is enabled by partnerships, which gives us the critical feed to grow our long-haul operations  Additionally, we can better utilize our limited slots:  We plan to add [Redacted] new routes, in addition we plan to add [Redacted] Mainline New Routes By Entity (2013-2017) Domestic Latin [Redacted] Atlantic Pacific Middle East/India/Africa TOTAL American Airlines 30 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case Document 37-2 Flled 08/27/13 Page 32 of 46 Evolution of American?s Mainline International etwork 2013 [Redacted] HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case Document 37-2 Flled 08/27/13 Page 33 of 46 Evolution of American?s Mainline International etwork 2014 [Redacted] HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case Document 37-2 Flled 08/27/13 Page 34 of 46 Evolution of American?s Mainline Internationa etwork 2015 [Redacted] HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case Document 37-2 Flled 08/27/13 Page 35 of 46 Evolution of American?s Mainline International etwork 2016 [Redacted] HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case Document 37-2 Flled 08/27/13 Page 36 of 46 Evolution of American?s Mainline International etwork 2017 [Redacted] HIGHLY CONFIDENTIAL - Case Document 37-2 Flled 08/2 American?s International Network [Redacted] Current Additions HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 38 of 46 What it means for pilots: More firm aircraft on order than United/Delta/US Airways combined  Aircraft orders come with $13B in committed financing Firm Fleet Orders 2012 A320 Family 2013 2014 2015 2016 20 35 30 25 260 239 B738 28 31 20 20 20 B777 Family 2 8 5 2 2 2 11 13 B787 2017 >2018 [Redacted] TOTAL 19 42 30 59 62 63 60 59 227 560 23 25 19 31 36 14 … .. 0 12 19 19 19 19 … .. 14 21 25 7 0 3 … .. American Airlines 37 HIGHLY CONFIDENTIAL - Case Document 37-2 Filed 08/27/13 Pag 39 of 46 What it means for pilots: Career advancement I Over the next five years, the company expects to add about 1,650 new pilot jobs resulting in promotional opportunities and seniority advancement Planned Number of Pilots and Seniority Progression 10,000 9,000 8,000 3 7,000 2 a; CA 2 5,000 l737/S80/320 CA .8 4 000 . l777/787 F0 5 l757/767 F0 .9 3,000 F0 3 2 2,000 1,000 . YE 2012 YE 2015 YE 2017 American Airlines HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 40 of 46 What it means for pilots: Pilot earnings will increase dramatically over the next five years  On average, a Pilot’s income in 2017 is expected to be about 50% higher than his or her 2012 earnings Annual Pilot Pay ($000s) This Year $285 $220 $205 $175 $110 Group 2 FO $220 $165 $130 Group 3 FO 2017 $285 $210 $185 $145 Group 4 FO Group 2 CA American Airlines Group 3 CA Group 4 CA 39 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 41 of 46 INVESTORS 40 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 42 of 46 Highly competitive overall unit cost structure  American will have among the lowest non-labor CASM of all full-service international airlines [Redacted] American Airlines 41 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 43 of 46 [Redacted] American Airlines 42 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 44 of 46 Debt levels will be reduced by nearly [Redacted] [Redacted] [Redacted] American Airlines 43 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 45 of 46 Cost improvements and revenue enhancements produce sustainable profitability [Redacted] American Airlines 44 HIGHLY CONFIDENTIAL - RESTRICTED DISSEMINATION ONLY Case 1:13-cv-01236-CKK Document 37-2 Filed 08/27/13 Page 46 of 46 The new American will be strong and vibrant  A strong foundation in place – Hubs in the right places for the most valuable customers – Strong base of High Value Customers  Restructuring has been highly successful – Strong performance despite distractions of bankruptcy – Competitive cost structure and strong balance sheet – Plan has been thoroughly vetted by experts and advisors  Growth will create pilot jobs and advancement – More firm aircraft on order than all other major Domestic carriers combined with $13 Billion of committed financing – New routes planned with an emphasis on international flying American Airlines 45 Case 1:13-cv-01236-CKK Document 37-3 Filed 08/27/13 Page 1 of 8 EXHIBIT 3 Transcript of the Motions Hearing Before the Honorable Ellen Segal Huvelle, United States District Judge United States of America, et al vs. Echostar Communications Corp, et al Civil Action No. 02-2138 (D.D.C.) 10/28/2003 14,50 FAX DDJ ANTI-TRUST DIV. Case Document 37-3 Filed 08/27/13 Page 2 of 8 @0021?081 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et a1, . Docket NO. CA 02-2138 Plaintiffs, . Washington, D. C. . November 5, 2002 VS. . 1:00 p.m. ECHOSTAR COMMUNICATIONS CORP., et al, Defendants TRANSCRIPT OF MOTIONS HEARING BEFORE THE HONORABLE ELLEN SEGAL HUVELLE UNITED STATES DISTRICT JUDGE APPEARANCES: For the Plaintiffs: R. HEWITT PATE, Deputy Assistant Attorney General Department of Justice Antitrust Division ANNE SCHNEIDER Assistant Attorney General State of Missouri JAY HIMES, Bureau Chief RICHARD E. GRIMM, Assistant Attorney General Attorney General's Office State of New York BRADY JOHNSON, Attorney General's Office State of Washington JULIE BRILL. Assistant Attorney General "Cap Office of the Attorney 1?9 General of Vermont 10f28/2003 14:50 FAX rm ANTI-TRUST 003x051 Case Document 37-3 Filed 08/27/13 Page30f8 APPEARANCES (Continued) PATRICIA NAGLER, Deputy Attorney General Office of the California Attorney General TERESA BROWN, Assistant Attorney General Office of the Attorney General of Arkansas BRIAN MORRIS, Assistant Attorney General Office of the Attorney General of Montana RODNEY I. KIMURA. Deputy Attorney General Office of the Attorney General of Hawaii FRANCIS ACKERMAN, Assistant Attorney General Maine Office of Attorney General BRETT T. DE LANGE. Deputy Attorney General Office of the Attorney General of Idaho TODD A. SATTLER. Assistant Attorney General Office of the Attorney General of North Dakota DAVID MONAHAN, Assistant Attorney General Office of the Attorney General of Massachusetts JOHN BERGEN, Office of the Attorney General of Iowa DAVID J. GILLES, Assistant Attorney General Office of the Attorney General of Wisconsin l4ib'l I-AX DDJ ANTI-TRUST DIV. @004/081 Case Document 37-3 Filed 08/27/13 Page4of8 APPEARANCES (Continued) ANTONIA CONTI, Assistant Attorney General Office of the Attorney General of Connecticut MARIE Assistant Attorney General Office of the Attorney General of Nevada MARK TOBEY, Assistant Attorney General KIM VAN WINKLE, Assistant Attorney General Office of the Attorney General of Texas ANDREW AUBERTINE, Assistant Attorney General Office of the Attorney General of Oregon LINDA DAVIS, Office of the Attorney General of Mississippi DON ALLEN RESNIKOFF, Assistant Corporation Counsel, Antitrust Office of the Corporation Counsel, District of Columbia ROGER REYNOLDS, Assistant Attorney General Attorney General, State of Connecticut JAMES DONAHUE, Chief Deputy Attorney General JOSEPH S. BETSKO, Deputy Attorney General Office of Attorney General Commonwealth of For the Defendants: DONALD FLEXNER, ESQUIRE Boies, Schiller Flexner, LLP 530 Wisconsin Avenue, N.W. Washington, D.C. 20015 10X28f2003 14:51 FA): um ANTI-TRUST DIV. Case Document 37-3 Filed 08/27/13 Paqe50f8 For the Defendants: HELENE D. JAFFE, ESQUIRE Weil, Gotshal Manges, LLP 767 Fifth Avenue - New York, New York 10153 Official Court Reporter: SANTA THERESA 21220 Room 4800C U. S. Courthouse Washington, D. C. 20001 (202) 289-1160 Computer-Aided Transcription of Stenographic Notes Pages 1?60 10/98/2003 14155 FAX UUJ guano/Uh. Case Document 37-3 Filed 08/27/13 Page 6 of 8 53 permanent injunction to emergency relief? MR. PATE: Well, if by some occurrence the FCC immediately gave a green light, then, sure, we would need to seek preliminary relief so that the anti?trust laws would then We would stand between the parties' consummation of a merger. do that, as always, on an expedited schedule. But, again, the schedule we proposed was one that was not picked as a situation where there was no urgency at all because of an FCC proceeding. Rather we think it is the best analogy that the Court can look to, to figure out what a very aggressive schedule would be. THE COURT: Where was the Lockheed?Martin case tried? MR. SCOTT: I'm sorry, Your Honor, I believe that case was resolved before it actually went all the way to trial. MR. PATE: The schedule is the point we were making. Not the time to try it. The schedule for trial. THE COURT: Okay. The Court will take a short recess. (Recess) THE COURT: I apologize to the people on the phone. Are they still on the conference call? THE DEPUTY CLERK: Yes, Your Honor. THE COURT: I also apologize for the temperature in here. I don?t control the temperature in the courtroom. The Court has heard the argument, has read all of the papers that have been submitted to me. and I hear Mr. Flexner telling me that the schedule they propose is essential to the IQJUU Ule l?UbUbe'l Case Document 37-3 Filed 08/27/13 Page 7 of 8 54 parties for their agreement. I am one of the few people who have actually tried to conclusion an.anti?trust case in less than four weeks, and That was certainly this case doesn?t compare with that case. an $825,000,000 merger, three live witnesses, 12 affidavits and 457 exhibits total. And the issue there was that the company would lose substantial value with respect to the bankruptcy if the decision was not issued by just about this time last year. Mid-November. Because the Bankruptcy Court had issued drop dead deadlines. It was not the parties? doing, it was the Bankruptcy Court. And there was an issue regarding the company?s value if the transaction wasn?t ruled on in a timely manner, but there was really only one issue there on how you define the relevant market, and I can say that that was a backbreaking experience for everybody concerned. Both parties agreed to that schedule. They asked for it. They wanted it. They moved together. And the Court bought into the schedule and committed itself to meeting the deadlines but it was certainly not something that anyone would consider the ordinary or desirable way for a judicial proceeding to proceed. The Court is not willing to abide by the schedule proposed by the defendants here. This is a they're asking basically to put the entire case on in less than six weeks. This case has been under consideration by the FCC and the 10x28x2003 14:55 FAX Case Document 37-3 Filed 08/27/13 Paoe DOJ ANTI-TRUST DIV. 1&0351081 55 Department of Justice for some 11 months. This deal was proposed, as far as I understand, in October, 2001. And now through no fault of anyone I suppose they're asking this Court to do what no one else has done so far, which is to try this case, decide this case and provide for time for appellate review in six weeks. And this is a self-created deadline, if you don't mind me saying so. This is within the discretion of Hughes. They may or may not trigger the transaction date. They can decide to change this if they want to, if it's such a valuable and important transaction. It is not something that the Bankruptcy Court is saying has to happen or the whole transaction will fall apart. 7 And I think the case I cited before, the FCC versus A.J. Heinz makes it perfectly clear if the merger is prevented, nothing stops it from being resurrected. If it's so important to the companies and so pro-competitive there would be tremendous incentive for the companies doing something. There is a major thing here which Mr. Flexner has basically said they are interested in this Court's decision because it would be persuasive to the FCC. The FCC who had 11 months to review this matter and issued a ISO?page decision rejecting the merger. The companies are now given an opportunity to come up with a different plan. Apparently there have been no transaction documents signed, as far as I understand, and the Case 1:13-cv-01236-CKK Document 39 Filed 08/27/13 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., ) ) Plaintiffs, ) ) v. ) ) US AIRWAYS GROUP, INC., et al., ) ) Defendants ) _______________________________________) Civil Action No. 13-1236 (CKK) APPEARANCE OF COUNSEL To: The clerk of court and all parties of record. I am admitted or otherwise authorized to practice in this Court, and I appear in this case as counsel for the Association of Professional Flight Attendants. Date: August 27, 2013 Respectfully submitted, /s/ N. Skelly Harper N. Skelly Harper D.C. Bar No. 1004509 GUERRIERI, CLAYMAN, BARTOS & PARCELLI, P.C. 1900 M Street, N.W., Suite 700 Washington, DC 20036 Tel.: (202) 624-7400 Fax: (202) 624-7420 sharper@geclaw.com Attorney for Association of Professional Flight Attendants Case Document 40 Filed 08/27/13 Page 1 of 1 A0 458 (Rev. 06f09) Appearance of Counsel UNITED STATES DISTRICT COURT for the District of Columbia United States of America. et al. Plainti?' V. Case No. US Airways Group. inc. et al. Defendant APPEARANCE OF COUNSEL To: The clerk of eourt and all parties of record I am admitted or otherwise authorized to practice in this court, and I appear in this case as'counsel for: Plaintiff Commonwealth of Date: 08/27/2013 Is! Jennifer A. Thomson Attorney '5 sz'gI-zafm'e Jennifer A. Thomson (PA Bar ID No. 89360) Printed name and bar number Office of Attorney General Commonwealth of Strawberry Square, 14th Floor Harrisburg. PA 17120 Address ithomson@attorneygeneral.gov Email address (717) 787-4530 Telephone number (717) 787-1190 FAX number Case 1:13-cv-01236-CKK Document 41 Filed 08/27/13 Page 1 of 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiff, v. US AIRWAYS GROUP, INC. 111 W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION 4333 Amon Carter Boulevard Fort Worth, TX 76155 Defendants. § § § § § § § § § § § § § § § § CASE NO. 1:13-CV-01236-CKK NOTICE OF APPEARANCE BY MJ MOLTENBREY PLEASE TAKE NOTICE that MJ Moltenbrey of Paul Hastings, LLP hereby enters her appearance as counsel on behalf of Defendants, AMR Corporation in the abovecaptioned case. Dated: August 27, 2013 Respectfully submitted, /s/ MJ Moltenbrey MJ Moltenbrey, (DC Bar No. 481127) Email: mjmoltenbrey@paulhastings.com Paul Hastings LLP 875 15th Street, N.W. Washington, DC 20005 Tel: (202) 551-1725 Fax: (202) 551-0225 ATTORNEYS FOR DEFENDANTS AMR CORPORATION Case 1:13-cv-01236-CKK Document 42 Filed 08/27/13 Page 1 of 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiff, v. US AIRWAYS GROUP, INC. 111 W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION 4333 Amon Carter Boulevard Fort Worth, TX 76155 Defendants. § § § § § § § § § § § § § § § § CASE NO. 1:13-CV-01236-CKK NOTICE OF APPEARANCE BY SCOTT FLICKER PLEASE TAKE NOTICE that Scott Flicker of Paul Hastings, LLP hereby enters his appearance as counsel on behalf of Defendants, AMR Corporation in the above-captioned case. Dated: August 27, 2013 Respectfully submitted, /s/ Scott Flicker Scott Flicker, (DC Bar No. 425825) Email: scottflicker@paulhastings.com Paul Hastings LLP 875 15th Street, N.W. Washington, DC 20005 Tel: (202) 551-1726 Fax: (202) 551-0126 ATTORNEYS FOR DEFENDANTS AMR CORPORATION Case 1:13-cv-01236-CKK Document 43 Filed 08/28/13 Page 1 of 3 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK ____________________________________ ) ) ) Plaintiffs, ) ) ) ) v. ) US AIRWAYS GROUP, INC., and ) ) AMR CORPORATION ) ) Defendants. ) ____________________________________) UNITED STATES OF AMERICA, et al. Case No. 1:13-cv-01236 NOTICE OF APPEARANCE Please notice that Mark Levy is admitted or otherwise authorized to practice in this court on behalf of plaintiff State of Texas. Dated: August 28, 2013 Respectfully submitted, ___/s/ Mark Levy____________________ Mark Levy Assistant Attorney General Consumer Protection Division – Antitrust Section Office of the Attorney General of Texas P. O. Box 12548 Austin, Texas 78711-2548 Mark.Levy@texasattorneygeneral.gov (512) 936-1847 (512) 320-0975 Fax Case 1:13-cv-01236-CKK Document 43 Filed 08/28/13 Page 2 of 3 CERTIFICATE OF SERVICE I hereby certify that on this 28th day of August, 2013, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system, which will send a notice of electronic filing to the counsel of record in this matter who are registered on the CM/ECF system, and that I caused a copy of the foregoing and the notice of electronic filing to be served by email and first class mail to the following non-ECF participants: Nancy M. Bonnell Antitrust Unit Chief Office of the Attorney General of The State of Arizona 1275 West Washington Phoenix, AZ 85007 (602) 542-7728 (phone) (602) 542-9088 (facsimile) Nancy.bonnell@azag.gov Victor J. Domen, Jr. Senior Antitrust Counsel Office of the Attorney General Of Tennessee 500 Charlotte Avenue Nashville, TN 37202 (615) 532-3327 (phone) (615) 532-6951(facsimile) Vic.Domen@ag.tn.gov James A. Donahue, III Executive Deputy Attorney General Public Protection Division Office of the Attorney General of Pennsylvania 14th Floor, Strawberry Square Harrisburg, PA 17120 (717) 787-4530 (phone) (717) 787-1190 (facsimile) jdonahue@attorneygeneral.gov Paul T. Denis (D.C. Bar No. 437040) Dechert LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 (phone) (202) 261-3333 (facsimile) paul.denis@dechert.com Charles F. Rule Cadwalader, Wichersham & Taft LLP 700 Sixth Street, N.W. Washington, DC 20001 (202) 862-2200 (phone) (202) 862-2400 (facsimile) rick.rule@cwt.com John M. Majoras Rosanna K. McCalips Jones Day 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (phone) (202) 626-1700 (facsimile) jmmajoras@jonesday.com rkmccalips@JonesDay.com Sarah Oxenham Allen Assistant Attorney General Office of the Attorney General of the Commonwealth of Virginia Consumer Protection Section 900 East Main Street Richmond, VA 23219 (804) 786-6557 (phone) (804) 786-0122 (facsimile) SOAllen@oag.state.va.us Mary Jean Moltenbrey Paul Hastings LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 (phone) (202) 551- 0225 (facsimile) mjmoltenbrey@paulhastings.com Case 1:13-cv-01236-CKK Document 43 Filed 08/28/13 Page 3 of 3 Nicholas A. Bush (D.C. Bar # 1011001) Assistant Attorney General Office of the Attorney General 441 Fourth Street, N.W., Suite 600-S Washington, DC 20001 (202) 442-9841 (phone) (202) 715-7720 (facsimile) Nicholas.bush@dc.gov Dated: __8/28/2013__________ Austin, Texas Lizbeth A. Brady Chief, Multistate Antitrust Enforcement Office of the Attorney General of Florida PL-01, The Capital Tallahassee, FL 32399-1050 (850) 414-3300 (phone) (850) 488-9134 (facsimile) Liz.brady@myfloridalegal.com _____/s/ Mark Levy___________ Mark Levy Case 1:13-cv-01236-CKK Document 44 Filed 08/28/13 Page 1 of 17 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, Case No. 1:13-cv-01236 (CKK) v. US AIRWAYS GROUP, INC. and AMR CORPORATION, Initial Scheduling Conference: Friday, August 30, 2013 9:30 a.m. Defendants. REPLY IN SUPPORT OF DEFENDANTS’ MOTION TO SET TRIAL DATE I. Introduction Plaintiffs seem surprised that there is no automatic entitlement or acquiescence by defendants in what would effectively equate to some 9 months of injunctive relief. Plaintiffs should not be surprised. Defendants’ proposal of a November 12 trial date is reasonable and consistent with the District Court’s well-established practice of expeditiously adjudicating merger challenges. In answer to defendants’ request for a trial date 90 days from the filing of the complaint, plaintiffs mischaracterize precedents, disregard the significant harm to both Airlines as they operate in an extended period of uncertainty, discount the seriousness of bankruptcy, grossly underestimate the difficulty of putting together a successful reorganization plan, and summarily dismiss the loss to others, including employees and customers, while exaggerating their own difficulties. After having had more than 16 months to conduct their investigation with the benefit of compulsory process, plaintiffs presume a right to the equivalent of a preliminary Case 1:13-cv-01236-CKK Document 44 Filed 08/28/13 Page 2 of 17 injunction absent any showing, much less a court finding, in their favor. Indeed, plaintiffs seek a schedule that would place the merger at risk regardless of its competitive benefits. Thus, plaintiffs incorrectly contend that: • “Six months to a full trial on the merits is in keeping with timetables in comparable merger cases.” (Opp’n at 8.) As the table below demonstrates, of the 23 cases cited by the parties, only 3 had trial schedules as long as plaintiffs’ request, whereas 14 had schedules that were actually shorter than what defendants propose. Moreover, not a single case cited by plaintiffs or defendants in which the schedule went longer than 110 days actually made it to a final adjudication after a trial on the merits. That is exactly what drives the Airlines’ concern here: that a trial delayed according to the plaintiffs’ schedule would knock the bottom out of this merger. • “[I]nterested parties knew what should have been clear: that a merger of two large firms competing in already highly concentrated markets might draw an antitrust challenge.” (Opp’n at 3.) In fact, the DOJ approved three large airline mergers in the last five years using criteria that, if applied here, would demonstrate that US Airways/American Airlines is even more pro-competitive than the others. • “American reported record profits in the second quarter of this year.” (Opp’n at 3.) In fact, prior to its restructuring, American lost $10 billion in the last decade. • “American’s restructuring efforts have been extraordinarily successful and have positioned the company to compete as a strong and vibrant standalone firm.” (Opp’n at 3.) Although American has made progress in restructuring, it has not yet presented an alternative plan to the bankruptcy court. • The harm of delay is merely costs that American “may incur” and “some uncertainty” that “employees will face.” (Opp’n at 5.) This is a significant understatement of the harm attendant to a delayed trial. The Airlines conservatively estimate that this merger will result in net direct consumer benefits of conservatively $500 million annually. The pay raises and benefits improvements that have been promised to both airlines’ employees are put on hold―amounting to $400 million annually. That translates to nearly $2.5 million permanently lost for every day of delay. And American’s employees, entitled to an equity stake worth about $2 billion (at today’s valuations) when the merger is closed, would have to stand by and watch as the value of that equity is buffeted by the market. Further, as plaintiffs are well aware, their proposal presents a significant risk that the schedule rather than the merits will determine the future of the planned transaction. The delay -2- Case 1:13-cv-01236-CKK Document 44 Filed 08/28/13 Page 3 of 17 proposed by plaintiffs inherently puts the transaction at risk because two independent companies can be asked to stay in limbo for only so long before they need to make independent plans. To avoid a schedule that could itself be outcome determinative, this trial should be set for November 12, 2013 (or as soon thereafter as the Court’s schedule will accommodate). Defendants are prepared to try this case starting November 12, 2013. Instead, plaintiffs seek a March trial date that will push a decision at least into April and very possibly May. This despite a 16-month or more head start both in party and third-party discovery, together with access to multiple detailed reports by defendants’ expert consultants, as well as access to defendants’ key witnesses. If defendants can be ready on November 12, so can plaintiffs. II. Long-standing Precedent Supports Defendants’ Proposed Schedule The chart below includes all of the cases put forward by both plaintiffs and defendants.1 It demonstrates that merger cases get to trial within 90 days as a matter of course. It also shows that the likelihood of a merger being abandoned steadily grows as trial dates get further and further out. Under the Clayton Act, plaintiffs have a right to seek an injunction, but not a schedule by which they can “win” through delay and trial avoidance. 1 As plaintiffs concede, plaintiffs’ cases were not included in defendants’ brief because they were ultimately settled or abandoned. (Opp’n at 7.) -3- TABLE 1 MERGER CHALLENGE CASES CITED 1N AND MEMORANDA Case Document 44 Filed 08/28/13 Page 4 of 17 Oct. 22, 2001 Nov. 8,2001 17 2 days Nov. 14, 2001 Apr. 12, 2007 May 7, 2007 25 5 days May 29, 2007 Jan. 7, 2011 Feb. 10, 2011 34 2 days Mat, 29, 2011 Jan. 14, 2002 Feb. 25,2002 42 1 day Apr. 22,2002 Nov. 26,2008 Jan. 8, 2009 43 7 days Mat. 18, 2009 Jul. 14, 2000 Aug. 30, 2000 47 6 days Oct. 18, 200 Apr. 20,2011 Jun. 13,2011 54 1 day Jun. 27,2011 Apr. 15, 2003 Jun. 9, 2003 55 10 days Jul. 25, 2003 Jun. 6,2007 Jul. 31,2007 55 2 days Aug. 16, 2007 May 31, 2000 Aug. 1, 2000 62 5 days Aug. 30, 2000 Dec. 1, 2010 Feb. 3,2011 64 1 day Mat. 11,2011 June 23, 2000 Sept. 5, 2000 74 4 days Dec. 14, 2000 Nov. 18,2011 Feb. 1, 2012 75 3 days Apr. 5,2012 Apr. 1, 2004 Jun. 21, 2004 81 10 days Aug. 16, 2004 Aug. 13, 2013 Nov. 12, 2013 91 10 days Feb. 26,2004 Jun. 7,2004 102 18 days Sep. 9,2004 May 23, 2011 Sept. 6, 2011 106 9 days Oct. 31, 2011 Com uware (DOJ) Oct. 29. 1999 NA: Merger Abandoned D0 Aug. 31.2011 NA: Merger Abandoned Lockheed Martin Mar. 23. 1998 NA NA: Merger Abandoned (DO NA 200 JBS (DOJ) Oct. 20. 2008 NA: Merger Abandoned Aug. 13,2013 Ma" 3? 2013 or later Mav 12. 1998 NA NA: Merger Abandoned Jan. 22.2010 NA 263 545 NA: merger: Settlement 202 Primestar (DO Dean Foods (DOJ) Northwest Airlines Oct. 23. 1998 Nov. 1.2000 NA: Settle111e11t (DO Plaintiffs have gone to great but without success, in seeking to distinguish some of the cases in which mergers have gone to trial. But they cannot overcome the fact Case 1:13-cv-01236-CKK Document 44 Filed 08/28/13 Page 5 of 17 that DOJ cases that actually made it to a trial decision took, on average, only 70 days to trial commencement. Plaintiffs make no effort to explain this long and consistent history. As to their efforts to distinguish other cases, only a few salient points need be made. First, the FTC cases included in the above chart, although decided on preliminary injunction motions, are directly relevant. Because the grant of a preliminary injunction effectively ends a planned merger, preliminary injunction hearings as a practical matter constitute trials on the merits: They are routinely treated as such by the judges in this District2 who typically hold multi-day evidentiary hearings.3 Second, the AT&T/T-Mobile case relied on by the plaintiffs concerned the special circumstances of a telecommunications merger where a parallel Federal Communications Commission (“FCC”) competition review was the gating item. Going into the merger, the parties expected a long period of FCC review. The FCC independently reviews 2 See, e.g., FTC v. Arch Coal, Inc., 329 F. Supp. 2d 109, 116, 158 (D.D.C. 2004) (performing detailed inquiry into “likelihood of success on the merits” and denying injunction after finding, inter alia, that “plaintiffs’ statistical case of increased market concentration is… much weaker than other FTC antitrust challenges” and that past price spikes and mine closures did not “constitute evidence of anticompetitive coordination among SPRB coal producers”); FTC v. Cardinal Health, 12 F. Supp. 2d 34, 44 (D.D.C. 1998) (holding that “the FTC must demonstrate… a likelihood of success on the merits” to get a preliminary injunction, and performing in-depth analysis that included, inter alia, market definition, effect of merger on market concentration, evaluation of possibility of entry, and discussion of buyer power in deciding to grant preliminary injunction). 3 See, e.g., FTC v. Staples, Inc., 970 F. Supp. 1066, 1069 (D.D.C. 1997) (five days); FTC v. Swedish Match, 131 F. Supp. 2d 151, 155 (D.D.C. 2000)(five-days); FTC v. Cardinal Health, Inc., 12 F. Supp. 2d 34, 44 (D.D.C. 1998); FTC v. H.J. Heinz, Co., 116 F. Supp. 2d 190, 192 (D.D.C. 2000) (five days); FTC v. Arch Coal, Inc., 329 F. Supp. 2d 109, 114 (D.D.C. 2004) (two-week evidentiary trial); FTC v. CCC Holdings, Inc., 605 F. Supp. 2d 26, 31 (D.D.C. 2009) (a nine-day evidentiary hearing); see also FTC v. Butterworth Health Corp., 946 F. Supp. 1285, 1288 (W.D. Mich. 1996) (five-day evidentiary hearing and touring of hospitals at issue), aff’d mem., 121 F. 3d 708 (6th Cir. 1997); FTC v. Tenet Health Care Corp., 186 F.3d 1045, 1048 (8th Cir. 1999)(noting the E.D. Mo. held a five-day evidentiary hearing); FTC v. Foster, No. CIV 07325 JBACT, 2007 WL 1793441 (D.N.M. May 29, 2007) (five day evidentiary hearing). -5- Case 1:13-cv-01236-CKK Document 44 Filed 08/28/13 Page 6 of 17 telecommunications mergers under the Communications Act of 1934. That review includes competition issues. In the AT&T/T-Mobile merger, the parties anticipated that the DOJ case would be heard prior to resolution of the FCC action, which would proceed on its own schedule. By contrast, the Clayton Act claim here is the key gating item. In an airline merger, the Department of Transportation (“DOT”), unlike the FCC, has no independent statutory authority to undertake a domestic competition review.4 Finally, this case involves a bankruptcy; a unique circumstance. To the best of defendants’ information, only two merger-challenge cases in the chart involved companies in ongoing bankruptcy proceedings: Sungard Data Systems (DOJ permanent injunction case) and Laboratory Corporation (FTC preliminary injunction case). Both had expedited schedules: 17 and 64 days, respectively, between the filing of the complaint and the start of trial. Defendants are here proposing 90 days. III. Plaintiffs’ Proposal Ignores the Fragility of the Airline Industry The airline industry is incredibly fragile. Of the airline mergers proposed since 1998, DOJ allowed all but two to proceed without challenge, and the two that were challenged were abandoned short of any final judgment. The four carriers involved in the abandoned transactions―Northwest, Continental, United, and US Airways―were left poorly positioned to weather the next exogenous industry shock, and three of them subsequently entered bankruptcy―US Airways twice. While each ultimately recovered, it was able to do so only by becoming a party to a subsequent merger, which was cleared by the DOJ. 4 Instead, the DOT exercises “jurisdiction over the transfer of international operating authority in conjunction with airline acquisitions.” See Department of Transportation web site, Mergers and Acquisitions Overview, http://www.dot.gov/policy/aviation-policy/competition-dataanalysis/mergers-acquisitions (last visited August 27, 2013). -6- Case 1:13-cv-01236-CKK Document 44 Filed 08/28/13 Page 7 of 17 Plaintiffs point to American’s June quarter earnings announcement which, they say, “demonstrates[ ] there is no evidence [it’s growth] will slow during the pendency of this litigation.” (Opp’n at 5.) But plaintiffs’ assertion is made without foundation and does not tell the whole story. In the last decade prior to its restructuring, American lost more than $10 billion. The reality is that the health of airlines is inherently fragile, subject to well-known (and repeated) exogenous shocks. Since 2000, US Airways and American have lost a cumulative $13.7 billion (American $10.3, US Airways $3.4) and filed for bankruptcy three times.5 Oil price spikes present a particular risk. In 2008, driven by a skyrocketing in the price of crude oil, the average price of jet fuel rose from $1.26 to $4.26 per gallon.6 For every $1 increase in the price of a barrel of crude oil, American’s annual costs increase by more than $60 million and US Airways’ costs by $35 million. Just yesterday, the price of crude oil jumped $3.63 per barrel, implying an annualized cost increase for American of about $242 million. Such an increase would in itself erase almost the entirety of the monthly profit American announced this week, after deductions for reorganizational costs are made. Out-of-control costs, like these, can quickly reverse the fortunes of the airlines. For example, US Airways earned $135 million in the second quarter of 2000, but lost $37 million in the very next quarter. It thereupon lost approximately $4.5 billion, through 2005, while twice filing for bankruptcy from which it was able to emerge via a merger with America West. The new US Airways earned $185 million in the third quarter of 2007, but lost $46 million in the very next quarter. That proved to be the first of 10 consecutive unprofitable quarters that The industry as a whole has lost 160,000 jobs and incurred $55 billion in losses in that time. Joe Sharkey, Since Sept. 11, Years of Change for Airlines, N.Y. Times, Sept. 5, 2011 at B6. 6 See 2009 Econ. Report (Air Transp. Ass’n, Washington, D.C.), 2009, at 9. available at http://www.airlines.org/Documents/economicreports/2009.pdf. 5 -7- Case 1:13-cv-01236-CKK Document 44 Filed 08/28/13 Page 8 of 17 cumulatively amounted to a $1.4 billion loss. And that loss would have led to a third, and likely, final bankruptcy absent the financial support of a number of industry suppliers. IV. Plaintiffs Offer No Persuasive Response to the Airlines’ Showing That This Case Presents an Urgent Need for Prompt Resolution The Airlines would face large and unusual burdens that would increase over time if resolution of this lawsuit were delayed and the implementation of this merger were needlessly forestalled. Motion at 2, 6-8. Both American and US Airways have been diligently planning to implement the merger. Medium-term decisions about schedules, aircraft financing, plane configuration, and facility leases and relocation are all being made in expectation that the merger would close within the next few weeks. Many of those plans are now on hold as a result of the uncertainty engendered by this lawsuit.7 Moreover, the vast array of the stakeholders of defendants, who have joined to support the merger, face ongoing uncertainty over their jobs and futures that could lead to the loss of employees if the plaintiffs’ lawsuit were to proceed according to its proposed trial schedule. This risk of adverse effects to US Airways and American stakeholders is illustrated by the amicus submission of the Allied Pilots Association, Association of Professional Flight Attendants, Association of Flight Attendants-CWA, and Transport Workers Union of America. These organizations document “the uncertainty cast upon the airline industry” as a whole in light of the pendency of this case and the urgent need of these stakeholders to have the plaintiffs’ claims resolved “in an expedited manner.” Amicus Br. at 3. The plaintiffs offer no substantive response to any of the foregoing points, which by itself suffices to establish the need for the 7 The Airlines had previously agreed not to consummate the merger for thirty days following the filing of a complaint seeking to enjoin the merger. The Airlines have agreed to a fourteen day extension of that date and have committed not to consummate the deal before 11:59 p.m. on Thursday September 26, 2013. -8- Case 1:13-cv-01236-CKK Document 44 Filed 08/28/13 Page 9 of 17 Airlines’ proposed schedule. American’s bankruptcy only exacerbates these largely undisputed harms. An injunction would set back American’s reorganization efforts by many months, requiring it to create the necessary agreements and consents of all of the stakeholders involved in the bankruptcy proceedings. Absent the merger, there will be prolonged disruption to those same stakeholders, employees and the flying public. Plaintiffs not only seek to impose those burdens, but by its proposed schedule it seeks to prolong them unnecessarily. How American is structured when it emerges from bankruptcy — whether merged with US Airways or standing independently — cannot be resolved by intellectual debate. Rather, it will necessarily be the result of the considerable hammering, pushing, and pulling that characterizes a reorganization process. The merger solution, with virtually all of the restructuring pieces in place, is ready to be implemented upon this Court’s concurrence that the combined New American is not anticompetitive. It is not possible to predict how American would look after a prolonged bankruptcy process in which any stakeholder can make its own demands for satisfying creditors, and where the merger solution that drew unanimous support would not be available. In either case, however, delay exacerbates the current uncertainties and related harm. Most fundamentally, of course, the uncertainty regarding the outcome of this lawsuit is impeding the ability of both American and US Airways to compete effectively today. Corporations that are soliciting proposals for multi-year contracts have done so with the expectation that American and US Airways would be selling them a combined network. How does an airline sell its network to corporate customers, if it not only cannot describe that network, but cannot even say when it will know? How do customers make informed decisions about staking their allegiances to a particular airline, when the only certainty is that it will be -9- Case 1:13-cv-01236-CKK Document 44 Filed 08/28/13 Page 10 of 17 different in the next year, but in some unknown way? The loss of any corporate customers, the customers that are the most valuable to the Airlines, for a one to three year contract period, is harm to the Airlines that can never be recouped. If this case were not tried until April or May of next year, an already bankrupt company will have incurred an additional $65,000,000 to $75,000,000 in bankruptcy-related fees. Plaintiffs cavalierly dismiss these fees as too high, and snidely suggests without any basis at all that these costs are unjustified, Opp’n at 5 n.11, but it offers no justification in law or logic for ignoring these large expenses when considering the harms associated with delaying the trial. Plaintiffs also ignore that these costs would substantially increase if, as a result of additional months of delay, the deal fell apart and American was left to hammer out an independent plan with the relevant stakeholders and then seek bankruptcy-court confirmation. Plaintiffs quibble that the Airlines do not unequivocally “claim that the transaction will be abandoned after December 13,” Opp’n at 6, but there is no question that a delay of the magnitude contemplated by plaintiffs’ proposed schedule would cast grave doubt on the parties’ ability to hold everything together and complete the transaction notwithstanding the wholesale absence of any meritorious basis for this lawsuit. The prolongation of the bankruptcy would also give rise to a variety of other needless expenses, such as additional financing costs and heightened aircraft-acquisition expenses. As a company operating in Chapter 11, American faces additional hurdles in obtaining financing. Much of American’s current financing was negotiated under the assumption that American would be emerging from bankruptcy and merging in the third quarter of 2013. American expects to acquire a large number of aircraft over the next several years. Prior to this lawsuit, American had completed much of the negotiations on business terms for the -10- Case 1:13-cv-01236-CKK Document 44 Filed 08/28/13 Page 11 of 17 acquisition of a substantial number of new regional jets to replace smaller regional jets or to replace older, inefficient larger jets with large, modern, regional aircraft. Deliveries of those aircraft were expected to start as early as June 2014. American intended to finance the purchases of these new aircraft with favorable export credit financing. However, this type of financing will only be available to American after it emerges from bankruptcy. American’s backstop financing agreements with the manufacturers are also conditioned on American’s emergence from bankruptcy. Any alternative financing for a company still in bankruptcy would almost certainly be under considerably less favorable terms, and would result in additional costs to American. Consumers, of course, would also be harmed as the pro-competitive benefits of the merger would be withheld from them. Defendants conservatively estimate net direct customer benefits of $500 million per year from the merger, meaning that the five months of additional time sought by plaintiffs would result in a loss of more than $200 million in consumer benefit that cannot be recaptured after the Airlines prevail on the merits. The merger agreement itself reinforces the Airlines’ contemporaneous recognition of these points. When the parties agreed to the transaction, they expressed a clear recognition of the dangers associated with delaying implementation by including a bilateral termination right starting December 13, 2013. See Motion at 7. Plaintiffs’ contention that the inclusion of this provision does not matter because the parties can agree to change it, Opp’n at 6, misses the point entirely. The parties certainly have the power to alter the agreement, but the question is whether they would be in a position to make the decision to do so in the face of unexpected delay. The provision underscores that the circumstances surrounding such a decision would be very different depending on whether the transaction would be expected to be completed in December 2013 or January 2014, or whether the delay would last until May or later. -11- Case 1:13-cv-01236-CKK Document 44 Filed 08/28/13 Page 12 of 17 In the face of these strong demonstrations of harm that would result from its proposed schedule, plaintiffs offer nothing but fragmentary quotations from American’s CEO in an effort to suggest that the merger is unnecessary to American’s success. But it is hardly surprising that a CEO would present favorable results to thank hard-working employees for their efforts and build morale following the turmoil and dire news from the previous months and years. Plaintiffs are merely trying to divert focus from the real issue in this case, which is whether the merger is anticompetitive, not whether either American or US Airways is capable of standing on its own. Plaintiffs also attempt to dismiss the steep costs associated with delay by offering a misleading characterization of the state of American’s business. Plaintiffs point to American’s most recent financial results and imply that they are indicative of America’s future performance. Opp’n at 3-4. In the first place, that presumes that American can continue to operate as it has most recently, which assumes the management continuity that delay erodes. American is confident that, in light of its incentive plan, it will retain critical management if the Airlines’ proposed trial schedule is adopted. But if plaintiffs were permitted to impose their proposed trial schedule, it would create a real risk over time that American could lose key employees who have been told that they will not have a position at the New American if the merger goes forward. In short, plaintiffs’ proposed delay could adversely affect American’s ability to retain missioncritical personnel as time passes. Placing the second-quarter results within the broader context of American’s net earnings since 2005 illustrates the longer-term variance in American’s earnings and the impossibility of projecting long-term results from the earnings of a single quarter. For instance, plaintiffs ignore that in the quarter preceding the most recent quarter, American had minimal net earnings. -12- Case 1:13-cv-01236-CKK Document 44 Filed 08/28/13 Page 13 of 17 Source: American Airlines Quarterly Earnings Releases (net earnings excluding special items), available at http://phx.corporate-ir net/phoenix.zhtml?c=117098&p=quarterlyearnings. Plaintiffs’ emphasis on earnings from the second quarter of 2013, and particularly the favorable results in the single month of July 2013, Opp’n at 3-4, is particularly misleading because it reflects results from the summer season, frequently a season of increased travel and particularly strong results for airlines, in a year in which demand is finally returning following a recession. So whether plaintiffs just don’t understand the industry or choose to misleadingly focus on the trees instead of the forest, the fact is that American today continues to be fully subject to the ebbs and flows of the airline industry, and is even more vulnerable until it can emerge from bankruptcy. In short, plaintiffs have not begun to undermine the Airlines’ showing that they will incur serious harm if the trial is delayed from November to March or April of next year. Plaintiffs entirely ignore or concede much of this showing, and the arguments they do make are either wrong or reinforce the need for a November trial. -13- Case 1:13-cv-01236-CKK Document 44 Filed 08/28/13 Page 14 of 17 V. Defendants’ Proposed Schedule Offers Plaintiffs a Full and Fair Opportunity to Present Their Case The government has been investigating this proposed merger for over 16 months. By any measure, plaintiffs have an enormous head start. The DOJ began investigating the merger in April 2012, issuing a Civil Investigative Demand (“CID”) to US Airways seeking documents and information related to a potential merger with American Airlines. DOJ demanded the production of documents and responses to interrogatories, which they explained, were “part of an Antitrust Division investigation into the possible merger of US Airways and American Airlines.”8US Airways produced thousands of documents in response to the CID, including documents from its key executives. Thereafter, before publicly announcing the merger, the parties in January 2013, submitted Hart-Scott-Rodino (“HSR”) pre-merger notifications, including hundreds more documents. Indeed, they did so on the basis of a letter of intent (rather than a definitive agreement) so as to provide the government with even more time to conduct its investigation. Moreover, under the DOJ’s second request pursuant to the HSR Act, the parties provided additional information on a rolling basis beginning April 4, 2013. By May 7, 2013, when the parties certified compliance, they had produced millions of pages of documents, data, and analyses, including answers to voluminous interrogatories. Between April and July, defendants provided numerous expert economic analyses and underlying data. These included estimates of direct consumer benefits resulting from the merger both generally and for passengers at Reagan National Airport (DCA), as well as a detailed econometric analysis of the advantage pricing program under a wide variety See Letter from Michael D. Billiel, U.S. Dep’t of Justice, to Howard Kass, Vice President of Legal and Gov’t Affairs, US Airways, Inc., at 1 (Apr. 20, 2012) (attached as Exhibit A). 8 -14- Case 1:13-cv-01236-CKK Document 44 Filed 08/28/13 Page 15 of 17 of specifications. In June and July, defendants made seven witnesses available for depositions. During that period, defendants met with the Department of Justice on multiple occasions to answer questions. And even before investigating the merger as such, the DOJ had already long been investigating some of the very issues that underlie the allegations in its complaint. For example, certain of the documents cited in the complaint were produced by US Airways’ in response to DOJ’s investigation of the proposed exchange of take-off and landing slots with Delta Air Lines at Reagan National and LaGuardia Airports. All told, since 2009, US Airways has delivered to the DOJ around 1.2 terabytes of documents (around 825,000 documents or, conservatively, over 4,000,000 pages of documents) and data spanning three HSR filings, three Second Request responses, and at least five other formal document and/or data demands. Defendants’ proposed schedule is not only reasonable in circumstances, it is consistent with past practice. It allows for substantial further discovery by all parties. Plaintiffs will be given until October 24, 2013―more than nineteen months after DOJ first demanded information and documents―to complete fact discovery and until November 4, 2013―seven months after they received the economists’ first report―to complete expert discovery. VI. Conclusion Timing of the trial should never be outcome determinative; a March trial risks that. For all these reasons, defendants’ request for a November 12 trial date should be granted. -15- Case 1:13-cv-01236-CKK Document 44 Filed 08/28/13 Page 16 of 17 Dated: August 28, 2013 Respectfully submitted, /s/ Richard G. Parker Richard G. Parker (DC Bar #327544) Henry Thumann (DC Bar #474499) Courtney Dyer (DC Bar #490805) O’MELVENY & MYERS LLP 1625 Eye Street, N.W. Washington, D.C. 20006 (202) 383-5300 (Phone) (202) 383-5414 (Facsimile) rparker@omm.com hthumann@omm.com cdyer@omm.com Kenneth R. O’Rourke (Admitted Pro Hac Vice) O’MELVENY & MYERS LLP 400 South Hope Street Los Angeles, CA 90071 (213) 430-6000 (Phone) (213) 430-6407 (Facsimile) korourke@omm.com Paul T. Denis (DC Bar #437040) Steven G. Bradbury (DC Bar #416430) DECHERT LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 (Phone) (202) 261-3333 (Facsimile) paul.denis@dechert.com steven.bradbury@dechert.com Charles F. Rule (DC Bar #370818) CADWALADER, WICKERSHAM & TAFT LLP 700 Sixth Street, N.W. Washington, DC 20001 (202) 862-2200 (Phone) (202) 862-2400 (Facsimile) rick.rule@cwt.com Attorneys for Defendant US Airways Group, Inc. -16- Case 1:13-cv-01236-CKK Document 44 Filed 08/28/13 Page 17 of 17 /s/ John M. Majoras John M. Majoras (DC Bar #474267) Michael S. Fried (DC Bar #458357) Rosanna K. McCalips (DC Bar #482859) JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (Phone) (202) 626-1700 (Facsimile) jmmajoras@jonesday.com msfried@jonesday.com rkmccalips@jonesday.com Mary Jean Moltenbrey (DC Bar #481127) PAUL HASTINGS LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 (Phone) (202) 551- 0225 (Facsimile) mjmoltenbrey@paulhastings.com Attorneys for Defendant AMR Corporation -17- Case Document 44-1 Filed 08/28/13 Page 1 of 3 EXHIBIT A Case Document 44-1 Filed 08/28/13 Page 2 of 3 U.S. Department ofJustice Antitrust Dlvision Liberty Square Building 450 Street, Washington, DC 20001 April 20, 2012 BY E-MAIL AND CERTIFIED MAIL Howard Kass Vice President Legal and Government Affairs US Airways, Inc. 1401 Street, NW, Suite 1075 Washington DC 20005 Re: Civil Investigative Demand No. 27035 Dear Howard: As we discussed, enclosed with this letter is a Civil Investigative Demand issued pursuant to the Antitrust Civil Process Act, 15 U.S.C. ??l3ll-l4, requiring US Airways Group, Inc., to produce certain documents and answer certain interrogatories speci?ed in the annexed Schedule. The CID seeks documents as part of an Antitrust Division investigation into the possible merger of US Airways and American Airlines. The due date for compliance is May 4, 2012. I call your attention to the certi?cate of compliance form printed on the reverse side of the CID. This certi?cate must be completed by all persons responsible for producing the documentary material called for by the CID and must accompany the documents you submit. I am the designated Deputy Custodian of the documentary materials and interrogatory answers sought from US Airways. To minimize your inconvenience in complying with the CID and to assist us, we propose that you submit copies of all documents by mail or messenger to me at the Antitrust Division, 450 Fifth St., NW, Suite 8000, Washington DC 20530. If you elect not to follow this procedure, please contact me by May 1, 2012. This letter will also serve as notice to US Airways that the Antitrust Division has an open investigation in this matter. Please take all the necessary steps to ensure that US Airways and any related entities preserve all documents and information, including electronically-stored information, relevant to this investigation. Such documents and information would include, but are not limited to, any of the topics identi?ed in the Case Document 44-1 Filed 08/28/13 Page 3 of 3 attached schedule. To that end, the necessary steps should include suspending the planned destruction or automatic deletion of any document or data, including e-mail, as well the suspension of the reuse or recycling of any back-up tape (or other media). If you have any questions regarding the C1D or document preservation, please contact me at (202)-3 07-6666. Sincerely yours, Michael D. Billiel Attorney Enclosure Case 1:13-cv-01236-CKK Document 45 Filed 08/28/13 Page 1 of 13 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, v. Civil Action No. 1:13-cv-01236-CKK US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants. JOINT REPORT AS REQUIRED BY LOCAL CIVIL RULE 16.3 The parties have met-and-conferred pursuant to Local Civil Rule 16.3 and Fed. R. Civ. P. 26(f) and submit the following report: I. Introduction The parties remain at an impasse regarding the date for a trial on the merits. That issue has now been fully briefed to the Court. The parties have reached agreement on several matters relating to case management and discovery that are not affected by the schedule. These Agreements are memorialized in Section II of this Joint Report. The issues where the parties disagree are summarized in Section III. The parties have also met-and-conferred with regard to the terms of a Case Management Order (“CMO”). The parties have reached agreement on most issues and are continuing to meetand-confer to resolve the issues still outstanding. The parties believe that once the Court sets a trial date and resolves the other disputes identified below, that they can quickly submit a jointly proposed CMO to the Court for review and approval. 1 Case 1:13-cv-01236-CKK Document 45 Filed 08/28/13 Page 2 of 13 II. Agreements on Topics Discussed Pursuant to Local Civil Rule 16.3(c) The parties have met-and-conferred and report agreement on the following topics: 16(c)(1) – The parties agree that the case is unlikely to be disposed of by dispositive motion. 16(c)(2) – Plaintiffs expect to file an Amended Complaint, and agree to do so no later than September 6, 2013. The Airlines have agreed to answer the Amended Complaint on or before September 10, 2013. 16(c)(3) – The parties do not consent to the assignment of the case to a magistrate judge for all purposes. 16(c)(4) – As to whether there is a realistic possibility of settling this case: Plaintiffs’ Statement: Plaintiffs are open to a settlement that addresses the competitive harms posed by the merger but have not yet received any such proposal from the defendants. Defendants’ Statement: Defendants attempted to settle the case before it was brought, have publicly indicated their willingness to consider alternative approaches to settlement, and continue to believe there ought to be a realistic possibility of settlement. 16(c)(5) – The parties believe that this case would not likely benefit from the Court’s alternative dispute resolution procedures. 16(c)(6) – The parties agree that the case is unlikely to be resolved in full by summary judgment or a motion to dismiss. 16(c)(7) – The parties agree that, in light of the Defendants’ prior submissions to the Plaintiffs, Defendants will fulfill all obligations with respect to initial disclosures by providing the information required under Fed. R. Civ. P. 26(a)(1)(A)(i). Plaintiffs, too, will provide the information required under Fed. R. Civ. P. 26(a)(1)(A)(i) and further agree to satisfy their obligations under Fed. R. Civ. P. 26(a)(1)(A)(ii) by producing to the Defendants by August 30, 2013, all civil investigative demands issued to non-parties during the course of Plaintiffs’ investigation into Defendants’ proposed merger, and producing all documents obtained from non-parties pursuant to those demands - as soon as practicable under applicable law and court orders. 16(c)(8) – The parties have agreed to respond in writing to written discovery requests served upon one another within twenty days of service, not thirty days as contemplated by the Fed. R. of Civ. P. 2 Case 1:13-cv-01236-CKK Document 45 Filed 08/28/13 Page 3 of 13 16(c)(9) – The parties have reached an agreement on the scope of expert disclosures. This specific language upon which the parties have agreed will be included in the proposed CMO. 16(c)(10) – The parties agree that the procedures under Fed. R. Civ. P. 23 are unnecessary because this is not a class action. 16(c)(11) – The parties agree that neither discovery nor trial should be bifurcated. 16(c)(12) – The parties agree that the Court should set the date for a pretrial conference at its convenience once the trial date has been decided. 16(c)(13) – The parties respectfully request that this Court determine at the initial scheduling conference when a trial will occur. III. Disagreements on Topics Discussed Pursuant to Local Civil Rule 16.3(c) The parties’ remaining disagreements involve specific topics addressed in Rule 16.3(c). Under Rule 16.3(c)(8), the parties disagree on the extent and limits on discovery. Under Rule 16.3(c)(9), the parties also disagree about the timing and sequence of expert disclosures. With regard to Rule 16.3(c)(14), the parties disagree about one aspect of a proposed stipulated protective order: whether the outside counsel for the AMR Corporation’s Unsecured Creditors’ Committee should be allowed access to Confidential Information produced by non-parties. The parties’ positions with regard to these three disagreements are summarized below: 16.3(c)(8) – Scope and Limits of Discovery Plaintiffs’ Position: 1) Depositions--Plaintiffs propose that each side be allowed up to 50 depositions, in addition to the deposition of any person who appears on the parties’ witness list who has not previously been deposed. Plaintiffs also propose that up to two executives from each Defendant be deposed for a maximum of 2 days. Plaintiffs believe that these limits are reasonable in light of the magnitude of this case. Each Defendant has many potential deponents involved in the aspects of their business relevant to this 3 Case 1:13-cv-01236-CKK Document 45 Filed 08/28/13 Page 4 of 13 case; for example, American alone has more than 20 employees devoted to monitoring its competitors’ fares. In addition, the Defendants have already made clear their intent to rely heavily on American’s restructuring as part of their defense. This necessitates deposing additional American executives about the restructuring and its impact on American’s competitive vigor going forward. Moreover, the Defendants have made clear that they intend to argue that several smaller airlines act as a constraint on coordination between existing legacy carriers. Thus, it may be necessary to depose executives from those airlines. And both parties are almost certainly to seek to depose executives from United, Delta, and Southwest. Against this backdrop, Plaintiffs’ proposed deposition limit is appropriate and consistent with other antitrust cases of similar size and scope. The two-day limit for a select number of the depositions is based on Plaintiffs’ specific analysis that several deponents, including in all likelihood the CEOs of Defendants, may require more than the allotted seven hours. 2) Written Discovery--Plaintiffs also propose that Plaintiffs may serve up to 10 interrogatories on each Defendant, and that Defendants may, in turn, serve up to 15 interrogatories on Plaintiffs, in aggregate. Though Fed. R. Civ. P. 33(a)(1) permits Plaintiffs to ask up to 25 interrogatories, Plaintiffs’ proposal represents a compromise with Defendants, who seek far fewer. Plaintiffs do believe that the limit should reflect the need to ask interrogatories of each Defendant separately. The set of issues varies to some degree by defendant (each of whom is represented by separate antitrust counsel). Therefore, Plaintiffs will issue some interrogatories directed at only one defendant, and believe the interrogatory limit should be set accordingly. Plaintiffs intend to use interrogatories to assess the factual bases for Defendants’ arguments, including support for any 4 Case 1:13-cv-01236-CKK Document 45 Filed 08/28/13 Page 5 of 13 efficiencies that it may claim justify the lessening of competition likely to result from this merger. Plaintiffs also propose that each side may serve up to 50 Requests for Admission, in addition to any requests relating solely to the authentication or admissibility of documents, data, or other evidence. Though the Federal Rules contain no limit on Requests for Admission, Plaintiffs’ proposal represents a compromise with Defendants who seek far fewer. Defendants’ Position: The Airlines believe the parties should concentrate on trial preparation, not answering interrogatories or requests for admission. Therefore, the Airlines propose each side be limited to five interrogatories and ten requests for admission. Similarly, the scope of the trial makes it appropriate that the parties be limited to ten (not 50) depositions per side, with additional depositions allowed for persons on a party’s final witness list who have not been deposed. All depositions should be limited to seven hours absent Court order, as the Rules currently require. The Airlines believe this proposal gives Plaintiffs ample opportunity for discovery to prepare for trial because Plaintiffs have already studied the proposed merger and examined the Airlines about its details and consequences at length. US Airways first submitted documents to the DOJ relating to a potential combination with AMR following a civil investigative demand issued in April 2012―nearly 16 months ago. Since that time, the Airlines have produced hundreds of thousands of documents, made seven witnesses available for investigational hearings, and answered numerous interrogatories. In light of these submissions, Plaintiffs do not need extensive written discovery to 5 Case 1:13-cv-01236-CKK Document 45 Filed 08/28/13 Page 6 of 13 prepare for trial. Nor do Plaintiffs have a need to take five times the number of depositions contemplated by the federal rules in this case. Fed. R. Civ. P. 30. This District regularly rejects requests for increasing the number of depositions when those additional depositions will be cumulative of prior discovery and burdensome to the opposing party. See Donohoe v. Bonneville Int'l Corp., 602 F. Supp. 2d 1, 4-8 (D.D.C. 2009). Limiting the depositions to ten, as contemplated by the federal rules, will focus discovery on the key issues in this case. Finally, Plaintiffs’ request for approval in advance to take four 14-hour depositions places an unreasonable and unnecessary burden on the Airlines. In light of their 16-month investigation, Plaintiffs should be able to focus their questioning to fit within the seven hours contemplated by the federal rules. Fed. R. Civ. P. 30(d)(2). 16.3(c)(9) – Timing and Sequence of Expert Disclosures Plaintiffs’ Position: Plaintiffs propose that the parties make their expert disclosures and rebuttal reports simultaneously, at the end of fact discovery. Plaintiffs’ proposal for simultaneous expert disclosures is appropriate in light of the expedited schedules that both parties propose. It allows both sides the same opportunity to complete fact discovery before submitting expert reports, gives both parties the same opportunity to respond to each side’s expert reports, and creates a complete record in advance of any expert depositions. Defendants’ proposal requires Plaintiffs to make expert disclosures halfway through Defendants’ time for fact discovery, and even allows the Defendants to take expert depositions before making their own expert reports available. This is a stark deviation from standard 6 Case 1:13-cv-01236-CKK Document 45 Filed 08/28/13 Page 7 of 13 practice and only demonstrates how Defendants’ proposed trial date—which all but compels the expert schedule Defendants’ seek—will serve to rush this matter to judgment. There is no basis for Defendants’ claim that Plaintiffs’ pre-complaint investigation should allow for the early submission of expert reports. Pre-complaint discovery is directed at making an enforcement decision, not preparing for trial. Moreover, the pre-complaint investigation and issue analysis is not prepared in the form of expert trial reports, which will be submitted by outside experts retained as trial witnesses. These experts require sufficient time to undertake their independent analysis of the still-developing factual record and complete their reports. They cannot reasonably do so on the schedule and sequence Defendants propose. Defendants’ Position: The Airlines propose sequential expert disclosures in which Plaintiffs would first produce their expert reports and the Airlines would then produce their expert reports. This structure is proper in this case because the Airlines have already submitted numerous expert economic analyses and participated in multiple meetings with Plaintiffs to review those analyses with the DOJ during the merger investigation. The Airlines met with DOJ staff and economists, on February 20th, May 3rd, June 12th, July 25th, August 1st, and again on August 6th of this year. In other words, Plaintiffs already have the advantage of having reviewed these expert analyses and having questioned the Airlines’ economists about them. Furthermore, sequential disclosure is aligned with the burden of proof and will streamline expert discovery by limiting the total number of expert reports to one set of opening reports from Plaintiffs’ experts (which presumably will also serve as a rebuttal to the Airlines’ experts presentations during the merger investigation) and a responsive round from the Airlines’ experts. In contrast, simultaneous disclosure will require two full sets of disclosures: initial disclosures 7 Case 1:13-cv-01236-CKK Document 45 Filed 08/28/13 Page 8 of 13 from both parties’ experts and then responsive disclosures. The Airlines’ approach reduces the burden on the parties 16.3(c)(14) – Inclusion of Outside Counsel from Skadden Arps for the Unsecured Creditors’ Committee in Protective Order Plaintiffs’ Position: Plaintiffs propose that counsel for the Unsecured Creditors Committee not be allowed access to documents designated as Confidential by non-parties, except to the extent that the non-parties consent. Both defendants are represented by experienced outside counsel and there is no apparent need to expose non-parties’ confidential information to counsel for the Unsecured Creditors Committee, which is a collection of organizations with interests that may be adverse to the nonparties that produced confidential information. Moreover, allowing committee counsel access to non-parties’ confidential information will likely significantly disrupt the discovery process. It will almost certainly require this Court to hear objections from non-parties to the protective order, and may well engender resistance to non-party subpoenas that will in turn lead to motions to compel that would otherwise not be necessary. In short, allowing counsel for the Unsecured Creditors Committee access to nonparties’ confidential information will likely significantly disrupt and delay discovery in a case that can hardly afford it, given the parties’ proposed schedules. Defendants’ Position The Court should permit outside counsel for AMR Corporation’s Unsecured Creditors Committee to review documents marked as confidential under the Protective Order. The Unsecured Creditors Committee has a responsibility for protecting the entire community of AMR’s unsecured creditors and ensuring that creditors remain well-represented about issues 8 Case 1:13-cv-01236-CKK Document 45 Filed 08/28/13 Page 9 of 13 affecting the debtor’s plan of reorganization. The UCC, which has endorsed the merger, has a direct interest in this action and a strong need to understanding its progress and its potential impact on AMR’s plan of reorganization. There is no reasonable confidentiality justification for excluding its outside counsel, Skadden Arps, from viewing designated documents. Counsel will be bound by the terms of the Protective Order entered in this case. 9 Case 1:13-cv-01236-CKK Document 45 Filed 08/28/13 Page 10 of 13 Dated: August 28, 2013 Respectfully Submitted, /s/ Ryan J. Danks United States Department of Justice Antitrust Division 450 5th Street NW Room 4648 Washington, DC 20001 (202) 305-0128 Fax: (202) 514-6525 Email: ryan.danks@usdoj.gov /s/ Richard G. Parker (DC Bar #327544) Courtney Dyer (DC Bar #490805) O’MELVENY & MYERS LLP 1625 Eye Street, N.W. Washington, D.C. 20006 (202) 383-5300 (Phone) (202) 383-5414 (Facsimile) rparker@omm.com cdyer@omm.com krobson@omm.com Attorney for Plaintiff United States /s/ Nancy M. Bonnell Antitrust Unit Chief Arizona Bar No. 016382 1275 West Washington Phoenix, Arizona 85007 Telephone: 602-542-7728 Facsimile: 602-542-9088 Email: nancy.bonnell@azag.gov Attorney for Plaintiff State of Arizona /s/ Bennett Rushkoff (D.C. Bar # 386925) Chief, Public Advocacy Section Nicholas A. Bush (D.C. Bar # 1011001) Assistant Attorney General Office of the Attorney General 441 Fourth Street, N.W., Suite 600-S Washington, DC 20001 Telephone: 202-442-9841 Facsimile: 202- 715-7720 E-mail: nicholas.bush@dc.gov Attorneys for Plaintiff District of Columbia Kenneth R. O’Rourke (Admitted Pro Hac Vice) O’MELVENY & MYERS LLP 400 South Hope Street Los Angeles, CA 90071 (213) 430-6000 (Phone) (213) 430-6407 (Facsimile) korourke@omm.com Paul T. Denis (DC Bar #437040) Steven G. Bradbury (DC Bar #416430) DECHERT LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 (Phone) (202) 261-3333 (Facsimile) paul.denis@dechert.com steven.bradbury@dechert.com Charles F. Rule (DC Bar #370818) CADWALADER, WICKERSHAM & TAFT LLP 700 Sixth Street, N.W. Washington, DC 20001 (202) 862-2200 (Phone) (202) 862-2400 (Facsimile) rick.rule@cwt.com Attorneys for Defendant US Airways Group, Inc. 10 Case 1:13-cv-01236-CKK Document 45 Filed 08/28/13 Page 11 of 13 /s/ Lizabeth A. Brady Chief, Multistate Antitrust Enforcement Christopher Hunt Associate Attorney General PL-01, The Capitol Tallahassee, Florida 32399-1050 Telephone: 850-414-3300 Facsimile: 850-488-9134 Attorneys for Plaintiff State of Florida /s/ James A. Donahue, III Executive Deputy Attorney General PA Bar No. 42624 Jennifer A. Thomson Deputy Attorney General Public Protection Division 14th Floor, Strawberry Square Harrisburg, PA 17120 Telephone: 717-787-4530 Facsimile: 717-787-1190 Email: jdonahue@attorneygeneral.gov Attorneys for Plaintiff Commonwealth of Pennsylvania /s/ John M. Majoras (DC Bar # 474267) J. Bruce McDonald (DDC Admission Pending) Michael S. Fried (DC Bar # 458347) Rosanna K. McCalips (DC Bar # 482859) JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (Phone) (202) 626-1700 (Facsimile) jmmajoras@jonesday.com bmcdonald@jonesday.com msfried@jonesday.com rkmccalips@jonesday.com Mary Jean Moltenbrey (DC Bar #481127) PAUL HASTINGS LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 (Phone) (202) 551- 0225 (Facsimile) mjmoltenbrey@paulhastings.com Attorneys for Defendant AMR Corporation /s/ Victor J. Domen, Jr. Senior Antitrust Counsel Tennessee Bar No. 015803 500 Charlotte Avenue Nashville, TN 37202 Telephone: 615-253-3327 Facsimile: 615-532-6951 Email: Vic.Domen@ag.tn.gov Attorney for State of Tennessee 11 Case 1:13-cv-01236-CKK Document 45 Filed 08/28/13 Page 12 of 13 /s/ Mark A. Levy Kayna Stavast-Piper Assistant Attorney General Texas Bar No. 24014555 Office of the Attorney General of Texas 300 W. 15th Street, 7th Floor Austin, Texas 78701 Telephone: 512-936-1847 Facsimile: 512-320-0975 Email:mark.levy@texasattorneygeneral.com Attorneys for Plaintiff State of Texas /s/ Sarah Oxenham Allen (Va. Bar # 33217) Matthew R. Hull (Va. Bar # 80500) Assistant Attorneys General Office of the Attorney General Consumer Protection Section 900 East Main Street Richmond, VA 23219 Telephone: 804-786-6557 Facsimile: 804 786-0122 Email: SOAllen@oag.state.va.us Attorneys for Plaintiff Commonwealth of Virginia 12 Case 1:13-cv-01236-CKK Document 45 Filed 08/28/13 Page 13 of 13 Parties’ Counter-Proposals for Discovery and Key Pre-trial and Trial Dates Plaintiffs’ Proposal Defendants’ Proposal 50 depositions per side (plus any non-deposed trial witnesses) 10 interrog. to each defendant 15 interrogatories to Plaintiffs 50 RFAs per side 10 depositions per side (plus any non-deposed trial witnesses) 5 interrogatories per side 10 RFAs per side Protective Order submitted to Court August 28, 2013 August 28, 2013 Discovery Commences per FRCP August 30, 2013 August 30, 2013 Plaintiffs file Amended Complaint September 6, 2013 September 6, 2013 Defendants’ respond to Amended Complaint September 10, 2013 September 10, 2013 December 2, 2013 September 27, 2013 Close of fact discovery January 7, 2014 October 24, 2013 Final trial witness lists January 15, 2014 November 1, 2013 Plaintiffs’ expert reports January 17, 2014 October 7, 2013 Defendants’ expert reports January 17, 2014 October 25, 2013 Rebuttal expert reports January 27, 2014 TBD if needed Close of expert discovery February 7, 2014 November 4, 2013 Opening pre-trial briefs due February 7, 2014 November 7, 2013 March 3, 2014 or after November 12, 2013 Scope of Discovery Preliminary non-binding trial witness lists Opening day of trial 13 Case 1:13-cv-01236-CKK Document 46 Filed 08/28/13 Page 1 of 5 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. ) ______________________________________ ) Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly MOTION OF OFFICIAL COMMITTEE OF UNSECURED CREDITORS FOR LEAVE TO FILE AMICUS CURIAE BRIEF IN SUPPORT OF DEFENDANTS’ MOTION TO SET TRIAL DATE Case 1:13-cv-01236-CKK Document 46 Filed 08/28/13 Page 2 of 5 I. PRELIMINARY STATEMENT The Official Committee of Unsecured Creditors (the “Statutory Committee”) of AMR Corporation (“AMR”) respectfully moves this Court for leave to file an amicus curiae brief in support of Defendants’ Motion to Set Trial Date, ECF No. 11 (the “Motion”). As discussed below, as well as in further detail in the proposed amicus brief attached to this Motion, the Statutory Committee writes to respond to certain assertions in the government’s brief opposing Defendants’ Motion and to request that the Court grant the Motion and set a trial date for November 2013, in order to resolve the government’s challenge to the proposed merger between AMR and US Airways Group, Inc. (“US Airways”) as expeditiously as possible. II. THE INTEREST OF THE STATUTORY COMMITTEE The Statutory Committee is a statutory fiduciary created by Congress to represent the stakeholders, including organized labor, that will own the majority interest of the airline that will exist following the proposed merger of AMR and US Airways.1 Consistent with its statutory mandate to exercise a significant role in a business reorganization, the Statutory Committee has been responsible for various aspects of AMR’s bankruptcy and has worked collaboratively with AMR to fairly and systematically evaluate restructuring alternatives. The Statutory Committee 1 The Statutory Committee consists of nine members: three indenture trustees (the Bank of New York Mellon, Manufacturers and Traders Trust Company and Wilmington Trust Company); three labor organizations (the Allied Pilots Association, the Association of Professional Flight Attendants and the Transport Workers Union of America); two trade creditors (Boeing Capital Corporation and Hewlett-Packard Enterprise Services, LLC) and the Pension Benefit Guaranty Corporation. The three labor organizations have moved for leave to file an amicus brief supporting Defendants’ Motion. See Motion of Allied Pilots Association, Association of Professional Flight Attendants, Association of Flight Attendants-CWA and Transport Workers Union of America to File Amicus Curiae Brief In Support of Defendant’s Motion To Set Trial Date [ECF No. 11], United States v. US Airways Group, Inc., No. 1:13-cv-01236-CKK (D.D.C. Aug. 23, 2013), ECF No. 21, Ex. A. Case 1:13-cv-01236-CKK Document 46 Filed 08/28/13 Page 3 of 5 provided extensive input to both AMR and US Airways throughout their merger negotiations. In addition, the Statutory Committee was actively involved throughout the lengthy Department of Justice (“DOJ”) investigation of the proposed transaction and attended and participated in all meetings between the DOJ and the merging parties. The Statutory Committee believes that prompt adjudication of the DOJ’s action is essential to the interests of AMR’s numerous unsecured creditors and other stakeholders. III. ARGUMENT “‘An amicus curiae, defined as ‘friend of the court,’ . . . does not represent the parties but participates only for the benefit of the Court.’” Jin v. Ministry of State Sec., 557 F. Supp. 2d 131, 136 (D.D.C. 2008) (quoting United States v. Microsoft Corp., No. Civ. A. 98-1232 (CKK), 2002 WL 319366, at *2 (D.D.C. Feb. 28, 2002)). “District courts have inherent authority to appoint or deny amici which is derived from Rule 29 of the Federal Rules of Appellate Procedure.” Id. (citation omitted). “It is solely within the court’s discretion to determine ‘the fact, extent, and manner’ of the participation.” Id. (citation omitted). Among other reasons, an amicus brief normally should be permitted when “the amicus has unique information or perspective that can help the court beyond the help that the lawyers for the parties are able to provide.” Id. at 137 (citation omitted). Here, as the representative of the stakeholders that will own a majority equity interest in the airline formed as a result of the proposed merger, the Statutory Committee has a unique perspective regarding the impact the protracted litigation schedule proposed by the government would have on AMR and its numerous and diverse stakeholders. As further explained in the attached brief, the Statutory Committee requests that the Court set a trial schedule consistent with Defendants’ proposal, rather than the government’s. Contrary to the government’s 2 Case 1:13-cv-01236-CKK Document 46 Filed 08/28/13 Page 4 of 5 opposition brief, the Statutory Committee believes that the government’s proposed schedule would compound the uncertainty that the filing of this litigation already has caused among AMR’s unsecured creditors and some 430,000 other stakeholders. AMR’s current plan of reorganization is based on its proposed merger with US Airways and is the only plan proposed to and voted on by creditors and stakeholders that is before the United States Bankruptcy Court for the Southern District of New York presiding over AMR’s pending chapter 11 cases. As the Statutory Committee has informed the government in several submissions and direct communications, any injunction here would return the AMR bankruptcy to square one with likely disruption and relative disarray among numerous, financially unaligned stakeholders. Accordingly, this litigation must be resolved swiftly in order to minimize the harm that the uncertainty inherent in the government’s action already is causing and which only would be compounded by the delay the government contemplates. None of the parties to this litigation represent the same, diverse interests as the Statutory Committee. As a result, the Statutory Committee is able to provide unique information and perspective that can assist the Court in determining the scheduling of this litigation. The Statutory Committee has consulted with the DOJ, Plaintiff States and Defendants regarding the filing of the amicus brief. The DOJ and Defendants have consented to this filing, and the Plaintiff States have no objection to the filing. IV. CONCLUSION For the foregoing reasons, the Statutory Committee respectfully requests that this Court grant its motion for leave to file an amicus brief. 3 Case 1:13-cv-01236-CKK Document 46 Filed 08/28/13 Page 5 of 5 Dated: August 28, 2013 Respectfully submitted, John Wm. Butler, Jr. (pro hac vice forthcoming) Albert L. Hogan, III (pro hac vice forthcoming) SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 155 North Wacker Drive Chicago, IL 60606 Tel: (312) 407-0700 Jack.Butler@skadden.com Al.Hogan@skadden.com Jay M. Goffman (pro hac vice forthcoming) James A. Keyte (pro hac vice forthcoming) Kenneth B. Schwartz (pro hac vice forthcoming) SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 4 Times Square New York, NY 10036-6522 Tel: (212) 735-3000 Jay.Goffman@skadden.com James.Keyte@skadden.com Ken.Schwartz@skadden.com 4 /s/ Gregory B. Craig Gregory B. Craig (D.C. Bar No. 164640) SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 1440 New York Avenue, N.W. Washington, DC 20005-2111 Tel: (202) 371-7000 Gregory.Craig@skadden.com Counsel for Official Committee of Unsecured Creditors Case 1:13-cv-01236-CKK Document 46-1 Filed 08/28/13 Page 1 of 11 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. ) ______________________________________ ) Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly MEMORANDUM OF LAW OF AMICUS CURIAE OFFICIAL COMMITTEE OF UNSECURED CREDITORS IN SUPPORT OF DEFENDANTS’ MOTION TO SET TRIAL DATE Case 1:13-cv-01236-CKK Document 46-1 Filed 08/28/13 Page 2 of 11 I. PRELIMINARY STATEMENT The Official Committee of Unsecured Creditors (the “Statutory Committee”) of AMR Corporation (“AMR”) submits this Memorandum of Law in support of Defendants’ Motion to Set Trial Date, ECF No. 11 (the “Motion”). As statutory representatives of the stakeholders that will own a majority equity interest in the airline formed as a result of the proposed merger between AMR and US Airways Group, Inc. (“US Airways”), the Statutory Committee has a unique fiduciary interest in ensuring that the uncertainty surrounding the government’s challenge to the merger—which is particularly disruptive and harmful to AMR and its stakeholders in the bankruptcy setting—is resolved as quickly as possible. Contrary to the government’s blithe assertions in its opposition brief (“Pls.’ Opp.”), the delicate balance of diverse stakeholders in bankruptcy that support this merger necessarily would be jeopardized by the extraordinary pretrial delay the government now seeks. Indeed, under the government’s proposal, trial would begin more than twenty-two months after the Department of Justice (“DOJ”) initiated its investigation of the proposed transaction and ten months after the merging parties substantially complied with the DOJ’s Request for Additional Information (“Second Request”). Further, and again contrary to the government’s assertion, the bankruptcy setting here is distinct from the merger challenges the government highlights, which did not involve transactions that brought together diverse stakeholders with potentially divergent interests, in support of creating a new competitor. In addition, the value created by this merger largely is the result of combining complementary networks much like those the DOJ approved previously in the context of the mergers of Delta Airlines and Northwest Airlines in 2008, United Airlines and Continental Airlines in 2010 and Southwest Airlines and AirTran in 2011. Case 1:13-cv-01236-CKK Document 46-1 Filed 08/28/13 Page 3 of 11 Finally, the government is completely wrong to suggest that exacerbating the uncertainty regarding AMR’s future is of no moment because AMR has a standalone plan of reorganization. On the contrary, AMR’s current plan of reorganization, which is based on the Merger Agreement, is the only plan proposed to and voted on by creditors and stakeholders that is before the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) presiding over AMR’s pending chapter 11 cases; there is no “Plan B” with regard to reorganization. Instead, as the Statutory Committee—which was actively involved throughout the DOJ’s investigation and attended and participated in all meetings between the DOJ and Defendants—has informed the government in several submissions and communications directly solicited by the DOJ, any injunction here would return the AMR bankruptcy to square one with likely disruption and relative disarray among numerous, financially unaligned stakeholders. It frankly is shocking that the government would knowingly suggest otherwise. In practical terms, the “sooner the better” is an apt approach for resolving this case in order to minimize the harm that the uncertainty inherent in the government’s action already is causing and which only would be compounded by the delay the government contemplates. II. THE INTEREST OF THE STATUTORY COMMITTEE The Statutory Committee is a statutory fiduciary created by Congress to represent the stakeholders that will own the majority interest of the airline that will exist following the proposed merger of AMR and US Airways.1 See 11 U.S.C. § 1102(a)(1) (requiring appointment 1 The Statutory Committee consists of nine members: three indenture trustees (the Bank of New York Mellon, Manufacturers and Traders Trust Company and Wilmington Trust Company); three labor organizations (the Allied Pilots Association, the Association of Professional Flight Attendants and the Transport Workers Union of America); two trade creditors (Boeing Capital Corporation and Hewlett-Packard Enterprise Services, LLC) and the Pension Benefit Guaranty Corporation. The three labor organizations have filed a proposed amicus brief supporting (cont'd) 2 Case 1:13-cv-01236-CKK Document 46-1 Filed 08/28/13 Page 4 of 11 of a general unsecured creditors’ committee “as soon as practicable” after the commencement of a chapter 11 case). The Statutory Committee exercises a “wide and important array of authority and responsibility . . . [and] the Bankruptcy Code contemplates a significant and central role for committees in the scheme of a business reorganization.” In re Penn-Dixie Indus., Inc., 9 B.R. 941, 944 (Bankr. S.D.N.Y. 1981). The Bankruptcy Code invests the Statutory Committee with oversight responsibilities, and the Statutory Committee is afforded investigatory authority consistent with its mandate to “provide supervision of the debtor in possession and of the trustee.” H.R. Rep. No. 95-595, at 401 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6357; see also 11 U.S.C. § 1103 (defining the powers and responsibilities of creditors’ committees and other statutory committees). Consistent with its statutory mandate, at the outset of AMR’s chapter 11 case, the Statutory Committee announced that its principal objective was “to work with the Debtors to achieve a feasible and expeditious transformation of American Airlines and its related businesses that preserves, and hopefully enhances, business enterprise value.” See In re AMR Corp., Case No. 11-15463 (SHL), ¶ 6 (Bankr. S.D.N.Y. Dec. 20, 2011), ECF No. 403. To advance this objective, the Statutory Committee and AMR worked collaboratively to fairly and systematically evaluate restructuring alternatives.2 On May 1, 2012, the Statutory Committee and AMR agreed ________________________ (cont'd from previous page) Defendants’ Motion. See Motion of Allied Pilots Association, Association of Professional Flight Attendants, Association of Flight Attendants-CWA and Transport Workers Union of America to File Amicus Curiae Brief In Support of Defendant’s Motion To Set Trial Date [ECF No. 11], United States v. US Airways Group, Inc., No. 1:13-cv-01236-CKK (D.D.C.. Aug. 23, 2013), ECF No. 21, Ex. A. 2 The aim of the strategic alternatives exploration process was to compare the AMR’s standalone business plan against a transaction with another airline. During this process, AMR, the (cont'd) 3 Case 1:13-cv-01236-CKK Document 46-1 Filed 08/28/13 Page 5 of 11 to a formal written protocol to guide their assessment of strategic alternatives. The announcement of a definitive merger agreement (the “Merger Agreement”) between AMR and US Airways on February 14, 2013, marked the culmination of that strategic alternatives process. Pursuant to the Merger Agreement, approximately 72% of the equity of the merged entity, New AAG, will be distributed to the AMR’s economic stakeholders. In addition, the Statutory Committee serves as a “primary negotiating bod[y] for the formulation of the plan of reorganization.” H.R. Rep. No. 95-959, at 401 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6357; see also In re Johns-Manville Corp., 801 F.2d 60, 62 (2d Cir. 1986). The Statutory Committee was therefore intimately involved in the negotiation of the AMR’s plan of reorganization (the “Plan”). In turn, that Plan—the only plan of reorganization before the Bankruptcy Court—is the product of an enormously complex set of related agreements. Specifically, the Plan contemplates the settlement of numerous complicated and contested intercreditor issues; the negotiation of memoranda of understanding between AMR, US Airways and their respective labor organizations concerning the integration of the two companies’ unionized workforces; and other settlements and compromises that are embodied in the Plan, all of which are predicated on the consummation of the merger. ________________________ (cont'd from previous page) Statutory Committee and their respective advisors assessed a number of potential transactions and concluded that a combination with US Airways could create significant incremental value for AMR’s estates by generating incremental traffic and cost synergies that could not be achieved through other means. Thus, in August 2012, AMR, the Statutory Committee and US Airways commenced formal negotiations and information sharing toward a potential merger. The Statutory Committee provided extensive input to both parties throughout their negotiations. 4 Case 1:13-cv-01236-CKK Document 46-1 Filed 08/28/13 Page 6 of 11 III. THE GOVERNMENT’S PROPOSED SCHEDULE WOULD EXACERBATE HARMFUL UNCERTAINTY The Statutory Committee believes that prompt adjudication of this action according to the schedule Defendants have proposed is in the best interests of AMR’s unsecured creditors and other stakeholders. AMR’s chapter 11 cases involve over 430,000 parties in interest, including investors, current and retired employees, suppliers and other business partners, airport authorities, stockholders and many others. Despite the sheer number of stakeholders and the diversity of interests they hold, all classes of creditors and equity interest holders entitled to vote on the Plan have accepted the Plan by margins that are virtually unprecedented in large chapter 11 cases.3 There is no guarantee, however, that the remarkable consensus the parties have achieved to date would endure over the elongated schedule the government proposes. The Statutory Committee believes that protracted litigation would engender greater uncertainty and could encourage opportunistic and destabilizing behavior. In particular, significant delay in resolving this litigation could lead individual stakeholders to attempt to extract as much value as possible for particular constituencies without maximizing the value of AMR’s estates as a whole. This concern is particularly acute because, as noted above, the Plan is predicated on a global settlement of enormously complex intercreditor issues. The prolonged uncertainty associated with the government’s proposed schedule could undermine these compromises and instead 3 On August 23, 2013, the Statutory Committee submitted a memorandum at the direction of the Bankruptcy Court addressing what impact, if any, the government’s action has on AMR’s outstanding request for entry of an order confirming the Plan. The Statutory Committee’s view, reflected in its submission to the Bankruptcy Court, is that the litigation pending before this Court, and the Plan confirmation proceedings in the Bankruptcy Court, are separate processes that can and should proceed independently. See In re AMR Corp., Case No. 11-15463 (SHL) (Bankr. S.D.N.Y. Aug. 23, 2013), ECF No. 9927. 5 Case 1:13-cv-01236-CKK Document 46-1 Filed 08/28/13 Page 7 of 11 precipitate factiousness and in-fighting among various constituencies. That AMR and US Airways understood and accounted for the possibility that the DOJ might seek to enjoin the merger in no way negates the risk that protracted litigation could upset the dynamics of AMR’s reorganization. In short, the government should not be permitted to rely on scheduling to block the proposed merger, without even having to prove its entitlement to relief on the merits. IV. THE BANKRUPTCY CONTEXT DISTINGUISHES THIS LITIGATION FROM THE CASES THE GOVERNMENT CITES The Statutory Committee was quite surprised to see the government argue that because there is “some uncertainty” in “every merger challenged by the government” (Pls.’ Opp. at 5), the bankruptcy context here is in no way unique. Nothing could be further from the truth. First and foremost, none of the prior challenges the government references (id. at 9) involved a merger agreement incorporated into a plan of reorganization accepted by creditors and shareholders following a bankruptcy court-approved solicitation process, let alone one that is the result of bringing together numerous and diverse stakeholders in support of creating a new competitor. As noted above, that support has the real potential to erode with the passage of time because stakeholders will respond differently to event risk—i.e., the risk of intervening exogenous events that would disrupt the proposed transaction. As the delay in consummating the proposed merger becomes more protracted, so too does event risk. Because stakeholders respond differently to event risk depending on the certainty of their recovery (e.g., stakeholders that are more certain to recover regardless of whether the proposed merger is consummated are less tolerant of event risk, and vice versa), the divergence of interest among stakeholders increases as the expected delay in merger consummation increases. Second and equally telling, none of the merger challenges identified by the government involved industries in which the DOJ itself was an active participant—through the approval of 6 Case 1:13-cv-01236-CKK Document 46-1 Filed 08/28/13 Page 8 of 11 three prior mergers—that created competitors capable of offering far more expansive service than AMR and US Airways could provide on their own. This is not to say that the government is legally estopped from abandoning its prior endorsement of merging complementary airline networks, but it is quite another thing for the government to act as if AMR and its creditors anticipated the government’s proposed schedule—under which trial would commence in March 2014, more than twenty-two months after the DOJ initiated its investigation by issuing Civil Investigative Demands in April 2012 and ten months after the parties substantially complied with a Second Request in May 2013—because, as the government now claims, this is a “highly problematic merger” in “highly concentrated markets.” (Pls.’ Opp. at 3.) That proposition is, of course, fanciful in light of the DOJ’s own airline merger precedents. With only seventeen direct flight overlaps (without accounting for the significance of other competitors on those routes), few conceivable slot issues beyond those alleged to exist at Ronald Reagan Washington National Airport and net direct consumer benefits of more than $500 million per year, Defendants and the Statutory Committee had every reason to believe that the December 17, 2013 outside termination date provided more than ample time to resolve any concerns that the DOJ could reasonably raise.4 Indeed, if anything, it was the DOJ that hid the ball from all interested parties and stakeholders during its nearly sixteen-month-long, intensive investigation of the potential (and, later, announced) merger, which in the Statutory Committee’s view leaves the government’s demand for additional massive and lengthy discovery quite hollow. 4 The Merger Agreement accounts for a delay in obtaining antitrust clearance by permitting either party to extend the “Termination Date” (as defined in the Merger Agreement) by up to two months, from October 14, 2013 to December 17, 2013. See In re AMR Corp., Case No. 1115463 (SHL) (Bankr. S.D.N.Y. June 5, 2013), ECF No. 8590, Ex. A § 6.2 (authorizing an extension to December 13, 2013, plus a forward adjustment to reflect time that elapsed during the Second Request process, resulting in a December 17, 2013 Termination Date). 7 Case 1:13-cv-01236-CKK Document 46-1 Filed 08/28/13 Page 9 of 11 V. THE GOVERNMENT CANNOT JUSTIFY A LENGTHY PRETRIAL SCHEDULE BASED ON A FICTIONAL PLAN “B” Finally, particularly from the Statutory Committee’s perspective, it is ironic that the government takes the position that significant delay and uncertainty cannot harm AMR (and presumably, its creditors) because AMR is, in the government’s view, positioned to “compete as a strong and vibrant standalone firm.” (Pls.’ Opp. at 3.) This presumptuous assertion is both factually unsubstantiated and, more importantly, misunderstands the procedural context of the AMR bankruptcy. Factually, as the Statutory Committee and its advisors analyzed in exhaustive detail and explained to DOJ throughout its lengthy investigation, AMR simply cannot compete as effectively long term against Delta, United, Southwest and others without the scope and breadth of connecting traffic that the DOJ allowed Delta, United and Southwest to attain through their recent mergers. Indeed, the Statutory Committee finds it particularly troubling that the government’s claim under Section 7 of the Clayton Act, 15 U.S.C. § 18, appears to be centered more around the government’s wishful or naive belief that AMR can compete effectively on its own (notwithstanding its current bankruptcy) than on proving that the combination of AMR’s and US Airways’ complementary networks may substantially lessen competition (rather than enhance it) in any economically meaningful market. Procedurally, as the Statutory Committee informed the government in response to one of the DOJ’s several requests for information directly from the Statutory Committee, there is no Plan B before the Bankruptcy Court that AMR, the Statutory Committee and other stakeholders could readily revert to if the present Plan, which is predicated on the Merger Agreement, cannot be consummated. The Statutory Committee conveyed to the government that any injunctive relief would take the bankruptcy back to square one because any confirmation order entered by 8 Case 1:13-cv-01236-CKK Document 46-1 Filed 08/28/13 Page 10 of 11 the Bankruptcy Court would be vacated, the Plan would be rendered null and void, and AMR would continue in chapter 11 administration. This scenario likely would result in the unwinding of numerous complex, multilateral settlements and contractual arrangements that are dependent on the Merger Agreement (including new union collective bargaining agreements) and a general balkanization of stakeholders that inevitably would impose relative disarray on AMR as a company and as a competitor. Again, presumably some of these issues will be the subject of trial, but the point for this Motion is that the government has no basis to assert, or even suggest, that AMR is a stable, longterm competitor that would be unaffected by the lengthy delay and uncertainty that the government’s schedule so myopically envisions. To the contrary, the government’s schedule only will exacerbate the harm that uncertainty itself creates in relation to the unique and complex balance of interests that culminated in the all but uniform support for this highly procompetitive merger. VI. CONCLUSION For the foregoing reasons, the Statutory Committee respectfully requests that this Court grant the Motion. 9 Case 1:13-cv-01236-CKK Document 46-1 Filed 08/28/13 Page 11 of 11 Respectfully submitted, Dated: August 28, 2013 John Wm. Butler, Jr. (pro hac vice forthcoming) Albert L. Hogan, III (pro hac vice forthcoming) SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 155 North Wacker Drive Chicago, IL 60606 Tel: (312) 407-0700 Jack.Butler@skadden.com Al.Hogan@skadden.com Jay M. Goffman (pro hac vice forthcoming) James A. Keyte (pro hac vice forthcoming) Kenneth B. Schwartz (pro hac vice forthcoming) SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 4 Times Square New York, NY 10036-6522 Tel: (212) 735-3000 Jay.Goffman@skadden.com James.Keyte@skadden.com Ken.Schwartz@skadden.com 10 /s/ Gregory B. Craig Gregory B. Craig (D.C. Bar No. 164640) SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 1440 New York Avenue, N.W. Washington, DC 20005-2111 Tel: (202) 371-7000 Gregory.Craig@skadden.com Counsel for Official Committee of Unsecured Creditors Case 1:13-cv-01236-CKK Document 46-2 Filed 08/28/13 Page 1 of 1 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. ) ______________________________________ ) Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly [PROPOSED] ORDER GRANTING MOTION OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS FOR LEAVE TO FILE AMICUS CURIAE BRIEF IN SUPPORT OF DEFENDANTS’ MOTION TO SET TRIAL DATE Upon review of the Motion of the Official Committee of Unsecured Creditors (“Statutory Committee”) for Leave to File Amicus Curiae Brief in Support of Defendants’ Motion to Set Trial Date in the above-captioned matter, it is hereby: ORDERED that the Motion is GRANTED on the grounds that the Statutory Committee will be able to provide unique information and perspective that can assist the Court in determining the scheduling of this litigation. ___________________________ Colleen Kollar-Kotelly United States District Judge Date: Case 1:13-cv-01236-CKK Document 47 Filed 08/28/13 Page 1 of 3 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK ____________________________________ ) ) ) Plaintiffs, ) ) ) ) v. ) US AIRWAYS GROUP, INC., and ) ) AMR CORPORATION ) ) Defendants. ) ____________________________________) UNITED STATES OF AMERICA, et al. Case No. 1:13-cv-01236-CKK NOTICE OF APPEARANCE Please notice that Kayna Stavast-Piper is admitted or otherwise authorized to practice in this court on behalf of plaintiff State of Texas. Dated: August 28, 2013 Respectfully submitted, ___/s/ Kayna Stavast-Piper _________ Kayna Stavast-Piper Assistant Attorney General Consumer Protection Division – Antitrust Section Office of the Attorney General of Texas P. O. Box 12548 Austin, Texas 78711-2548 Kayna.Stavast-Piper@texasattorneygeneral.gov (512) 463-1563 (512) 320-0975 Fax Case 1:13-cv-01236-CKK Document 47 Filed 08/28/13 Page 2 of 3 CERTIFICATE OF SERVICE I hereby certify that on this 28th day of August, 2013, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system, which will send a notice of electronic filing to the counsel of record in this matter who are registered on the CM/ECF system, and that I caused a copy of the foregoing and the notice of electronic filing to be served by email and first class mail to the following non-ECF participants: Nancy M. Bonnell Antitrust Unit Chief Office of the Attorney General of The State of Arizona 1275 West Washington Phoenix, AZ 85007 (602) 542-7728 (phone) (602) 542-9088 (facsimile) Nancy.bonnell@azag.gov Victor J. Domen, Jr. Senior Antitrust Counsel Office of the Attorney General Of Tennessee 500 Charlotte Avenue Nashville, TN 37202 (615) 532-3327 (phone) (615) 532-6951(facsimile) Vic.Domen@ag.tn.gov James A. Donahue, III Executive Deputy Attorney General Public Protection Division Office of the Attorney General of Pennsylvania 14th Floor, Strawberry Square Harrisburg, PA 17120 (717) 787-4530 (phone) (717) 787-1190 (facsimile) jdonahue@attorneygeneral.gov Paul T. Denis (D.C. Bar No. 437040) Dechert LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 (phone) (202) 261-3333 (facsimile) paul.denis@dechert.com Charles F. Rule Cadwalader, Wichersham & Taft LLP 700 Sixth Street, N.W. Washington, DC 20001 (202) 862-2200 (phone) (202) 862-2400 (facsimile) rick.rule@cwt.com John M. Majoras Rosanna K. McCalips Jones Day 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (phone) (202) 626-1700 (facsimile) jmmajoras@jonesday.com rkmccalips@JonesDay.com Sarah Oxenham Allen Assistant Attorney General Office of the Attorney General of the Commonwealth of Virginia Consumer Protection Section 900 East Main Street Richmond, VA 23219 (804) 786-6557 (phone) (804) 786-0122 (facsimile) SOAllen@oag.state.va.us Mary Jean Moltenbrey Paul Hastings LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 (phone) (202) 551- 0225 (facsimile) mjmoltenbrey@paulhastings.com Case 1:13-cv-01236-CKK Document 47 Filed 08/28/13 Page 3 of 3 Nicholas A. Bush (D.C. Bar # 1011001) Assistant Attorney General Office of the Attorney General 441 Fourth Street, N.W., Suite 600-S Washington, DC 20001 (202) 442-9841 (phone) (202) 715-7720 (facsimile) Nicholas.bush@dc.gov Dated: __8/28/2013__________ Austin, Texas Lizbeth A. Brady Chief, Multistate Antitrust Enforcement Office of the Attorney General of Florida PL-01, The Capital Tallahassee, FL 32399-1050 (850) 414-3300 (phone) (850) 488-9134 (facsimile) Liz.brady@myfloridalegal.com _/s/ Kayna Stavast-Piper______ Kayna Stavast-Piper Case 1:13-cv-01236-CKK Document 48 Filed 08/29/13 Page 1 of 2 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, v. Civil Action No. 13-1236 (CKK) US AIRWAYS GROUP INC., et al., Defendants. ORDER (August 29, 2013) An initial scheduling conference is set in this matter for August 30, 2013. Upon consideration of the Defendants’ [11] Motion for Trial Date and related pleadings, as well as the parties’ [45] Meet and Confer Statement, it is, this 29th day of August, 2013, hereby ORDERED that the parties shall be prepared to address the following issues during the initial scheduling conference:1 Pre-Litigation Investigation  The scope of documents the Department of Justice obtained from the Defendant Airlines prior to filing suit.  The scope of documents the Department of Justice obtained from third parties prior to filing suit.  The identities of individuals the Department of Justice deposed prior to filing suit. Written Discovery  1 The scope of additional written discovery the Plaintiffs intend to seek from the The Court appreciates that the exact scope of discovery each party may seek and produce depends on multiple variables that may be unknown at this time and no party shall be bound by the answers provided during the hearing. Nevertheless, the greater detail the parties can provide regarding these issues, the better positioned the Court will be to set a trial date that is both expeditious and attainable. Case 1:13-cv-01236-CKK Document 48 Filed 08/29/13 Page 2 of 2 Defendant Airlines.  The volume of documents the Defendant Airlines anticipate producing to the Plaintiffs during discovery.  The scope of discovery the Plaintiffs intend to request from third parties.  The scope of discovery the Defendant Airlines intend to request from the Plaintiffs, apart from the documents the Department of Justice obtained from third parties pursuant to civil investigative demands.  The scope of discovery the Defendant Airlines intend to seek from third parties. Depositions  A breakdown of the depositions each party proposes to take by type of deponent and subject matter, including how many depositions would be taken of partyopponents as opposed to third parties. Experts  The number of experts each party anticipates designating and the subject matter of each expert report.  Whether the Defendant Airlines’ experts and/or opinions were disclosed to the Department of Justice prior to this litigation and vice versa. Trial  The format each party envisions for the trial, including to the extent testimony shall be introduced via affidavit or deposition, the number of live witnesses each party intends to introduce, and the scope of any live testimony. IT IS FURTHER ORDERED that the parties shall immediately begin serving written discovery to the extent possible. The Plaintiffs shall be permitted to propound up to 10 interrogatories (including subparts) to each Defendant. The Defendants shall be permitted to propound up to 15 interrogatories (including subparts) to the Plaintiffs collectively. SO ORDERED /s/ COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE 2 Case 1:13-cv-01236-CKK Document 49 Filed 08/29/13 Page 1 of 3 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ____________________________________ ) ) ) Plaintiffs, ) ) ) ) v. ) US AIRWAYS GROUP, INC., and ) ) AMR CORPORATION ) ) Defendants. ) ____________________________________) UNITED STATES OF AMERICA, et al. Case No. 1:13-cv-01236-CKK NOTICE OF APPEARANCE Please notice that Mark Levy is admitted or otherwise authorized to practice in this court on behalf of plaintiff State of Texas. Dated: August 29, 2013 Respectfully submitted, __/s/ Mark Levy_____________________ Mark Levy Assistant Attorney General Consumer Protection Division – Antitrust Section Office of the Attorney General of Texas P. O. Box 12548 Austin, Texas 78711-2548 Mark.Levy@texasattorneygeneral.gov (512) 936-1847 (512) 320-0975 Fax Case 1:13-cv-01236-CKK Document 49 Filed 08/29/13 Page 2 of 3 CERTIFICATE OF SERVICE I hereby certify that on this 29th day of August, 2013, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system, which will send a notice of electronic filing to the counsel of record in this matter who are registered on the CM/ECF system, and that I caused a copy of the foregoing and the notice of electronic filing to be served by email and first class mail to the following non-ECF participants: Nancy M. Bonnell Antitrust Unit Chief Office of the Attorney General of The State of Arizona 1275 West Washington Phoenix, AZ 85007 (602) 542-7728 (phone) (602) 542-9088 (facsimile) Nancy.bonnell@azag.gov Victor J. Domen, Jr. Senior Antitrust Counsel Office of the Attorney General Of Tennessee 500 Charlotte Avenue Nashville, TN 37202 (615) 532-3327 (phone) (615) 532-6951(facsimile) Vic.Domen@ag.tn.gov James A. Donahue, III Executive Deputy Attorney General Public Protection Division Office of the Attorney General of Pennsylvania 14th Floor, Strawberry Square Harrisburg, PA 17120 (717) 787-4530 (phone) (717) 787-1190 (facsimile) jdonahue@attorneygeneral.gov Paul T. Denis (D.C. Bar No. 437040) Dechert LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 (phone) (202) 261-3333 (facsimile) paul.denis@dechert.com Charles F. Rule Cadwalader, Wichersham & Taft LLP 700 Sixth Street, N.W. Washington, DC 20001 (202) 862-2200 (phone) (202) 862-2400 (facsimile) rick.rule@cwt.com John M. Majoras Rosanna K. McCalips Jones Day 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (phone) (202) 626-1700 (facsimile) jmmajoras@jonesday.com rkmccalips@JonesDay.com Sarah Oxenham Allen Assistant Attorney General Office of the Attorney General of the Commonwealth of Virginia Consumer Protection Section 900 East Main Street Richmond, VA 23219 (804) 786-6557 (phone) (804) 786-0122 (facsimile) SOAllen@oag.state.va.us Mary Jean Moltenbrey Paul Hastings LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 (phone) (202) 551- 0225 (facsimile) mjmoltenbrey@paulhastings.com Case 1:13-cv-01236-CKK Document 49 Filed 08/29/13 Page 3 of 3 Nicholas A. Bush (D.C. Bar # 1011001) Assistant Attorney General Office of the Attorney General 441 Fourth Street, N.W., Suite 600-S Washington, DC 20001 (202) 442-9841 (phone) (202) 715-7720 (facsimile) Nicholas.bush@dc.gov Dated: __8/29/2013__________ Austin, Texas Lizbeth A. Brady Chief, Multistate Antitrust Enforcement Office of the Attorney General of Florida PL-01, The Capital Tallahassee, FL 32399-1050 (850) 414-3300 (phone) (850) 488-9134 (facsimile) Liz.brady@myfloridalegal.com _____ /s/ Mark Levy Mark Levy _____ Case 1:13-cv-01236-CKK Document 50 Filed 08/29/13 Page 1 of 3 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ____________________________________ ) ) ) Plaintiffs, ) ) ) v. ) ) US AIRWAYS GROUP, INC., and ) ) AMR CORPORATION ) ) Defendants. ) ____________________________________) UNITED STATES OF AMERICA, et al. Case No. 1:13-cv-01236-CKK NOTICE OF APPEARANCE Please notice that Kayna Stavast-Piper is admitted or otherwise authorized to practice in this court on behalf of plaintiff State of Texas. Dated: August 29, 2013 Respectfully submitted, ___/s/ Kayna Stavast-Piper _________ Kayna Stavast-Piper Assistant Attorney General Consumer Protection Division – Antitrust Section Office of the Attorney General of Texas P. O. Box 12548 Austin, Texas 78711-2548 Kayna.Stavast-Piper@texasattorneygeneral.gov (512) 463-1563 (512) 320-0975 Fax Case 1:13-cv-01236-CKK Document 50 Filed 08/29/13 Page 2 of 3 CERTIFICATE OF SERVICE I hereby certify that on this 29th day of August, 2013, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system, which will send a notice of electronic filing to the counsel of record in this matter who are registered on the CM/ECF system, and that I caused a copy of the foregoing and the notice of electronic filing to be served by email and first class mail to the following non-ECF participants: Nancy M. Bonnell Antitrust Unit Chief Office of the Attorney General of The State of Arizona 1275 West Washington Phoenix, AZ 85007 (602) 542-7728 (phone) (602) 542-9088 (facsimile) Nancy.bonnell@azag.gov Victor J. Domen, Jr. Senior Antitrust Counsel Office of the Attorney General Of Tennessee 500 Charlotte Avenue Nashville, TN 37202 (615) 532-3327 (phone) (615) 532-6951(facsimile) Vic.Domen@ag.tn.gov James A. Donahue, III Executive Deputy Attorney General Public Protection Division Office of the Attorney General of Pennsylvania 14th Floor, Strawberry Square Harrisburg, PA 17120 (717) 787-4530 (phone) (717) 787-1190 (facsimile) jdonahue@attorneygeneral.gov Paul T. Denis (D.C. Bar No. 437040) Dechert LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 (phone) (202) 261-3333 (facsimile) paul.denis@dechert.com Charles F. Rule Cadwalader, Wichersham & Taft LLP 700 Sixth Street, N.W. Washington, DC 20001 (202) 862-2200 (phone) (202) 862-2400 (facsimile) rick.rule@cwt.com John M. Majoras Rosanna K. McCalips Jones Day 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (phone) (202) 626-1700 (facsimile) jmmajoras@jonesday.com rkmccalips@JonesDay.com Sarah Oxenham Allen Assistant Attorney General Office of the Attorney General of the Commonwealth of Virginia Consumer Protection Section 900 East Main Street Richmond, VA 23219 (804) 786-6557 (phone) (804) 786-0122 (facsimile) SOAllen@oag.state.va.us Mary Jean Moltenbrey Paul Hastings LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 (phone) (202) 551- 0225 (facsimile) mjmoltenbrey@paulhastings.com Case 1:13-cv-01236-CKK Document 50 Filed 08/29/13 Page 3 of 3 Nicholas A. Bush (D.C. Bar # 1011001) Assistant Attorney General Office of the Attorney General 441 Fourth Street, N.W., Suite 600-S Washington, DC 20001 (202) 442-9841 (phone) (202) 715-7720 (facsimile) Nicholas.bush@dc.gov Dated: __8/29/2013__________ Austin, Texas Lizbeth A. Brady Chief, Multistate Antitrust Enforcement Office of the Attorney General of Florida PL-01, The Capital Tallahassee, FL 32399-1050 (850) 414-3300 (phone) (850) 488-9134 (facsimile) Liz.brady@myfloridalegal.com _/s/ Kayna Stavast-Piper______ Kayna Stavast-Piper Case 1:13-cv-01236-CKK Document 51 Filed 08/29/13 Page 1 of 4 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, Case No. 1:13-cv-01236 (CKK) v. US AIRWAYS GROUP, INC. and AMR CORPORATION, Initial Scheduling Conference: Friday, August 30, 2013 9:30 a.m. Defendants. NOTICE OF LODGING OF PROPOSED PROTECTIVE ORDER Plaintiffs, the United States and the Plaintiff States, and Defendants US Airways Group, Inc. and AMR Corporation, hereby jointly lodge the proposed Protective Order attached hereto as Exhibit One. As set forth in the parties’ Joint Report, the parties dispute whether outside counsel for the Unsecured Creditors Committee of AMR Corporation should be granted access to documents marked confidential under the Protective Order. If the Court concludes that UCC counsel should have such access and approves the rest of the order, the parties request that the Court sign the order as submitted herewith. If, on the other hand, the Court concludes that outside counsel for the UCC should not have such access, the form of order submitted here is prepared so that the Court may strike paragraph 9(h) before approving the order. Case 1:13-cv-01236-CKK Document 51 Filed 08/29/13 Page 2 of 4 Dated: August 29, 2013 Respectfully submitted, Attorneys for Defendant US Airways Group, Inc. Attorneys for Defendant AMR Corporation /s/ Richard G. Parker Richard G. Parker (DC Bar #327544) Henry Thumann (DC Bar #474499) Courtney Dyer (DC Bar #490805) O’MELVENY & MYERS LLP 1625 Eye Street, N.W. Washington, D.C. 20006 (202) 383-5300 (Phone) (202) 383-5414 (Facsimile) rparker@omm.com hthumann@omm.com cdyer@omm.com /s/ John M. Majoras John M. Majoras (DC Bar #474267) Michael S. Fried (DC Bar #458357) Rosanna K. McCalips (DC Bar #482859) JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (Phone) (202) 626-1700 (Facsimile) jmmajoras@jonesday.com msfried@jonesday.com rkmccalips@jonesday.com Kenneth R. O’Rourke (Admitted Pro Hac Vice) O’MELVENY & MYERS LLP 400 South Hope Street Los Angeles, CA 90071 (213) 430-6000 (Phone) (213) 430-6407 (Facsimile) korourke@omm.com Mary Jean Moltenbrey (DC Bar #481127) PAUL HASTINGS LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 (Phone) (202) 551- 0225 (Facsimile) mjmoltenbrey@paulhastings.com Paul T. Denis (DC Bar #437040) Steven G. Bradbury (DC Bar #416430) DECHERT LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 (Phone) (202) 261-3333 (Facsimile) paul.denis@dechert.com steven.bradbury@dechert.com Charles F. Rule (DC Bar #370818) CADWALADER, WICKERSHAM & TAFT LLP 700 Sixth Street, N.W. Washington, DC 20001 (202) 862-2200 (Phone) (202) 862-2400 (Facsimile) rick.rule@cwt.com -2- Case 1:13-cv-01236-CKK Document 51 Filed 08/29/13 Page 3 of 4 FOR THE UNITED STATES FOR THE STATE OF ARIZONA /s/ Ryan Danks Ryan J. Danks Antitrust Division U.S. Department of Justice 450 Fifth Street Northwest, Suite 8000 Washington, DC 20530 Telephone: (202) 305-0128 Facsimile: : (202) 514-6525 E-mail: ryan.danks@usdoj.gov /s/ Nancy Bonnell Nancy M. Bonnell Antitrust Unit Chief Arizona Bar No. 016382 1275 West Washington Phoenix, Arizona 85007 Telephone: 602-542-7728 Facsimile: 602-542-9088 Email: nancy.bonnell@azag.gov FOR THE DISTRICT OF COLUMBIA FOR THE STATE OF FLORIDA /s/ Bennett Rushkoff Bennett Rushkoff (D.C. Bar # 386925) Chief, Public Advocacy Section /s/ Lizabeth A. Brady Lizabeth A. Brady Chief, Multistate Antitrust Enforcement Christopher Hunt Associate Attorney General PL-01, The Capitol Tallahassee, Florida 32399-1050 Telephone: 850-414-3300 Facsimile: 850-488-9134 /s/ Nicholas A. Bush Nicholas A. Bush (D.C. Bar # 1011001) Assistant Attorney General Office of the Attorney General 441 Fourth Street, N.W., Suite 600-S Washington, DC 20001 Telephone: 202-442-9841 Facsimile: 202- 715-7720 E-mail: nicholas.bush@dc.gov FOR THE STATE OF TEXAS FOR THE COMMONWEALTH OF PENNSYLVANIA /s/ Mark A. Levy Mark A. Levy Kayna Stavast-Piper Assistant Attorney General Texas Bar No. 24014555 Office of the Attorney General of Texas 300 W. 15th Street, 7th Floor Austin, Texas 78701 Telephone: 512-936-1847 Facsimile: 512-320-0975 Email:mark.levy@texasattorneygeneral.com /s/ James A. Donahue III James A. Donahue, III Executive Deputy Attorney General PA Bar No. 42624 Jennifer A. Thomson Deputy Attorney General Public Protection Division 14th Floor, Strawberry Square Harrisburg, PA 17120 Telephone: 717-787-4530 Facsimile: 717-787-1190 Email: jdonahue@attorneygeneral.gov -3- Case 1:13-cv-01236-CKK Document 51 Filed 08/29/13 Page 4 of 4 FOR THE COMMONWEALTH OF VIRGINIA FOR THE STATE OF TENNESSEE /s/ Sarah Oxenham Allen Sarah Oxenham Allen (Va. Bar # 33217) Matthew R. Hull (Va. Bar # 80500) Assistant Attorneys General Office of the Attorney General Consumer Protection Section 900 East Main Street Richmond, VA 23219 Telephone: 804-786-6557 Facsimile: 804 786-0122 Email: SOAllen@oag.state.va.us /s/ Victor J. Domen, Jr. Victor J. Domen, Jr. Senior Antitrust Counsel Tennessee Bar No. 015803 500 Charlotte Avenue Nashville, TN 37202 Telephone: 615-253-3327 Facsimile: 615-532-6951 Email: Vic.Domen@ag.tn.gov -4- Case Document 51-1 Filed 08/29/13 Page 1 of 15 Exhibit One Case 1:13-cv-01236-CKK Document 51-1 Filed 08/29/13 Page 2 of 15 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, v. Case No. 1:13-cv-01236 (CKK) US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants. STIPULATED PROTECTIVE ORDER CONCERNING CONFIDENTIALITY In the interests of (i) promoting an efficient and prompt resolution of this Action; (ii) facilitating discovery by the Parties litigating this Action; and (iii) protecting the Parties’ and non-parties’ Confidential Information from improper disclosure or use, Plaintiffs, the United States and the Plaintiff States, and Defendants, US Airways Group, Inc. and AMR Corporation, have stipulated to the provisions set forth below. Upon good cause shown, the Court, pursuant to Fed. R. Civ. P. 26(c)(1)(G), ORDERS as follows: A. DEFINITIONS 1. As used in this Order: (a) “Confidential Information” means the portions of any Investigation Materials, or any other documents, transcripts, or other material that contain any trade secret or 1 Case 1:13-cv-01236-CKK Document 51-1 Filed 08/29/13 Page 3 of 15 other confidential research, development, or commercial information, as such terms are used in Fed. R.Civ. P. 26(c)(1)(G). (b) “Defendants” means US Airways Group, Inc. and AMR Corporation, their divisions, subsidiaries, affiliates, partnerships and joint ventures, and all directors, officers, employees, agents, and representatives of the foregoing. (c) “Disclosed” means shown, divulged, revealed, produced, described, transmitted, or otherwise communicated, in whole or in part. (d) “Document” means documents or electronically stored information as defined in Fed. R. Civ. P. 34(a). (e) “Investigation” means the Department of Justice’s and Plaintiff States’ preComplaint inquiries into the proposed merger of US Airways Group, Inc. and AMR Corporation. (f) “Investigation Materials” means documents, information, transcripts of testimony, or other materials that (i) any non-party provided to any Party either voluntarily or under compulsory process during the Investigation, (ii) any Party provided to any non-party during the Investigation, or (iii) that Defendants have provided to Plaintiffs during the Investigation. (g) “Parties” means collectively the Plaintiffs and Defendants to this Action, each of whom may be referred to as a “Party.” (h) “Person” means any natural person, corporate or business entity, partnership, association, joint venture, governmental entity, or trust. (i) “Plaintiffs” means the United States of America, represented by the Antitrust Division of the United States Department of Justice, the Plaintiff States, and 2 Case 1:13-cv-01236-CKK Document 51-1 Filed 08/29/13 Page 4 of 15 representatives of the Antitrust Division of the Department of Justice and the Plaintiff States. (j) “Plaintiff States” means the named plaintiff states in this Action, their respective Attorneys General and other authorized officials, and representatives of their respective Attorneys General. (k) “Protected Person” means any person (including a Party) that provides or has provided Investigation Materials or that, voluntarily or under compulsory process, provides any documents, testimony, or other materials produced in this Action. (l) This “Action” means the above-captioned action pending in this Court, including any pretrial, trial, or post-trial proceedings. B. DESIGNATION OF CONFIDENTIAL INFORMATION 1. Any document or portion thereof submitted by a Protected Person during an investigation by Plaintiffs that is entitled to confidentiality under the Antitrust Civil Process Act, 15 U.S.C. ¶¶ 1311-14, or any federal or state statute, regulation, interpretation, or precedent concerning documents in the possession of Plaintiffs, as well as any information taken from any portion of such document, shall be treated as “Confidential Information” for purposes of this Order. 2. Within two business days after the Court’s entry of this Order, the applicable Party shall send by email, facsimile, or overnight delivery a copy of this Order to each nonparty Protected Person (or, if represented by counsel, the Protected Person’s counsel) that provided Investigation Materials to any Party. Any of the foregoing acts constitute notice of this Order to a Protected Person. 3 Case 1:13-cv-01236-CKK Document 51-1 Filed 08/29/13 Page 5 of 15 If a non-party Protected Person determines that this Order does not adequately protect its confidential Investigation Materials, it may, after meeting and conferring with the Parties and within ten days after receipt of a copy of this Order, seek additional relief from the Court. If a non-party Protected Person seeks additional relief from the Court, only the Investigation Materials for which additional protection has been sought will not be produced until the Protected Party and the Parties have agreed or the Court has ruled on the Protected Party’s motion. No non-party Protected Person’s Confidential Information shall be produced to any Party by any other Party until at least 11 days after the non-party’s receipt of notice of this Order unless, before then, the non-party Protected Person indicates in writing that it does not seek relief in addition to the terms of this Order. 3. A Protected Person may designate as “Confidential Information” any information that it provides to any Party during this Action, to the extent such information constitutes Confidential Information as defined in Paragraph 1(a) of this Order. Such designations constitute a representation to the Court that such Protected Person believes, in good faith, that the information so designated constitutes Confidential Information. Any production of information not designated as Confidential Information will not be deemed a waiver of any future claim of protection concerning such information if it is later designated Confidential Information pursuant to Paragraph 6 of this Order. However, any such subsequent designation will not retroactively prohibit the disclosure of any information for which disclosure was proper when made. 4. In view of the large volume of Investigation Materials provided by Protected Persons, and of the burden of reviewing all of those Investigation Materials, those 4 Case 1:13-cv-01236-CKK Document 51-1 Filed 08/29/13 Page 6 of 15 Investigation Materials will generally be treated as Confidential Information under this Order during pretrial proceedings, except that any Investigation Materials that have been treated as Confidential Information under this Paragraph may be Disclosed in accordance with the procedures set forth in this Order. 5. Designation as Confidential Information of deposition transcripts and documents and other material produced during this Action is governed as follows: (a) After this Order is entered, whenever discovery is sought by subpoena from a non-party in this Action a copy of this Order shall accompany the subpoena. (b) All transcripts of depositions taken in this Action after entry of this Order will be treated as Confidential Information in their entirety for 10 days after the date a copy of the final transcript has been received by the deponent (or the deponent’s counsel) for review. If the transcript is not otherwise provided to the deponent (or the deponent’s counsel), then the Party that noticed the deposition shall provide the final transcript to the deponent or the deponent’s counsel within three days of receipt. At any time during the 10 days following receipt of the final transcript, a Protected Person may designate any portion of testimony or any deposition exhibits produced by the deponent or the deponent’s employer as Confidential Information, in compliance with Paragraph 3 of this Order. Such designations (with reference to the page(s) and line(s) of the final transcript) must be provided in writing by the person making such designations to both Plaintiffs’ and Defendants’ counsel. When a deponent’s testimony discloses information contained in an exhibit designated by a different Protected Person as Confidential Information, all Parties, as well as the deponent and his or her counsel, shall treat the exhibit and all testimony related to such an exhibit in accordance with the exhibit’s confidential 5 Case 1:13-cv-01236-CKK Document 51-1 Filed 08/29/13 Page 7 of 15 designation until 30 days after the party that noticed the deposition provides to the Protected Person who so designated the exhibit the portion of the transcript relating to the exhibit, during which time the Protected Person may designate those portions of the testimony as Confidential Information in accordance with Paragraph 3 of this Order. (c) A Protected Person that designates as Confidential Information any document produced in this Action after entry of this Order must stamp or label each page of each document containing Confidential Information with the designation “CONFIDENTIAL.” Where Confidential Information is produced in electronic format on a disk or other medium that contains exclusively Confidential Information, the “CONFIDENTIAL” designation may be placed on the disk or other medium. 6. If a Party or other Protected Person inadvertently fails to designate as Confidential Information any documents or testimony or other materials, it may later so designate by notifying the Parties in writing. After receiving such notice, the Parties shall thereafter treat the newly designated information as Confidential Information. No prior disclosure of newly designated Confidential Information shall violate this Order, and the Parties have no obligations regarding such prior disclosures. However, in circumstances other than depositions and court filings, the disclosing Party will cooperate with the Protected Person to retrieve copies distributed to non-parties or Parties beyond those permitted by this Order to have such document or information. If a Party or Protected Person inadvertently produces, or has produced, material subject to the attorney-client privilege, work-product protection, the deliberative-process privilege, or any other applicable privilege or protection, despite reasonable efforts to prescreen such material prior to production, the applicable privilege and/or protection 6 Case 1:13-cv-01236-CKK Document 51-1 Filed 08/29/13 Page 8 of 15 shall not be waived if a request for return of such inadvertently produced material is made promptly after the producing Party or Protected Person learns of its inadvertent production. Upon such prompt notice, the parties will comply with Fed. R. Civ. P. 26(b)(5)(B) and any other applicable rules or orders. 7. If a Party receives from a Protected Person a confidentiality waiver, or a Party itself waives confidentiality of its own Confidential Information, to allow a deponent that is not related to the waiving Protected Person (or Party) to be questioned on information that would otherwise be Confidential Information that is not permitted to be disclosed to the deponent, that waiver (including identification of the specific Confidential Information to which it pertains) must be disclosed to counsel for all other Parties as soon as reasonably possible, and in any event no later than 24 hours prior to the deposition of the witness in question, unless good cause for later disclosure is shown. 8. Any Party that objects to the designation as Confidential Information of any materials that it intends disclose to a deponent, file with the Court, or use at trial shall notify the Protected Person in writing, copying all Parties identifying the specific documents and information they believe should not be designated as Confidential Information and the basis for their belief. Thereafter, within three days the Party objecting to the designation shall confer with the Protected Person by telephone to discuss their respective positions. Unless the Protected Person withdraws the designation(s) objected to, the Protected Person shall then have 10 days from the date of the telephonic conference to file a motion seeking an order upholding the designation or otherwise raise the issue with the Special Master. The burden of proving that the designation is proper under Fed. R. Civ. P. 26(c)(1)(G) shall be upon the person seeking 7 Case 1:13-cv-01236-CKK Document 51-1 Filed 08/29/13 Page 9 of 15 to uphold the designation. If a motion is filed, or if the Parties have been notified that the Protected Person intends to file a motion, the Parties shall continue to treat the designated Confidential Information at issue as Confidential Information until a ruling on the motion and afterward if the motion is granted. If the Protected Person does not seek an order within 13 days of receiving the original objection to the designation, or if the Court determines the designation of Confidential Information to have been inappropriate, the challenged designation shall be rescinded. C. SCOPE OF DISCLOSURE OF CONFIDENTIAL INFORMATION 9. Except as authorized by this Order, information designated as Confidential Information pursuant to this Order shall not be disclosed to any Person other than the persons set forth below, and may be disclosed to and used by the persons set forth below and used only in this Action in the manner described below: (a) the Court and all individuals assisting the Court in this Action, including law clerks, court reporters, and stenographic or clerical personnel; (b) United States Department of Justice attorneys and employees, and independent contractors retained by the United States Department of Justice to assist in the prosecution of this Action or otherwise assist in its work; (c) attorneys and employees of the Attorneys General of the Plaintiff States, and independent contractors retained by them to assist in the prosecution of this Action or otherwise assist in their work; (d) outside counsel acting for Defendants in this Action, that counsel’s employees, and independent contractors who are not employees of any Defendant, assisting such outside counsel in the defense of this Action; 8 Case 1:13-cv-01236-CKK Document 51-1 Filed 08/29/13 Page 10 of 15 (e) authors, addressees, and recipients of particular information designated as Confidential Information solely to the extent that they have previously had lawful access to the particular information disclosed or to be disclosed; (f) persons (and their counsel) that Plaintiffs or Defendants believe, in good faith, to have had prior access to the Confidential Information, or who have been participants in a communication that is the subject of the Confidential Information and from whom verification of or other information about that access or participation is sought, solely to the extent of disclosing such information to which they may have had access or that is the subject of the communication in which they may have participated; provided that, unless and until the persons or their counsel confirms that the persons had access or were participants, only as much of the information may be disclosed as may be necessary to confirm the persons’ access or participation; (g) testifying or consulting experts who are not employees of Defendants, retained by a Party to assist in the prosecution or defense of this Action, including employees of the firm with which the expert or consultant is associated or independent contractors who are not employees of any Defendants, who are necessary to assist the experts’ work in this Action; and (h) outside counsel to the Unsecured Creditors Committee of AMR Corporation. 10. Before any information designated as Confidential Information may be disclosed to any person described in Paragraph 9(g) of this Order, he or she must first read this Order or must have otherwise been instructed on his or her obligations under the Order by this Court or counsel for a Party, and shall have executed the agreement included as Appendix A hereto. Counsel for the Party making the disclosure must retain a copy of 9 Case 1:13-cv-01236-CKK Document 51-1 Filed 08/29/13 Page 11 of 15 such executed agreement for a period of at least one year following the final resolution of this Action. Each individual described in Paragraph 9 of this Order to whom information designated as Confidential Information is disclosed must not disclose that Confidential Information to any other Person, except as provided in this Order. 11. Nothing in this Order: (a) subject to the notice requirement in Paragraph 7, limits a Person’s use or disclosure outside of this Action of its own information designated as Confidential Information; (b) prevents disclosure of Confidential Information by any Party to any current employee of the Protected Person that designated the information as Confidential Information; (c) subject to the notice requirement in Paragraph 7, prevents disclosure of Confidential Information by any Party with the consent of the person that designated the Confidential Information; or (d) prevents disclosure by a Party of Confidential Information (i) that is or has become publicly known through no fault of that Party; (ii) lawfully acquired or known to that Party independent of receipt in discovery in this Action; (iii) previously produced, disclosed, and/or provided to that Party without an obligation of confidentiality and not by inadvertence or mistake; or (iv) pursuant to an order of a Court or as may be required by law; or (e) prevents Plaintiffs, subject to taking appropriate steps to preserve the further confidentiality of such information, from disclosing information designated as Confidential Information (i) to secure compliance with a Final Judgment that is entered in 10 Case 1:13-cv-01236-CKK Document 51-1 Filed 08/29/13 Page 12 of 15 this Action; (ii) for law enforcement purposes, including in the course of any such proceedings in which Plaintiffs are parties; or (iii) as may be required by law. D. DISCLOSURE OF CONFIDENTIAL INFORMATION IN THIS ACTION 12. If any documents or testimony or other materials designated under this Order as Confidential Information is included in any pleading, motion, exhibit, or other paper to be filed with the Court, the Party seeking to file such material shall follow the procedures set forth in LCvR 5.1(j) of the Rules of the United States District Court for the District of Columbia. Nothing in this Order shall restrict any person, including any member of the public, from challenging the filing of any Confidential Information material under seal. A Party that files with the Court material that has been designated as Confidential Information by a non-party shall notify the non-party of that filing (and what Confidential Information designated by that non-party was included in the filing) within one day after the filing, provided that the non-party has informed the parties of its desire to receive such notification and provided an email contact to the parties. In addition, parties shall provide non-parties at least twenty-four (24) hours’ notice before any court hearings or other proceedings during which a non-party’s Confidential Information may be publicly disclosed, provided that the non-party has informed the Parties of its desire to receive such notification and provided an email contact to the parties. 13. Disclosure at trial of documents and testimony and other materials designated as Confidential Information will be governed pursuant to Court order. The parties shall meet and confer no later than 30 days before trial and submit a recommended order outlining those procedures. Absent a ruling by the Court to the contrary, documents or deposition testimony, or other materials or information designated as Confidential 11 Case 1:13-cv-01236-CKK Document 51-1 Filed 08/29/13 Page 13 of 15 Information by a Protected Person that appear on an exhibit list or in deposition designations, that are admitted into evidence at trial, will be disclosed on the public record, and any examination relating to such information will likewise be disclosed on the public record, after compliance processes established by this Court. 14. All Confidential Information produced by a Party or non-party as part of this proceeding shall be used solely for purposes of the conduct of this Action and shall not be used for any business, commercial, competitive, personal, or other purpose. E. PROCEDURES UPON TERMINATION OF THIS ACTION 16. (a) Within 90 days after receiving notice of the entry of an order, judgment, or decree terminating this Action concerning all parties (including the resolution of appeals, if any), all persons having received information designated as Confidential Information must either make a good-faith effort to return such material and all copies thereof to the Person that produced it if the information is contained in original documents, or destroy all copies of such Confidential Information. Counsel for the Parties will be entitled to retain court papers and filings, deposition and trial transcripts and exhibits, expert reports and supporting documents, and work product (including compilations of documents), provided that Plaintiffs’ employees and Defendants’ counsel and such counsel’s employees do not disclose such materials to any person except pursuant the terms of this Order or other Court order, or pursuant to agreement with the person that produced the information designated as Confidential Information. All Confidential Information returned to the Parties or their counsel by the Court likewise must be disposed of in accordance with this Paragraph. Nothing in this Paragraph restricts the rights of the Plaintiffs, under Paragraph 11 of this Order, to retain and use documents, information, or 12 Case 1:13-cv-01236-CKK Document 51-1 Filed 08/29/13 Page 14 of 15 other material designated as Confidential Information for law-enforcement purposes or as otherwise required by law. (b) This Order shall be binding on the parties to this action, their attorneys, and their successors, personal representatives, administrators, assigns, parents, subsidiaries, divisions, affiliates, employees, agents, retained consultants and experts, and any persons or organizations over which they have direct control. The obligations imposed by this Order survive the termination of this litigation unless the Court, which shall retain jurisdiction to resolve any disputes arising out of this Order, orders otherwise. F. RIGHT TO SEEK MODIFICATION 17. Nothing in this Order prevents any Person, including members of the public, from seeking modification of this Order, upon motion made pursuant to the rules of this Court. G. PRIVACY ACT 18. This Order constitutes a court order within the meaning of the Privacy Act, 5 U.S.C. § 552a(b)(11). SO ORDERED. BY THE COURT: _______________________________ United States District Judge Dated: _________________ 13 Case 1:13-cv-01236-CKK Document 51-1 Filed 08/29/13 Page 15 of 15 APPENDIX A UNITED STATES OF AMERICA, et al. Plaintiffs, v. Case No. 1:13-01236-CKK US AIRWAYS GROUP, INC. and AMR CORPORATION Defendants. AGREEMENT CONCERNING CONFIDENTIALITY I, ____________________________, am employed as ______________________ by __________________________________. I hereby certify that: 1. I have read the Stipulated Protective Order Concerning Confidentiality (“Protective Order”) entered in the above-captioned action, and understand its terms. 2. I agree to be bound by the terms of the Protective Order and agree to use information, designated as Confidential Information, provided to me only for the purpose of this litigation. 3. I understand that my failure to abide by the terms of the Protective Order entered in the above-captioned action may subject me, without limitation, to civil and criminal penalties for contempt of Court. 4. I submit to the jurisdiction of the United States District Court for the District of Columbia solely for the purpose of enforcing the terms of the Protective Order entered in the above-captioned action and freely and knowingly waive any right I may otherwise have to object to the jurisdiction of said Court. 5. I make this certificate this ____ day of __________, 201__. Signed: _____________________________________ 14 Case 1:13-cv-01236-CKK Document 52 Filed 08/29/13 Page 1 of 1 AO 458 (Rev. 06/09) Appearance of Counsel UNITED STATES DISTRICT COURT for the District of Columbia United States of America, et al. Plaintiff v. US Airways Group, Inc. and AMR Corporation Defendant ) ) ) ) ) Case No. 13-cv-01236 APPEARANCE OF COUNSEL To: The clerk of court and all parties of record I am admitted or otherwise authorized to practice in this court, and I appear in this case as counsel for: . United States Date: 08/29/2013 /s/ Attorney’s signature William H. Stallings (DC Bar #444924) Printed name and bar number 450 Fifth Street Northwest Suite 8000 Washington, DC 20530 Address william.stallings@usdoj.gov E mail address (202) 514-9323 Telephone number (202) 307-2784 FAX number Case 1:13-cv-01236-CKK Document 53 Filed 08/29/13 Page 1 of 1 AO 458 (Rev. 06/09) Appearance of Counsel UNITED STATES DISTRICT COURT for the District of Columbia United States of America, et al. Plaintiff v. US Airways Group, Inc. and AMR Corporation Defendant ) ) ) ) ) Case No. 13-cv-01236 APPEARANCE OF COUNSEL To: The clerk of court and all parties of record I am admitted or otherwise authorized to practice in this court, and I appear in this case as counsel for: . United States Date: 08/29/2013 /s/ Attorney’s signature Kathleen S. O'Neill Printed name and bar number 450 Fifth Street Northwest Suite 8000 Washington, DC 20530 Address kathleen.oneill@usdoj.gov E mail address (202) 307-2931 Telephone number (202) 307-2784 FAX number Case 1:13-cv-01236-CKK Document 54 Filed 08/29/13 Page 1 of 1 AO 458 (Rev. 06/09) Appearance of Counsel UNITED STATES DISTRICT COURT for the District of Columbia United States of America, et al. Plaintiff v. US Airways Group, Inc. and AMR Corporation Defendant ) ) ) ) ) Case No. 13-cv-01236 APPEARANCE OF COUNSEL To: The clerk of court and all parties of record I am admitted or otherwise authorized to practice in this court, and I appear in this case as counsel for: . United States Date: 08/29/2013 /s/ Katharine S. Mitchell-Tombras Attorney’s signature Katharine Mitchell-Tombras Printed name and bar number 450 Fifth Street Northwest Suite 8000 Washington, DC 20530 Address katharine.mitchell@usdoj.gov E mail address (202) 532-4923 Telephone number (202) 307-2784 FAX number Case Document 55 Filed 08/30/13 Page 1 of 14 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, er a1. Case No. 1:13-cv-01236 (CKK) US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants. STIPULATED PROTECTIVE ORDER CONCERNING CONFIDENTIALITY In the interests of promoting an ef?cient and prompt resolution of this Action; (ii) facilitating discovery by the Parties litigating this Action; and protecting the Parties? and non-parties? Con?dential Information from improper disclosure or use, Plaintiffs, the United States and the Plaintiff States, and Defendants, US Airways Group, Inc. and AMR Corporation, have stipulated to the provisions set forth below. Upon good cause shown, the Court, pursuant to Fed. R. Civ. P. ORDERS as follows: A. DEFINITIONS 1. As used in this Order: ?Con?dential Information? means the portions of any Investigation Materials, or any other documents, transcripts, or other material that contain any trade secret 0r Case Document 55 Filed 08/30/13 Page 2 of 14 other con?dential research, development, or commercial information, as such terms are used in Fed. R.Civ. P. ?Defendants? means US Airways Group, Inc. and AMR Corporation, their divisions, subsidiaries, af?liates, partnerships and joint ventures, and all directors, of?cers, employees, agents, and representatives of the foregoing. ?Disclosed? means shown, divulged, revealed, produced, described, transmitted, or otherwise communicated, in whole or in part. ?Document? means documents or electronically stored information as de?ned in Fed. R. Civ. P. 34(a). (6) ?Investigation? means the Department of Justice?s and Plaintiff States? pre? Complaint inquiries into the proposed merger of US Airways Group, Inc. and AMR Corporation. (1) ?Investigation Materials? means documents, information, transcripts of testimony, or other materials that any non?party provided to any Party either voluntarily or under compuls0ry process during the Investigation, (ii) any Party provided to any non?party during the Investigation, or that Defendants have provided to Plaintiffs during the Investigation. ?Parties? means collectively the Plaintiffs and Defendants to this Action, each of whom may be referred to as a ?Party.? (11) ?Person? means any natural person, corporate or business entity, partnership, association, joint venture, governmental entity, or trust. ?Plaintiffs? means the United States of America, represented by the Antitrust Division of the United States Department of Justice, the Plaintiff States, and Case Document 55 Filed 08/30/13 Page 3 of 14 representatives of the Antitrust Division of the Department of Justice and the Plaintiff States. ?Plaintiff States? means the named plaintiff states in this Action, their respective Attorneys General and other authorized of?cials, and representatives of their respective Attorneys General. ?Protected Person? means any person (including a Party) that provides or has provided Investigation Materials or that, voluntarily or under compulsory process, provides any documents, testimony, or other materials produced in this Action. (1) This ?Action? means the above-captioned action pending in this Court, including any pretrial, trial, or post-trial proceedings. B. DESIGNATION OF CONFIDENTIAL INFORMATION 1. Any document or portion thereof submitted by a Protected Person during an investigation by Plaintiffs that is entitled to con?dentiality under the Antitrust Civil Process Act, 15 U.S.C. 111] 1311-14, or any federal or state statute, regulation, interpretation, or precedent concerning documents in the possession of Plaintiffs, as well as any information taken from any portion of such document, shall be treated as ?Con?dential Information? for purposes of this Order. 2. Within two business days after the Court?s entry of this Order, the applicable Party shall send by email, facsimile, or overnight delivery a copy of this Order to each nonparty Protected Person (or, if represented by counsel, the Protected Person?s counsel) that provided Investigation Materials to any Party. Any of the foregoing acts constitute notice of this Order to a Protected Person. Case Document 55 Filed 08/30/13 Page 4 of 14 If a non?party Protected Person determines that this Order does not adequately protect its con?dential Investigation Materials, it may, after meeting and conferring with the Parties and within ten days after receipt of a copy of this Order, seek additional relief from the Court. If a non-party Protected Person seeks additional relief from the Court, only the Investigation Materials for which additional protection has been sought will not be produced until the Protected Party and the Parties have agreed or the Court has ruled on the Protected Party?s motion. No non~party Protected Person?s Con?dential Information shall be produced to any Party by any other Party until at least 11 days after the non?party?s receipt of notice of this Order unless, before then, the non?party Protected Person indicates in writing that it does not seek relief in addition to the terms of this Order. 3. A Protected Person may designate as ?Confidential Information? any information that it provides to any Party during this Action, to the extent such information constitutes Con?dential Information as defined in Paragraph 1(a) of this Order. Such designations constitute a representation to the Court that such Protected Person believes, in good faith, that the information so designated constitutes Con?dential Information. Any production of information not designated as Con?dential Information will not be deemed a waiver of any future claim of protection concerning such information if it is later designated Con?dential Information pursuant to Paragraph 6 of this Order. However, any such subsequent designation will not retroactiver prohibit the disclosure of any information for which disclosure was preper when made. 4. In view of the large volume of Investigation Materials provided by Protected Persons, and of the burden of reviewing all of those Investigation Materials, those I Case Document 55 Filed 08/30/13 Page 5 of 14 Investigation Materials will generally be treated as Confidential Information under this Order during pretrial proceedings, except that any Investigation Materials that have been treated as Con?dential Information under this Paragraph may be Disclosed in accordance with the procedures set forth in this Order. 5. Designation as Con?dential information of deposition transcripts and documents and other material produced during this Action is governed as follows: After this Order is entered, whenever discovery is sought by subpoena from a non-party in this Action a copy of this Order shall accompany the subpoena. All transcripts of depositions taken in this Action after entry of this Order will be treated as Con?dential Information in their entirety for 10 days after the date a copy of the final transcript has been received by the deponent (or the deponent?s counsel) for review. If the transcript is not otherwise provided to the deponent (or the deponent?s counsel), then the Party that noticed the deposition shall provide the ?nal transcript to the deponent or the deponent?s counsel within three days of receipt. At any time during the 10 days following receipt of the ?nal transcript, a Protected Person may designate any portion of testimony or any deposition exhibits produced by the deponent or the deponent?s employer as Con?dential Information, in compliance with Paragraph 3 of this Order. Such designations (with reference to the page(s) and line(s) of the ?nal transcript) must be provided in writing by the person making such designations to both Plaintiffs? and Defendants? counsel. When a deponent?s testimony discloses information contained in an exhibit designated by a different Protected Person as Con?dential Information, all Parties, as well as the deponent and his or her counsel, shall treat the exhibit and all testimony related to such an exhibit in accordance with the exhibit?s confidential Case Document 55 Filed 08/30/13 Page 6 of 14 designation until 30 days after the party that noticed the deposition provides to the Protected Person who so designated the exhibit the portion of the transcript relating to the exhibit, during which time the Protected Person may designate those portions of the testimony as Con?dential Information in accordance with Paragraph 3 of this Order. (0) A Protected Person that designates as Con?dential Information any document produced in this Action after entry of this Order must stamp or iabel each page of each document containing Confidential Information with the designation Where Con?dential Information is produced in electronic format on a disk or other medium that contains exclusively Con?dential Information, the designation may be placed on the disk or other medium. 6. If a Party or other Protected Person inadvertently fails to designate as Con?dential Information any documents or testimony or other materials, it may later so designate by notifying the Parties in writing. After receiving such notice, the Parties shall thereafter treat the newly designated information as Con?dential Information. No prior disclosure of newly designated Con?dential Information shall violate this Order, and the Parties have no obligations regarding such prior disclosures. However, in circumstances other than depositions and court filings, the disclosing Party will cooperate with the Protected Person to retrieve copies distributed to non-parties or Parties beyond those permitted by this Order to have such document or information. If a Party or Protected Person inadvertently produces, or has produced, material subject to the attorney?client privilege, work-product protection, the deliberative~process privilege, or any other applicable privilege or protection, despite reasonable efforts to prescreen such material prior to production, the applicable privilege and/or protection Case Document 55 Filed 08/30/13 Page 7 of 14 shall not be waived if a request for return of such inadvertently produced material is made after the producing Party or Protected Person learns of its inadvertent production. Upon such prompt notice, the parties will comply with Fed. R. Civ. P. and any other applicable rules or orders. 7. If a Party receives from a Protected Person a con?dentiality waiver, or a Party itself waives con?dentiality of its own Con?dential Information, to allow a deponent that is not related to the waiving Protected Person (or Party) to be questioned on information that would otherwise be Con?dential Information that is not permitted to be disclosed to the deponent, that waiver (including identi?cation of the speci?c Con?dential Information to which it pertains) must be disclosed to counsel for all other Parties as soon as reasonably possible, and in any event no later than 24 hours prior to the deposition of the witness? in question, unless good cause for later disclosure is shown. 8. Any Party that objects to the designation as Con?dential Information of any materials that it intends disclose to a deponent, ?le with the Court, or use at trial shall notify the Protected Person in writing, copying all Parties identifying the speci?c documents and information they believe should not be designated as Con?dential Information and the basis for their belief. Thereafter, within three days the Party objecting to the designation shall confer with the Protected Person by telephone to discuss their respective positions. Unless the Protected Person withdraws the designation(s) objected to, the Protected Person shall then have 10 days from the date of the telephonic conference to ?le a motion seeking an order upholding the designation or otherwise raise the issue with the Special Master. The burden of proving that the designation is proper under Fed. R. Civ. P. shall be upon the person seeking Case Document 55 Filed 08/30/13 Page 8 of 14 to uphold the designation. If a motion is ?led, or if the Parties have been noti?ed that the Protected Person intends to ?le a motion, the Parties shall continue to treat the designated Con?dential Information at issue as Con?dential information until a ruling on the motion and afterward if the motion is granted. If the Protected Person does not seek an order within 13 days of receiving the original objection to the designation, or if the Court determines the designation of Con?dential information to have been inappropriate, the challenged designation shall be rescinded. C. SCOPE OF DISCLOSURE OF CONFIDENTIAL INFORMATION 9. Except as authorized by this Order, information designated as Con?dential Information pursuant to this Order shall not be disclosed to any Person other than the persons set forth below, and may be disclosed to and used by the persons set forth below and used only in this Action in the manner described below: the Court and all individuals assisting the Court in this Action, including law clerks, court reporters, and stenographic or clerical personnel; United States Department of Justice attorneys and employees, and independent contractors retained by the United States Department of Justice to assist in the prosecution of this Action or otherwise assist in its work; attorneys and employees of the Attorneys General of the Plaintiff States, and independent contractors retained by them to assist in the prosecution of this Action or otherwise assist in their work; outside counsel acting for Defendants in this Action, that counsel?s employees, and independent contractors who are not employees of any Defendant, assisting such outside counsel in the defense of this Action; Case Document 55 Filed 08/30/13 Page 9 of 14 authors, addressees, and recipients of particular information designated as Con?dential Information solely to the extent that they have previously had lawful access to the particular information disclosed or to be disclosed; persons (and their counsel) that Plaintiffs or Defendants believe, in good faith, to have had prior access to the Con?dential Information, or who have been participants in a communication that is the subject of the Con?dential Information and from whom veri?cation of or other information about that access or participation is sought, solely to the extent of disciosing such information to which they may have had access or that is the subject of the communication in which they may have participated; provided that, unless and until the persons or their counsel con?rms that the persons had access or were participants, only as much of the information may be disclosed as may be necessary to con?rm the persons? access or participation; testifying or consulting experts who are not employees of Defendants, retained by a Party to assist in the prosecution or defense of this Action, including employees of the ?rm with which the expert or consultant is associated or independent contractors who are not employees of any Defendants, who are necessary to assist the experts? work in this Action; and 10. Before any information designated as Con?dential Information may be disclosed to any person deseribed in Paragraph 9(g) of this Order, he or she must ?rst read this Order or must have otherwise been instructed on his or her obligations under the Order by this Court or counsel for a Party, and shall have executed the agreement included as Appendix A hereto. Counsel for the Party" making the disclosure must retain a copy of Case Document 55 Filed 08/30/13 Page 10 of 14 such executed agreement for a period of at least one year following the final resolution of this Action. Each individual described in Paragraph 9 of this Order to whom information designated as COn?dential Information is disclosed must not disclose that Con?dential Information to any other Person, except as provided in this Order. 11. Nothing in this Order: subject to the notice requirement in Paragraph limits a Person?s use or disclosure outside of this Action of its own information designated as Con?dential Information; prevents disclosure of Con?dential Information by any Party to any current employee of the Protected Person that designated the infermation as Con?dential Information; (0) subject to the notice requirement in Paragraph 7, prevents disclosure of Con?dential Information by any Party with the consent of the person that designated the Con?dential Infonnation; or prevents disclosure by a Party of Con?dential Information that is or has become publicly known through no fault of that Party; (ii) lawfully acquired or known to that Party independent of receipt in discovery in this Action; previously produced, disclosed, and/or provided to that Party without an obligation of con?dentiality and not by inadvertence or mistake; or (iv) pursuant to an order of a Court or as may be required by law; or prevents Plaintiffs, subject to taking appropriate steps to preserve the further con?dentiality of such information, from disclosing information designated as Con?dential Information to secure compliance with a Final Judgment that is entered in 10 Case Document 55 Filed 08/30/13 Page 11 of 14 this Action; (ii) for law enforcement purposes, including in the course of any such proceedings in which Plaintiffs are parties; or as may be required by law. I). DISCLOSURE OF CONFIDENTIAL INFORMATION IN THIS ACTION 12. If any documents or testimony or other materials designated under this Order as Con?dential Information is included in any pleading, motion, exhibit, or other paper to be ?led with the Court, the Party seeking to ?le such material shall follow the procedures set forth in 5.10) of the Rules of the United States District Court for the District of Columbia. Nothing in this Order shall restrict any person, including any member of the public, from challenging the ?ling of any Con?dential Information material under seal. A Party that ?les with the Court material that has been designated as Confidential Information by a non?party shall notify the non?party of that filing (and what Con?dential Information designated by that non~party was included in the ?ling) within one day after the ?ling, provided that the non?party has informed the parties of its desire to receive such noti?cation and provided an email contact to the parties. In addition, parties shall provide non?parties at least twenty-four (24) hours? notice before any court hearings Or other proceedings during which a non-party?s Con?dential Information may be publicly disclosed, provided that the nonuparty has informed the Parties of its desire to receive such noti?cation and provided an email contact to the parties. 13. Disclosure at trial of documents and testimony and other materials designated as Confidential Information will be governed pursuant to Court order. The parties shall meet and confer no later than 30 days before trial and submit a recommended order outlining those procedures. Absent a ruling by the Court to the contrary, documents or deposition testimony, or other materials or information designated as Con?dential 11 Case Document 55 Filed 08/30/13 Page 12 of 14 Information by a Protected Person that appear on an exhibit list or in deposition designations, that are admitted into evidence at trial, will be disclosed on the public record, and any examination relating to such information will likewise be disclosed on the public record, after compliance processes established by this Court. 14. All Con?dential information produced by a Party or non-party as part of this proceeding shall be used solely for purposes of the conduct of this Action and shall not be used for any business, commercial, competitive, personal, or other purpose. E. PROCEDURES UPON TERMINATION OF THIS ACTION 16. Within 90 days after receiving notice of the entry of an order, judgment, or decree terminating this Action concerning all parties (inciuding the resolution of appeals, if any), all persons having received information designated as Con?dential Information must either make a good-faith effort to return such material and all copies thereof to the Person that produced it if the information is contained in original documents, or destroy all copies of such Con?dential Information. Counsel for the Parties will be entitled to retain court papers and ?lings, deposition and trial transcripts and exhibits, expert reports and supporting documents, and work product (including compilations of documents), provided that Plaintiffs? employees and Defendants? counsel and such counsel?s employees do not disclose such materials to any person except pursuant the terms of this Order or other Court order, or pursuant to agreement with the person that produced the information designated as Con?dential Information. All Con?dential Information returned to the Parties or their counsel by the Court likewise must be disposed of in accordance with this Paragraph. Nothing in this Paragraph restricts the rights of the Plaintiffs, under Paragraph 11 of this Order, to retain and use documents, information, or 12 Case Document 55 Filed 08/30/13 Page 13 of 14 other material designated as Con?dential Information for law-enforcement purposes or as otherwise required by law. This Order shall be binding on the parties to this action, their attorneys, and their successors, personal representatives, administrators, assigns, parents, subsidiaries, divisions, af?liates, employees, agents, retained consultants and experts, and any persons or organizations over which they have direct control. The obligations imposed by this Order survive the termination of this litigation unless the Court, which shall retain jurisdiction to resolve any disputes arising out of this Order, orders otherwise. F. RIGHT TO SEEK MODIFICATION 17. Nothing in this Order prevents any Person, including members of the public, from seeking modi?cation of this Order, upon motion made pursuant to the rules of this Court. G. PRIVACY ACT 18. This Order constitutes a court order within the meaning of the Privacy Act, 5 U.S.C. 5523(b)(11). SO ORDERED. BY THE COURT: an- we United States District Judge Dated: jei [30"?3 13 Case Document 55 Filed 08/30/13 Page 14 of 14 APPENDIX A UNITED STATES OF AMERICA, er a1. Plaintiffs, Case No. US AIRWAYS GROUP, INC. and AMR CORPORATION Defendants. AGREEMENT CONCERNING CONFIDENTIALITY I, am employed as by . I hereby certify that: 1. I have read the Stipulated Protective Order Concerning Con?dentiality (?Protective Order?) entered in the above?captioned action, and understand its terms. 2. I agree to be bound by the terms of the Protective Order and agree to use information, designated as Confidential Information, provided to me only for the purpose of this litigation. 3. I understand that my failure to abide by the terms of the Protective Order entered in the above?captioned action may subject me, without limitation, to civil and criminal penalties for contempt of Court. 4. I submit to the jurisdiction of the United States District Court for the District of Columbia solely for the purpose of enforcing the terms of the Protective Order entered in the above-captioned action and freely and knowingly waive any right I may otherwise have to object to the jurisdiction of said Court. 5. i make this certi?cate this day of 201? Signed Case 1:13-cv-01236-CKK Document 56 Filed 08/30/13 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, v. Civil Action No. 13-1236 (CKK) US AIRWAYS GROUP INC., et al., Defendants. ORDER (August 30, 2013) The Court held an initial scheduling conference in this matter on August 30, 2013. This Order briefly sets forth some of the issues discussed on the record and in Chambers with counsel for both parties. Trial in this matter shall commence on November 25, 2013. The parties shall promptly file a proposed case management order, and email a native copy of the order to Chambers. By no later than September 4, 2013, the parties shall file a joint proposed order concerning referral of discovery disputes to a special master. The parties shall also confer and contact the Court regarding the appointment of a third-party mediator for use at the parties’ discretion. The Court shall hold a status conference on October 1, 2013, at 10:30 AM to discuss trial procedures and pre- and post-trial briefing. If there are any issues the parties would like for the Court to address during the status hearing, the parties shall file a joint status report by no later than September 30, 2013 at 12:00 PM briefing outlining the issue(s). SO ORDERED /s/ COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE Case Document 57-1 Filed 08/29/13 Page 1 of 46 EXHIBIT 1 Bg??i?i??t 2 Exhibit 100a: Declaration of Andrew Yearley Pg 1 of 45 APA Exhibit 100a 'Bgii?i?lf??t 3 gilg? Exhibit 100a: Declaration of Andrew Yearley Pg 2 of 45 Filiberto Agusti Joshua R. Taylor (admitted pro hac vice) STEPTOE JOHNSON LLP 1330 Connecticut Avenue, NW Washington, DC 20036 Tel: (202) 429-3000 Facsimile: (202) 429-3902 Edgar N. James (admitted pro hac vice) Kathy L. Krieger (admitted pro hac vice) David P. Dean (admitted pro hac vice) Darin M. Dalmat (admitted pro hac vice) Daniel M. Rosenthal (admitted pro hac vice) JAMES HOFFMAN, RC. 1130 Connecticut Avenue, NW, Suite 950 Washington, DC 20036 Tel: (202) 496-0500 Facsimile: (202) 496-0555 Charles R. Hairston (admitted pro hac vice) Staff Attorney - .. ALLIED PILOTS ASSOCIATION 14600 Trinity Boulevard, Suite 500 Fort Worth, TX 76155?2512 Tel: (817) 302-2178 Facsimile: (817) 302-2187 Counsel for Allied Pilots Association UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK -- In re Chapter 1 AMR CORPORATION, er al. Case Debtors. (Jointly Administered) UPDATED DECLARATION OF ANDREW YEARLEY IN OPPOSITION TO MOTION TO REJECT COLLECTIVE BARGAINING AGREEMENT PURSUANT TO 11 U.S.C. 8 1113(0) ligdgv?9iggf'c?i?d Sg?iereF?l?iiquEi/?gz?f??iigf 4 $5135? Exhibit 100a: Declaration of Andrew Yearley Pg 3 of 45 Table of Contents I. INTRODUCTION ..1 II. BUSINESS PLAN RESULTS IN THE MOST PROFITABLE AIRLINE IN THE INDUSTRY BY USING LABOR COSTS AS THE TO ACHIEVE UNPRECEDENTED AND UNNECESSARY PROFIT MARGIN ..7 RAPIDLY CHANGING QUANTIFICATION OF ITS LABOR SAVINGS NEED AND ITS ASSERTED VALUATIONS OF COUNTERPROPOSALS ARE NOT CREDIBLE AND NOT CONSISTENT WITH BARGAINING . . 7 IV. THE CREDIT AND LEVERAGE METRICS, FINANCIAL AND FINANCIAL METRICS FOR PREVIOUS AIRLINE BANKRUPTCIES CITED BY MR. RESNICK DO NOT DEMONSTRATE THAT THE RELIEF REQUESTED BY THE MOTION IS ..19 V. AS PROPOSED, 1113 MOTION EFFECTIVELY REQUIRES LABOR TO SUBSIDIZE THE LARGEST AIRCRAFT PURCHASE IN US. AVIATION HISTORY WITHOUT DEMONSTRATING TO STAKEHOLDERS THAT THE SIZE OR TIMING OF THAT PURCHASE IS OR OPTIMAL ..25 VI. THE APA HAS NEGOTIATED A CONSENSUAL LABOR AGREEMENT WITH US AIRWAYS THAT EVIDENCES ITS COMMITMENT TO SUPPORTING MARKET-BASED CONTRACT CONCESSIONS ..32 VII. THE MOTION IS PREMATURE AND AMR HAS SUFFICIENT TIME TO ENSURE IT HAS THE BUSINESS PLAN AND IDENTIFIED THE TRULY LABOR SAVINGS NEED ..33 CONCLUSION ..33 APPENDIX A: Andrew Yearley - Biography ..36 APPENDIX B: History of Lazard Diligence Requests AMR Re-Fleeting and Aircraft Purchases ..38 APPENDIX C: Materials Relied Upon ..41 114546563339: [rigii?il?f??t 5 0/1143 Exhibit 100a: Declaration of Andrew Yearley Pg 4 of 45 Exhibit List 101 Historlcal EBITDAR Slnce 00 .S. etwork arrlers 102 Frequency of EBITDAR Margins (2001-2011) US. Network Carriers 103 2013B and 2017B Projected Comparable Airline EBITDAR and EBITDAR Margin 104 Comparison of AMR Pre- and Post-Labor Savings Operating Cash Flow with Aircraft Financing Costs 2012?2017 (33 in Millions) 105 US. Network Carrier Mainline Fleet Age in Years (2009-2011) ii 6 Exhibit 100a: Declaration of Andrew Yearley Pg 5 of 45 1, Andrew Yearley, under penalty of perjury and in lieu of af?davit as permitted under 28 U.S.C. 1746, declare and state as follows: I. INTRODUCTION 1. I am a Managing Director of Lazard Freres Co. LLC (?Lazard?), which maintains of?ces at 30 Rockefeller Plaza, New York, NY 10020. I also lead the ?rm?s restructuring practice in North America and am a member of the ?rm?s Investment Banking Committee. 2. Lazard is the US operating subsidiary of a preeminent international ?nancial advisory and asset management ?rm. Lazard, together with its predecessors and af?liates, has been advising clients around the world for over 150 years. Lazard has dedicated professionals who provide advisory services to its clients. Lazard has extensive experience working with ?nancially troubled companies in complex ?nancial restructurings out?of?court and in Chapter 11 proceedings. Lazard and its principals have been involved as advisor to companies, as well as creditor, labor and equity constituencies and government agencies in many high-pro?le restructuring engagements. Since 1990, Lazard?s professionals have been involved in over 250 restructurings, representing over $1 trillion in assets. Lazard also has extensive experience in the airline sector, having advised on some of the largest and most complicated strategic transactions in the industry. 3. Since joining Lazard in 1999, I have advised companies, as well as creditor, labor and equity constituencies and government agencies in numerous in-court and out-of?court restructurings, recapitalizations, and reorganizations, as well as capital raises, mergers and acquisitions. Prior to joining Lazard, I was a Vice President in Deutsche Bane Alex Brown?s Restructuring Group and spent ?ve years in the Restructuring and Reorganization Group at Ernst 7 Qi?? Exhibit 100a: Declaration of Andrew Yearley Pg 6 of 45 Young LLP. I began my career in 1989 at Chase Manhattan Bank in the Structured Finance Division, and spent two years in the Leveraged Transactions Group at BZW, at the time the investment banking arm of Barclays PLC. I have a Bachelors of Arts degree (Phi Beta Kappa) from Duke University and a Master of Business Administration degree (with honors) from Columbia University. My quali?cations and experience are more fully summarized in my biography, attached hereto as Appendix A. 4. I have testi?ed at trial, in writing, by deposition or by proffer in a wide range of Chapter 11 cases including Trump Entertainment Resorts, Inc., Wellman Inc., Washington Construction, Stone Webster, Radnor Holdings, Plastech, NorthWestern Corporation, Delphi Corporation, National Steel, Huffy Corporation, Derby Cycle, Conseco and ACT Manufacturing. In addition, I was the designated expert in US. District Court for the Eastern District of Michigan in support of the labor and retiree medical agreement reached between the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (the and Ford Motor Company in 2007. 5. My restructuring experience in the context of labor negotiations, litigations under Section 1113 of the Bankruptcy Code and pension-related matters includes advising the the structuring and negotiation of the VEBA trusts for General Motors Corporation (?General Motors?), Ford and Corporation advising the UAW VEBA trusts in the Chapter 11 bankruptcies of General Motors and advising the UAW in the Section 1113 litigations in the Delphi Corporation bankruptcy and advising National Steel and the Huffy Corporation in the distress termination of their respective quali?ed de?ned bene?t pension plans. I also currently advise the National Association of Letter Carriers in their ongoing collective bargaining and restructuring negotiations with the United States Postal Service. 11t?68V29??3FC?l?d Bg?il?f??t SE?lerEc'l?iSFl??g?iszsp?df 8 91ile Exhibit 100a: Declaration of Andrew Yearley Pg 7 of 45 6. The Lazard team under my supervision includes seasoned industry bankers with over 30 years of airline sector banking experience, providing advice with regard to mergers and acquisitions, restructurings and capital raising transactions. Selected major transactions in which our airline industry team has been involved include advising Continental Airlines on its merger with United Airlines in 2010; advising the creditors? committee of Northwest Airlines during its Chapter 11 restructuring; advising the creditors? committee of Continental Airlines during its Chapter 11 restructuring; advising an unsecured creditor during the United Airlines restructuring; advising the Air Transportation and Stabilization Board on its investments in US Airways, ATA and Aloha Airlines and its approval of the US Airways merger with America West; advising American Airlines on its acquisition of advising Northwest Airlines on its proposed entrance to the Wings Alliance; advising United Airlines on the sale of a majority of its equity to .its employees; advising US Airways on a sale of a minority interest to British Airways; advising Boeing on its acquisition of the defense business of Rockwell; Boeing?s acquisition of McDonnell Douglas; the strategic alliance between Continental Airlines and Northwest Airlines; advising Piedmont Airlines on its sale to US Airways; advising Northwest Airlines on its acquisition of Republic Airlines; advising the Government of Australia on the privatization of Australian Airways and the sale of a minority interest of Qantas to British Airways and later its subsequent privatization; advising United Airlines on its recapitalization and special dividend through the sale of Hilton International, Westin Hotels and Hertz; the raising of equity capital by Volotea and Virgin America; Cerberus Capital Management?s strategic investment in Air Canada and the securing of debtor in possession ?nancing for US Airways. Members of Lazard?s airline team have also testi?ed before Congress on various business and ?nancial issues facing the US. airline industry. 9 Qil?? Exhibit 100a: Declaration of Andrew Yearley Pg 8 of 45 7. Lazard serves as ?nancial advisor to the Allied Pilots Association (the Lazard has been working with the APA since November 2011. Lazard was retained by the APA to conduct due diligence of business and operations, to provide advice with respect to restructuring alternatives for the Debtors (collectively, or the ?Company?) and the implications of thoSe alternatives on APA and to evaluate the impact and necessity of any proposals made by AMR to APA seeking labor concessions. Such work, among other things, requires Lazard to review historical and current ?nancial performance and future projections, analyze business plan and supporting ?nancial models and analyses, and assess the necessity of various preposals for labor cost relief. 8. In forming the opinions set forth in this Declaration, I have relied upon and/or considered the following: my experience; (ii) review of business plan, projections, ?nancial statements, reports and other information made available in connection with this Chapter 11 case; meetings and discussions with leadership and Board; (iv) meetings and discussions with certain of management employees and advisors; meetings and discussions with the members and advisors of the AMR Of?cial Unsecured Creditors Committee (the ?Creditors? Committee?); (vi) meetings and discussions with Lazard employees under my supervision; (vii) review of Wall Street research, rating agency reports, and various other third party analysis of the airline industry and AMR in particular; and review of the pleadings ?led in this bankruptcy case. 9. Summarv of Opinions: Based on the scope of work performed to date (as outlined in the preceding paragraph), I believe that the proposed contract modi?cations and the SE'rlterJ?i?ed?iif?lfs??gi lORlD?BExhibit 100a: Declaration of Andrew Yearley Pg 9 of 45 $370 million in average1 annual labor savings sought by the Debtors from the pilots represented by APA, as reflected in the Business Plan2 and the 1113 proposal underlying the Debtors? Motion to Reject Collective Bargaining Agreements Pursuant to 11 U.S.C. ?l 13 (the ?Motion?) are not necessary and the APA has good cause to reject the 1113 proposal. The following is a summary of my reasoning and conclusions, which are detailed further in this Declaration: The Business Plan seeks labor concessions that are neither market-competitive nor necessary for AMR to reorganize and emerge with a healthy and competitive ?nancial pro?le but, rather, are ?backsolved? to make AMR the most pro?table airline in the industry. Simply stated, rather than addressing its competitive and strategic disadvantages as a standalone airline, AMR is seeking to create a new competitive advantage for itself on the backs of labor by demanding new long-term collective bargaining agreements that, in the case of pilots, lock in unnecessarily deep labor concessions, including extensive cutbacks in contractua ?scope? provisions. 1 1113 proposal for the APA is based on a six-year average (2012?2017) savings of $370 million but this number is misleading in two important ways: (1) a large component of the APA concessions relate to productivity gains and work rule changes which AMR projects will be realized over time and, therefore, while the six-year average savings from the APA concessions is targeted at $370 million, AMR projects that concessions are actually worth $470 million by 2017 and (2) APA disputes many of valuation methods and conclusions and believes the alleged six-year savings of $370 million is signi?cantly higher. See APA Exhibit 400a, Declaration of Neil Roghair (?Roghair Decl.?) at 1111 46?53, 56-57, 60, 61, 69, 71, 72, 80; APA Exhibit 200a, Declaration of Allison Clark (?Clark Decl.?) at 1] 4. 5E?tel?iln?3659i?i?liezgm 11 RWExhibit 100a: Declaration of Andrew Yearley Pg 10 of 45 As evidence of tactics, just two months after its bankruptcy ?ling, the Company increased its allegedly ?necessary? labor savings by almost 40%, from $800 million to nearly $1.1 billion.3 0 The assertions of ?nancial expert, David L. Resnick of Inc. that labor cost reductions are the ?minimum necessary for a successful reorganization?4 and for AMR to attract capital and have suf?cient liquidity and ?nancial ?exibility are premised on incomplete and ?awed analytics and as a result do not support the labor savings now sought in the Debtors? Motion to Reject Collective Bargaining Agreements Pursuant to 11 U.S.C. ?1113 as it relates to the APA. 1113 proposal is in large part a function of the Company?s plans to purchase over 460 mainline aircraft - the largest aircraft purchase in aviation history on an accelerated timeframe. This re-?eeting plan, which entails the purchase of 35% more aircraft than is contained in the entire mainline ?eet of US Airways, results in a massive and rapid increase in debt obligations. These ?eet?related debt obligations limit free cash ?ow and negatively impact the Company?s ?nancial pro?le. APA and other unions are effectively being asked to subsidize this re-?eeting plan through unnecessarily deep labor concessions? Based on Lazard?s work to date, it appears that experts did not consider alternative approaches to the nature, size or timing of the re-?eeting program. Further, the Company did not provide Lazard or APA with the relevant information needed to evaluate this major component of the Business Plan that purportedly requires the labor concessions demanded in the 1113 proposal. Despite repeated requests, and despite testimony suggesting that management prepared a detailed ?business case? for the re-?eeting plan,5 AMR and its experts have not provided Lazard with such documentation or any other supporting analysis of 3 The Business Plan targets $1.5 billion of labor costs savings by 2017, of which an estimated $1.1 billion relates to concessions demanded of the APA, APFA and TWU. See AA Exs. 914 and 919 (APA), 1004 (APFA), 1140-1143 (TWU). 4 Updated Declaration of David L. Resnick in Support of Debtors? Motion to Reject Collective Bargaining Agreements Pursuant to 11 U.S.C. 1113 (the ?Resnick Declaration?) at 11 12. 5 See 1113 Transcript (276:9 27623) (Apr. 25, 2012) (Mr. Vahidi testifying ?When we make a signi?cant purchase and we have to go to our boards of directors to request authority to spend money for the purchase or to sign an agreement even though in this speci?c case the deal was pre-?nanced by the manufacturer we build What I would refer to as a ?business case? for whether that project made sense, either based on the return on investment or return on the capital invested in the project. So, there was a business case developed and built as to why that those aircraft agreements that were signed made economic sense?). No such ?business case? has been shared with Lazard despite numerous requests, as is further discussed in paragraph 35 below. 6 5Er1er5396b9??f?l?e?gi 12?E>A65xhibit 100a: Declaration of Andrew Yearley Pg 11 of 45 the ?nancial returns associated with the re-?eeting plan. - willingness to agree to meaningful and competitive labor and scope concessions that will facilitate a realistic, successful restructuring is demonstrated by the fact that APA negotiated and concluded an agreement 0n the terms of a new labor pact with US Airways, based on serious evaluation of the pros and cons of potential consolidation as a means of exiting Chapter 11. Importantly, the APA agreement with US Airways includes a mechanism whereby future pilot compensation, bene?ts and productivity will be indexed to closest competitors, Delta and United. 0 The Motion is premature. rush to seek rejection of its labor agreements under Section 1113 and its refusal to consider alternatives potential merger proposals) prior to such rejection belies its current ?nancial picture. AMR is not in crisis. It has nearly $5 billion of cash, no DIP ?nancing agreements that subject AMR to covenant or liquidity tests, and, according to its own expert, Mr. Resnick, will apparently not need exit ?nancing or seek a revolving credit facility upon emergence from bankruptcy.6 Further, Mr. Resnick is not taking a position at this time as to Whether raising? is even required for AMR to exit bankruptcy.7 Indeed, according to most recent ?nancial update presentation to the Creditors? Committee, American is performing better than it has in recent history. With union leadership representing over 50,000 American Airlines employees having made a demonstrated commitment to competitive labor concessions (notwithstanding the lack of any near?terrn crisis), the Company cannot establish at this time that its own ?standalone? 1113 proposal, which refuses to consider strategic alternatives and is premised on a top?down and unduly aggressive pro?t target, is either necessary or based on the most complete and reliable information available. 11. BUSINESS PLAN RESULTS IN THE MOST PROFITABLE AIRLINE IN THE INDUSTRY BY USING LABOR COSTS AS THE TO ACHIEVE UNPRECEDENTED AND UNNECESSARY PROFIT MARGINS 10. court pleadings and Business Plan materials acknowledge its strategic challenges including a network whose size and reach put it at a competitive disadvantage relative See 11 13 Transcript (1 19:2 119:7) (Apr. 25, 2012); Resnick Declaration 23. mismanageth 13 AW Exhibit 100a: Declaration of Andrew Yearley Pg 12 of 45 to its largest major network carrier competitors - United and Delta.8 As a result, share in most regions of the US. market, including its so?called ?cornerstone? cities, has signi?cantly eroded over the last decade as its key network carrier competitors have consolidated and extended their network and scale advantages. Equally troubling has been the steady defection of share of high?yield corporate customers and elite travelers to the superior networks of United and Delta a development that has caused AMR, which once enjoyed a ?premium? in relative RASM9 to the rest of the industry, to now suffer from a RASM ?discount.? most recent Strategy to arrest this decline the so-called ?Cornerstone Strategy? has not, to date, shown obvious signs of success.10 11. Business Plan largely re?ects the same (generally speaking, unsuccessful) ?Cornerstone Strategy,? paired with a historically unprecedented and costly aircraft purchase whose size and timing (as discussed below) has not been justi?ed by any disclosed business case or other supporting ?nancial analysis. AMR also proposes a package of take?it?or-leave-it labor concessions designed to ?patch? lagging network using a mix of upgauged regional jets and hypothetical ?iture domestic codeshare agreements and to impose unnecessarily extensive 8 The Memorandum in Support of the Debtors? Motion to Reject the Collective Bargaining Agreements Pursuant to 11 U.S.C. 1113 acknowledges scale and network problem. For example, it acknowledges inability to ?grow the airline to be competitive? (Memorandum at 26) has been a crucial driver of its strategic problems and concedes that its network carrier competitors have ?been able to use the increased network scale created by their mergers to maintain a healthy premium over fares charged by lower cost carriers [while] American?s revenue premium . . . has shrunk dramatically? (Memorandum at 30). 9 Revenue per available seat mile represents the revenue generated per fundamental ?unit? of production (seat miles equals the number of seats available multiplied by the number of miles) for a passenger?carrying airline. 10 The ?Cornerstone Strategy,? which was ?rst unveiled by AMR three years ago, emphasizes a revenue turnaround through the maximization of market share among high-value corporate customers in ?ve major markets Chicago, Dallas, Los Angeles, Miami and New York. 14A?M65xhibit 100a: Declaration of Andrew Yearley Pg 13 of 45 modi?cations to the pilot contract modi?cations that were determined on a ?top down? basis with no relation to the market. To better understand this last point, it is useful to review my understanding of how the Business Plan was developed. In summary, the Business Plan was constructed as follows: Step 1: Assume $1.0 Billion of Revenue Improvements by 201711 Begin with the Cornerstone Strategy, largely unchanged: The Business Plan relies on the Cornerstone Strategy, unmodi?ed except for three network?related modifications: (1) expanded use of domestic codesharing with hypothetical future partners, (2) expanded use of joint business agreements with competitors and (3) re-gauging of ?eet in order .to better match capacity with demand. See Plan for Success at 27- 38. Assume the terms, size and timing of the July 2011 aircraft purchase are unaltered and the re-?eeting proceeds as planned: In July 2011, AMR agreed to the largest aircraft purchase in aviation history, purchasing over 460 aircraft from both Boeing and Airbus at a total cost of over over the next six years. Additionally, AMR plans to re??eet its regional aircraft ?eet at a cost of more than over the same time period. Although I discuss in greater detail below the lack of business analysis or support that has been provided to explain the size and timing of this purchase, for now it is suf?cient to note that the Business Plan assumes that the re??eeting will result in both revenue and cost improvements for AMR. See Plan for Success at 37, 50. Add modest improvement in services: The Business Plan assumes AMR will make a number of improvements to its service offerings in order to make them market?competitive. These changes include installation of in? ?ight WiFi, entertainment-on?demand, mobile boarding passes and a variety of other improvements. See id. at 39. 11 Plan for Success by Beverly Goulet (February 1, 2012) (AA Ex. 1505) (the ?Plan for Success?) at 40. 12 9 5E?iel?t?d??ia??1?6??aq 15 RM5Exhibit 100a: Declaration of Andrew Yearley Pg 14 of 45 Step 2: Assume $625 Million of Non-Labor In-Court Savings by 2017 0 Use Chapter 11 to reduce non-labor costs: The Business Plan assumes that, during the pendency of the bankruptcy, AMR will use the tools of Chapter 11 to realize savings from (1) rejecting aircraft leases and/or restructuring aircraft ?nance debt, (2) renegotiating executory contracts with vendors and (3) rejecting and/or renegotiating leases at airports and elsewherethe Plan for Success, AMR states summarily that generate competitive earnings, and otherwise execute our Business Plan, we need $3.1 billion in annual improvements by 2017.? Id. at 52. Although the Plan for Success document does not explicitly explain the derivation of the $3.1 billion of ?needed? annual improvements (and therefore does not explicitly explain the $1.1 billion of allegedly ?necessary? savings from unionized labor), it was generally represented to our team by AMR management (both at the February 3 unveiling of the Business Plan in Fort Worth and at subsequent meetings between Lazard and AMR management) that this 10 16A?M%xhibit 100a: Declaration of Andrew Yearley Pg 15 of 45 annual improvement target was generally sized using a target EBITDAR Margin13 of- by 2017.14 U.) 14. Mr. Resnick?s conclusion that projected EBITDAR Margins under its Business Plan are reasonable relative to comparable airlines is based on ?awed analyses and is not supportable. On its face, the Resnick Declaration simply presumes the 1113 proposal will be imposed by the Court and shows that the resultant pro?tability is better than the status quo. Indeed, as he candidly conceded in his live testimony, he did not attempt to test Whether a more 13 Margin? is a ?nancial metric that consists of the ratio of (Earnings Before Interest, Taxes, Depreciation, Amortization and Rent) to total revenue. EBITDAR is a common metric for measuring operating pro?tability in the airline industry. 14 See 1113 Transcript (114:2?116z9) (Apr. 24, 2012) (Beverly Goulet describing the process by which the ?top down? labor savings ?need? was derived based on a pro?tability target). 15 Resnick Decl. at EX. 306A. 11 11-1540?1?119wm?C1??emqmat SE?te?lrin/ia??liezeam 17 AWExhibit 100a: Declaration of Andrew Yearley Pg 16 of 45 moderate savings number would be suf?cient to return AMR to ?nancial health.16 Therefore, it is unclear how Mr. Resnick has any basis for describing the 1113 proposal as ?necessary.? 15. In my opinion, to support an asserted labor savings need that is truly ?necessary,? AMR must be targeting a pro?tability level that, among other things, is consistent with the norms of the US. airline industry. In this case, AMR has targeted an EBITDAR Margin of- by 2017. As APA Exhibit 101 illustrates, in the post-9/11 environment, that level of pro?tability has male; been achieved by a US. network carrier. Indeed, in only fo_ur distinct instances since 2001 has any major network carrier achieved EBITDAR Margins of-or higher. The average EBITDAR Margin for closest competitors Delta, United and US Airways over the last two years has been approximately 13%. 16. To provide a better sense for the EBITDAR Margin that better approximates ?normalcy,? Lazard has prepared APA Exhibit 102, a frequency histogram that shows various EBITDAR Margin ranges and the frequency that those ranges have been achieved by network carriers in the US. airline industry since 2001. 16 See 1113 Transcript (68:4 68:15) (Apr. 25, 2012) (Mr. Resnick conceding that he did not ?select? or ?recommend? labor savings target, nor did he ?independently cost out what [other] labor cost reductions were available?). l2 18/9M65xhibit 100a: Declaration of Andrew Yearley Pg 17 of 45 APA Exhibit 102: Frequency of EBITDAR Margins (2001-2011) U.S. Network Carriers* 1 - r. . . Source: Public ?lings. Excludes one-time special items. network carriers include AMR, Delta, Northwest, United, Continental and US Airways. 17. In order for Mr. Resnick to assert that the EBITDAR Margins targeted by the Business Plan are ?in-line with, or exceeded? by comparable airlines, Resnick Dccl. at 1] 27, Mr. Resnick chooses a ?comparable? airline group that is, at best, misleading. To ?nd airlines with projected 2013 EBITDAR Margins that ?exceeded? projected 2013 EBITDAR Margin 11~154?s?hil1 lend/29712223613 5E?rel??il?d?liiai?lie?rm 19 RWExhibit 100a: Declaration of Andrew Yearley Pg 18 of 45 under the 1113 proposal, Mr. Resnick stretches the universe of ?comparables? to include the following companies: Alaska Airlines Alaska operates in a niche regional market within the US. airline industry, with a small network largely focused on the Paci?c Northwest and West Coast. This limited market is served from hubs in Seattle, Portland, Los Angeles and Anchorage. While Alaska offers ?mainline? service (Boeing 7373, dual first/economy classes), it is a regional carrier in terms of its footprint. As such, it is not comparable to AMR, which is much larger and operates a nationwide network across the US. and internationally. Allegiant Airlines Allegiant Air is a low-cost point-to-point carrier that offers scheduled and chartered air service. Its ?eet consists entirely of older aircraft and 757-2003), purchased at lower cost than newer narrowbody aircraft. Allegiant focuses exclusively on leisure travelers, providing low frequency service from small cities with no connections or codeshares. Allegiant is Wholly owned by Allegiant Travel Company, a leisure travel company. Its business model (low-cost scheduled and charter ?ights to leisure travelers) differs substantially from AMR, which serves large cities in a comprehensive network across the US. and internationally using a hub-and?spoke model, targeting high-value business customers a very different market segment than Allegiant?s. etBlue Airlines JetBlue is a low-cost carrier that primarily offers point-to?point service. Its aircraft ?eet (consisting of Airbus A3205 and Embraer 1905) offers a single service class, with leather seats and free in?ight entertainment systems targeted at the leisure passenger. etBlue?s product and service offering (new planes, single cabin with high quality products and services), network (primarily and business model (limited ?eet types, low-cost) are entirely different from traditional network carrier model. Spirit Airlines Spirit Airlines is an ultra low-cost carrier that targets non-corporate customers and unbundles components of air travel using a la carte pricing. Describing itself as a ?frills for a fee? airline, Spirit charges passengers a fee for all services including baggage handling, telephone booking, premium seat or advance seat selection, food and beverages and other onboard items. In 2011, Spirit?s average base fare was approximately $81.19 Spirit?s business model (single aircraft type, a la carte pricing, ultra-low base fares, primarily point-to-point, no alliances) is not simply different from it is entirely different from any other major US. airline in operation today. 19 Spirit Airlines, Annual Report (Form 10-K), at 4 (Feb. 22, 2012). 14 5Edtell?b9559?lff?lf6:??g? 100a: Declaration of Andrew Yearley Pg 19 of 45 For the reasons stated above, I believe that Alaska, Allegiant, etBlue and Spirit which tpgetl? have total 2011 revenues that are less than half of 2011 revenues20 are not comparable airlines to AMR. Furthermore, it is important to note that until the ?ling of this Motion, there were generally only thri airlines cited by AMR management as ?comparable? airlines in the many presentations it regularly provided to Wall Street pre-petition: Delta, United and US Airways.21 9? 20 2011 revenues of Alaska billion), Allegiant ($779 million), JetBlue billion) and Spirit billion) total to $10.7 billion, which is 44.5% of 2011 revenues ($24.0 billion). 21 See, e. g, AMR Corp, Corporation Transformational Agreements Presentation? at 8 (Jul. 20, 2011) (comparing AMR ?eet age to Delta, United and US Airways), AMR Corp., ?Presentation to PMorgan Aviation, Transportation Defense Conference? at 13 (Mar. 22, 2011) (comparing AMR liquidity to Delta, United and US Airways), AMR Corp., ?High Yield Leveraged Finance Conference? at 13 (Mar. 1, 2011) (same), AMR Corp, ?Bank of America Merrill Global Transportation Conference Presentation? at 36 (AMR CEO benchmarking unit costs to Continental (now United), Delta, Northwest (now Delta), United and US Airways) (Jun. 15, 2010), AMR Corp, PMorgan Aviation, Transportation Defense Conference Presentation? at 35, 42 (then EVP Finance Flaming and CFO Tom Horton comparing AMR capacity and revenue to Continental (now United), Delta, Northwest (now Delta), United and US Airways) (Mar. 9, 2010), AMR Corp., ?Next Generation Equity Research Airlines Conference Presentation? at 5 (Dec. 9, 2009). 15 5Erlie?$d?l?i39?1?a?mq 21 RWExhibit 100a: Declaration of Andrew Yearley Pg 20 of 45 22 AMR has not been consistent in its public statements and pleadings as to whether it considers Southwest Airlines a ?comparable? airline. Historically, public investor presentations have not included Southwest as a comparable. Ms. Goulet and Mr. Kasper, in their Declarations, describe Southwest as a ?low cost carrier? (apparently non?comparable) that has transformed the modern U.S. airline industry at the expense of large network carriers such as AMR. See Declaration of Beverly K. Goulet in Support of Debtors? Motion to Reject Collective Bargaining Agreements Pursuant to 11 U.S.C. 1113 at 1i 13; Declaration of Daniel M. Kasper in Support of Debtors? Motion to Reject Collective Bargaining Agreements Pursuant to 11 U.S.C. 1113 (the ?Kasper Declaration?) at 11 15. In his own Declaration, Mr. Resnick appears to consider Southwest a ?comparable? airline to AMR, although in his in?court testimony, he described them as a ?straddler? airline. See 1113 Transcript (178:4; 178:16) (Apr. 25, 2012). 16 11-154sdsn?t 1666? 100a: Declaration of Andrew Yearley Pg 21 of 45 RAPIDLY CHANGING QUANTIFICATION OF ITS LABOR SAVINGS NEED AND ITS ASSERTED VALUATIONS OF COUNTERPROPOSALS ARE NOT CREDIBLE AND NOT CONSISTENT WITH BARGAINING 19. By way of background, since Lazard?s retention by APA in November 2011, I have, with the help of my team, conducted due diligence on the history of negotiations between AMR and APA in the period leading up to Chapter 11 petition. After the 1113 proposal to APA was unveiled in early February, my team received regular updates from Negotiating Team onthe status of negotiations, including counterproposals and the valuation that each side?s contract assigned to the various items. I was also present at, and participated in, the negotiations between APA and US Airways that ultimately culminated in the agreement announced on April 20, 2012. 20. In my opinion, as an experienced restructuring banker who has advised unions in negotiations both inside and outside of Chapter 11, the ?uctuating labor savings target that AMR has publicly asserted is ?necessary? to return itself to competitiveness calls into question the veracity of the alleged ?need? and creates a challenging negotiating dynamic, given ?moving goal posts.? For instance, in February 2011, in its 2010 10K ?ling, AMR stated that it ?estimates that American?s labor cost disadvantage (the amount by which its labor costs exceed What such costs would be if they were determined based on the average of other network carrier ?23 A mere seven months later, on labor contracts) is approximately $600 million per year. November 29, 2011 (the very day of the Chapter 11 petition) CEO Tom Horton stated to the press that ?If you look at our labor costs and compare it roughly to the average of the other big legacy carriers, the difference between our contracts and theirs is about $800 million a 23 AMR Corp., Annual Report (Form 1049, at 29 (Feb. 16, 2011) (emphasis added). 17 ??ft?'cb?emm?t RWExhibit 100a: Declaration of Andrew Yearley Pg 22 of 45 year.?24 Two months after this statement, alleged savings ?need? from its unions, as described in its 1113 proposal, had increased to $1.1 billion a year by 2017. 21. Not surprisingly, the APA Negotiating Committee has made minimal progress with AMR in the post-petition period as the Company?s stated labor savings ?need? has increased by nearly 40% (despite other cost?saving opportunities offered by Chapter 11) and the rationale for the change in demands is now tied to a management?derived pro?tability target. It is my understanding that post-petition labor negotiations have been further hampered by changing valuations of the parties? proposals. See Roghair Decl., 111] 41-50. As one example, I have been informed by APA that, during its recent negotiations with AMR on the value of certain proposals, negotiating team has insisted on valuing certain contract modi?cations using a ?weighted average cost of capital?25 of 13.79%. See Clark Decl., 1] 48. use of such a high WACC had the practical effect of attaching a much lower total value to concessions offered by APA, thereby creating an arti?cial justi?cation for additional concessions in order to reach the $370 million ?savings target? that AMR has set for APA. As the ?nancial adviser to APA, I would ?rst observe that such a high discount rate is not supportable.26 In my team?s own internal analyses, we have generally used a weighted average cost of capital for AMR, depending on the particular facts and market conditions at the time, of 24 PBS Newshour, segment by Judy Woodmff (PBS television broadcast, November 29, 2011) (emphasis added). 25 The ?weighted average cost of capita (or is a calculation of a ?rm?s cost of capital in which the costs of debt and equity are proportionately weighted to determine a blended required rate of return to use in order to discount cash ?ows. 26 Among the many incorrect assumptions embedded in this alleged discount rate are (1) a risk-free rate of based on an ?average? 10?year historical ?gure (this is over twice the current 10-Year Treasury Rate of 1.92%) and (2) an assumed cost of debt of 13.5% (this is also far too high as discussed in Section IV, most airlines issue secured debt which would generally imply a cost of debt for AMR of between 4% and 18 5%dte??lleds9?lif?lfe??gi 100a: Declaration of Andrew Yearley Pg 23 of 45 between 8% and 10%.277 own witness testifying in support of the Motion uses a weighted average cost of capital of 10.6% for valuation of AMR cash ?ows.28 In my Opinion, the fact that labor relations team has wasted negotiating capital on positions directly contradicted by own testifying economist in the Section 1113 litigation sheds light on why APA has so far been unable to reach consensual agreement with AMR management. IV. THE CREDIT AND LEVERAGE METRICS, FINANCIAL AND FINANCIAL METRICS FOR PREVIOUS AIRLINE BANKRUPTCIES CITED BY MR. RESNICK DO NOT DEMONSTRATE THAT THE RELIEF REQUESTED BY THE MOTION IS 22. In addition to the estimated $1.1 billion of annual unionized labor savings that AMR claims to need by 2017 in order to meet target EBITDAR Margins, AMR also argues that it needs these labor concessions in order to attract capital and have suf?cient liquidity and ?nancial ?exibility to operate after emergence. In the Resnick Declaration, Mr. Resnick introduces a number of ?nancial metrics all of which include the same non-comparable airlines used to skew Mr. Resnick?s EBITDAR Margin analysis to attempt to justify alleged labor savings need. Mr. Resnick only mentioned one of these metrics liquidity29 in his in- court testimony. In my opinion, none of these ?nancial metrics clearly demonstrates the supposed ?necessity? of current 1113 proposal to the APA as further detailed below. 27 Based on standard methodology for calculating WACC utilizing current lO-year Treasury yield of 1.92% and cost of debt of which represents the likely range which American can raise secured ?nancing. For comparison, in March 2012, United completed a ?nancing secured by newer generation 73 73 (similar to the AMR aircraft on current order) and to -be? delivered 7875 at a blended rate of Business Plan itself assumes an 8% cost of secured debt for the ?nancing of its widebody aircraft and the Company has no plans for unsecured debt ?nancing. 28 See Kasper Declaration at 1] 34. 29 See 1113 Transcript (31 221?372) (Apr. 25, 2012). 19 15196! was-Crawling RWExhibit 100a: Declaration of Andrew Yearley Pg 24 of 45 23. Credit Metrics and Leverage: Mr. Resnick states that ?credit ratings are a key indicator used by the capital markets in assessing a company?s overall ?nancial and operating situation and to satisfy its future ?nancial obligations.? Resnick Decl. at 11 28. While this is certainly true as a general matter, this statement is misleading as applied to an airline. The reason for this is because, as Mr. Resnick himself acknowledges is true for AMR, most of the debt issued by major network carriers (and all of the debt AMR apparently plans to issue in the future30) is debt, backed by speci?c collateral (most commonly aircraft) with the credit quality of the debt tied far more to the quality and condition of the equipment than to a speci?c airline?s ?nancial condition. Indeed, Moody?s Investor Service (?Moody?s?) own introduction to its airline rating methodology explicitly states that, in determining credit ratings, its focus is on unsecured debt: ?Our objective is for users to be able to estimate the likely credit rating (senior unsecured rating for investment-grade issuers [and] Corporate Family rating for speculative-grade issuers . . .) for a passenger airline within two alpha- numeric rating notches?.31 Since AMR has not issued straight unsecured bond debt in years,32 and according to AMR and Mr. Resnick himself, see Resnick Declintention to issue anything other than secured aircraft debt in the near future, it is not obvious, nor is it explained by Mr. Resnick, why the hypothetical ratings of Moody?s or Standard Poor?s for unsecured AMR bond debt (or the criteria for determining them) is directly relevant to whether 1113 proposal is ?necessary,? Whether considered alone or in comparison with potential alternatives. 30 See Resnick Decl. at 1] 14. 31 Moody?s Global Corporate Finance Global Passenger Airlines Rating Methodology at 1 (Mar. 2009) (?Moody?s Airline Methodology?). 32 The 9.00% Senior Notes due 2012 were issued on July 29, 1992. This was last issuance of nonconvertible senior unsecured bond debt. 20 5E?terFeilF?59?iif?1?6??SE 26)Ri??i?SExhibit 100a: Declaration of Andrew Yearley Pg 25 of 45 24. However, even assuming that rating agency criteria are directly relevant to whether 1113 proposal is ?necessary?, the Resnick Declaration does not apply them consistently or comprehensively. Moody?s, for instance, lists eleven ratings criteria each with a pre-deterrnined weighting totaling to 100% that it considers in determining the credit rating it would apply to a senior unsecured debt issuance by a passenger airline.33 The substance of the metrics in the Resnick Declaration only re?ects Eur of those eleven Moody?s criteria EBITDA Margin, Cash Liquidity, EBIT/Interest, Net which collectively represent only of the analytical weighting in Moody?s methodology. Id. Moreover, the Resnick Declaration makes no attempt to tie pro forma performance under these four metrics to any hypothetical credit rating at all. Thus, it is unclear how Mr. Resnick?s truncated analysis is relevant even to future credit rating; much less whether 1113 proposal is I ?necessary.?34 25. Liquidity: The Resnick Declaration also contains an analysis that attempts to quantify projected liquidity (cash balance and projected revolver availability) as a percentage of revenues in 2013 and compares that ratio to the projected liquidity (as estimated by Wall Street of other asserted airline ?cornparables.?35 As before, this analysis includes 33 Moody?s Airline Methodology at 3. 34 With respect to the relevance of Mr. Resnick?s ?credit rating metric? analysis to whether the 1113 proposal is ?necessary? is even less clear. rating methodologies, as revised in recent years, are considerably broader and more holistic than Moody?s and, although they do encompass ?nancial metrics such as they decline to assign a weight to this or any other metric, in favor of a comprehensive approach that emphasizes a Wide range of qualitative and quantitative considerations. See Standard Poor?s Key Credit Factors: Criteria For Rating The Airline Industry (Oct. 22, 2010). 35 It is worth noting that this approach to measuring ?liquidity? deviates signi?cantly from the approach used by Moody?s, which instead measures liquidity as ?cash and cash equivalents divided by gross unadiusted debt.? Moody?s Methodology at 10. Mr. Resnick does not explain 21 5is?tel?itrd?liiai?1?6?r$q27 RWExhibit 100a: Declaration of Andrew Yearley Pg 26 of 45 the same non-comparable airlines used by in its other exhibits. This approach is curious since only 13 months ago current AMR CRO, Beverly Goulet, in a public presentation to Wall Street on the very topic of ?liquidity? in the airline industry described comparable companies as being Delta, United and US Airways.36 Review of Investor Relations site reveals several other instances of Ms. Goulet describing Delta,? United and US Airways as liquidity comparators.? Using this proper comparable company set shows that liquidity, as measured by Mr. Resnick pro forma for the 1113 proposal, is expected to be greater than all but one of these three competitors, see Resnick Decl. at Ex. 310A, and Mr. Resnick?s analysis presumed that AMR does not raise a new revolving credit facility, which would further improve its liquidity. I 26. In addition, in arriving at the conclusion that labor concessions are the minimum required to attain requisite levels of liquidity at exit, Mr. Resnick leaves open the question of the size of, or even the need for, a hypothetical? that could materially impact the amount of liquidity available to AMR.38 Further, as noted earlier, Mr. Resnick, without explanation, assumes that AMR will not have access to a revolving credit why the Moody?s methodology that he appears to cite favorably in paragraphs 28 and 29 of his Declaration was disregarded altogether in paragraph 35 of his Declaration. 36 ?Presentation to PMorgan Aviation, Transportation Defense Conference? at 13 (March 22, 2011). - 37 See, 8. AMR Corp, ?Presentation to JPMorgan Aviation, Transportation Defense Conference? at 13 (Mar. 22, 2011) (Ms. Goulet comparing AMR liquidity to Delta, United and US Airways), AMR Corp, ?High Yield Leveraged Finance Conference? at 13 (Mar. 1, 2011) (same), AMR Corp., ?Next Generation Equity Research Airlines Conference Presentation? at 5 (Dec. 9, 2009) (same). 38 Mr. Resnick states that he is ?presently not taking a position as to whether or not the billion rights offering described in the current Business Plan] is either required or suf?cient for emergence.? Resnick Decl. at ?11 23. 22 11-154??-?s9ni11 16198 28RE?6Exhibit 100a: Declaration of Andrew Yearley Pg 27 of 45 facility upon emergence from bankruptcy which could be a material additional source of liquidity to AMR. See Resnick Decl. at 1] 35. Finally, the analysis in the Resnick Declaration makes no effort to compare alternatives or show pro forma 2013 liquidity for any labor savings scenarios other than own 1113 proposal including, for example, the agreed US Airways terms. For all of these reasons, the projected liquidity analysis is insuf?cient evidence of the supposed ?necessity? of 1113 proposal. 27. Other ?Additional Financial Metrics?: The Resnick Declaration also includes discussion of three additional ?nancial metrics none of which is commonly used as a comparative measure by research Moody?s or As such, I will not focus on these metrics other than to make a few brief comments as to why it is unreasonable for Mr. Resnick to use them to justify the 1113 proposal: 0 ?Pre-Tax Income Margin?: This metric is speculative at best at this stage in the Chapter 11 process. Among other things, this metric is measured after Depreciation Amortization a line item that cannot be quanti?ed until closer to emergence after adjustments for, among other things, ?fresh start? accounting under GAAP and a variety of restructuring decisions that AMR concedes have not yet been made, including decisions to reject or assume pre-petition aircraft ?nancings as well as the interest costs associated with any new ?nancings or leases. 39 23 5E?ter?li??b9?i?f?l?ef?st Zg?lBAGExhibit 100a: Declaration of Andrew Yearley Pg 28 of 45 28. Other Airline Bankruptcies: Finally, the Resnick Declaration also attempts to justify the ?necessity? of 1113 proposal by pointing the Court to the various ?nancial metrics and ratios that were targeted by other US. network carriers in earlier Chapter 11 proceedings and noting that those targeted ?nancial metrics were ?generally consistent with those of Business Plan.? Resnick Decl. at 1] 41. I ?nd this assertion unpersuasive. In the ?rst place, it is important to remember the historical context of many of the airline bankruptcies that are cited by Mr. Resnick as ?precedents? most of them occurred post?9/1 1, an event that transformed the modern U.S. airline industry. At the time of those bankruptcies, it was not clear to most industry experts or ?nancial advisors What pro?t targets were appropriate for major network carriers and airlines therefore often targeted historical margins from the 19908 margins that have subsequently proven unachievable in the post-9/11 environment. Put simply, these so-called ?precedents? are not truly precedents. In the second place, as I stated above and as own pleadings explicitly acknowledge, the US. airline industry has changed tremendously over the last decade as a result of, among other things, unprecedented consolidation. Since the dates that each of the plans of reorganization cited in the Resnick Declaration US Airways I, UAL, Delta Air Lines, and Northwest Airlines were con?rmed, the industry has experienced no fewer than transformative merger transactions America West/US Airways, Delta/Northwest, United/Continental and Southwest/AirTran. For both of 24 100a: Declaration of Andrew Yearley Pg 29 of 45 these reasons, I believe it is much more accurate and analytically sound to judge whether a proposal under Section 1113 is ?necessary? based on market conditions and on the ?nancial performance of comparable companies as they exist my. V. AS PROPOSED, 1113 MOTION EFFECTIVELY REQUIRES LABOR TO SUBSIDIZE THE LARGEST AIRCRAFT PURCHASE IN U.S. AVIATION HISTORY WITHOUT DEMONSTRATING TO STAKEHOLDERS THAT THE SIZE OR TIMING OF THAT PURCHASE IS OR OPTIMAL 29. In July 2011, just four months before its Chapter 11 ?ling, AMR announced the largest aircraft purchase in aviation history, including over 460 mainline aircraft from Boeing and Airbus at a cost of more than? in the next six years (and more thereafter). To put the size of this order in context, the total number of aircraft purchased would be- larger than the entire mainline ?eet of US Airways, the next largest network carrier in the U.S. At the time of the announ?ement, AMR described the purchase to investors as game?changing and one that would ?transform American?s narrowbody ?eet over ?ve years.?40 Additionally, AMR plans to re-?eet its regional aircraft ?eet at a cost of more than_.41 Post?petition, AMR management continues to describe this unprecedentedly large and rapid aircraft purchase to stakeholders (with minimal analytical support), as transformative and essential to the Business Plan. For instance, in the Plan for Success, the re-?eeting is depicted, rather summarily, by AMR as essential to its efforts to ?Win the High Value Customer? and ?Achieve Competitive Costs? through reduced fuel and maintenance costs. Id. at 37-3 8, 50. 40 Press Release, AMR Corporation Announces Largest Aircraft Order in History with Boeing and Airbus (July 20, 2011) at Archives/ edgar/data/ 6201 /000 1 1931251 1191877/dex992.htm 41' 25 5E?rel'eil?dmia??liszsam31 AWExhibit 100a: Declaration of Andrew Yearley Pg 30 of 45 30. The rapid (and so far unexplained) timeline for re??eeting plan is a key driver of current 1113 proposal. Put simply, unions are being asked to help fund large and rapid re-?eeting plan through their labor concessions. ?So framed, it should hardly be surprising that the APA and Lazard are focused on understanding whether the Boeing/Airbus purchase (and, equally importantly, the highly aggressive timing of the proposed deliveries) are well-considered they are, in a sense, direct drivers of 1113 proposal. 42 ?Fleet?related costs? de?ned as mainline and regional aircraft and aircraft?related rent, capital expenditure and interest expense. 26 32/9Hrl6Exhibit 100a: Declaration of Andrew Yearley Pg 31 of 45 31. While I do not dispute that the introduction of new aircraft should generally result in reduced maintenance costs and improved fuel ef?ciency, the size, timing, and resultant ?nancial impact of this massive and rapidly delivered aircraft order on liquidity, cash ?ow and ?nancial metrics demands careful study and, at a minimum, an evaluation of potential alternatives. For instance, do high-value airline passengers care more about the age of a plane or in the age and condition of the interior and the breadth and quality of the amenities of that plane? Does it make sense for AMR to order current generation aircraft only to upgrade to ?next generation? aircraft only a few years later? Would it make better sense to retro?t certain older planes in its ?eet as an interim step to taking delivery of ?next generation? aircraft? What would be the overall ?nancial impact of a more gradual introduction of new ?eet? Does the ?eet order?s projected return on investment exceed cost of capital and thus represent a positive net present value? None of these questions have been answered by AMR or its advisors despite repeated attempts to better understand the rationale for the order and the associated massive increase in aircraft debt. 32. Moreover, while it be true that the accelerated purchase of new mainline aircraft will help AMR ?win the high value customer,? comparison with other US. network carriers suggests that the evidence for this View is mixed. For instance, as APA Exhibit 105 illustrates, Delta Air Lines, which has been gaining market share from AMR for years especially among ?high value customers? and has a higher RASM than AMR has a mainline ?eet that is actually than mainline ?eet. Delta also recently announced the purchase and interior renovation of additional used MD-9OS a fact that begs the question of 27 33 RWExhibit 100a: Declaration of Andrew Yearley Pg 32 of 45 whether airline customers really care about the age of a particular aircraft.? Moreover, as was demonstrated in the previous analysis of comparator EBITDAR Margins, even with this older ?eet (and any fuel and maintenance inef?ciencies that stem from them), Delta?s pro?tability, without such a correspondingly large or accelerated aircraft order, is quite comparable to the projected pro?tability of AMR with its new aircraft. APA Exhibit 105: U.S. Network Carrier Mainline Fleet Age in Years (2009-2011) 2009A 2010A 2011A AMR 15.0 15.0 15.0 Delta 15.6 15.7 16.1 United 11.1 12.0 12.4 US Airways 11.6 12.3 12.4 Source: Public ?lings. 33. On many occasions since the Chapter 11 petition, Lazard has requested analytics from AMR management that justify the re-?eeting plan. To date, Lazard has received minimal data and support. In addition, and its advisors? testimony on the subject of the re-?eeting plan has been high?level and summary. For instance, in his. deposition, Mr. Resnick disclaimed any knowledge or independent review of this fundamental component of the Business Plan: Q: [D]id you ever see any kind of a business analysis that underlay or justi?ed the proposed capital expenditures for re-?eeting? A: I can recall some presentations talking about the re-?eeting plan, but I can?t personally recall something -- a presentation that looked at alternatives to What the company had agreed, although my team might have reviewed it as part of their diligence on the business plan. But you have not been informed that that happened? I don't know. 4: [D]o you have any understanding of Whether the return on investment exceeds cost of capital? I believe the company has analyzed that for its ?eet plan, but I ?cannot recall that analysis. 43 Andrew Compart, ?Delta Acquires Seven More MD-90s for Fleet Replacement Strategy,? Aviation Week (Apr. 18, 2012). 28 5E?ter?i?6?9?l?f?1?ez??gi 34x9i??i65xhibit Q: 6? 100a: Declaration of Andrew Yearley Pg 33 of 45 Would you expect them to have made that type of analysis in constructing a business plan? In constructing a ?eet plan, yes. But you have never seen it? I have not seen it, but again, we have nine people on our team so they might have seen it as part of their diligence on a business plan. And has itself conducted any analysis, to your knowledge, that Supports the belief that this will have a positive return on investment? A: You're referring to the ?eet plan speci?cally with that question? Q: Yes. A: We have not conducted that analysis. Resnick Dep. 47:4 50:11 (Apr. 13, 2012). In his own deposition, Alexander Dichter of McKinsey dismissed the need for detailed review of this historically large aircraft purchase and accelerated six-year re-?eeting plan, indicating that it was justi?able based on ?simple math?: Q: I want to talk about the re-?eeting plan of AMR. You indicate I think that you did review American?s decision to invest in new aircraft? That's correct. Can you tell us exactly the analysis that you performed It was a very quick and simple analysis. Okay. And did you personally look at it? I had a discussion with the team and talked through the numbers. I did not see any output. Q: Are you here testifying and vouching for, if you will, all of the work that Q: A: McKinsey did in connection with its engagement? Yes. There are areas Where we went very deep because it was necessary to go very deep in order to validate the plan. On other areas, the plan stood quite ?rmly on logic and what I would call simple math, which is just I can walk you through that simple math if you would like. On the re??eeting, did you have to go deep or did you do it on simple math? Simple math. Dichter Dep. 65:20 67:8 (Apr. 20, 2012). 34. Given the unprecedented size and cost of the re-?eeting program and its impact on the Business Plan (and, therefore, on the 1113 proposal), I have been surprised by and 29 meantime 35 AWExhibit 100a: Declaration of Andrew Yearley Pg 34 of 45 its advisors? lack of responsiveness to my team?s repeated requests for information and analysis concerning this program. For the reasons discussed above, shortly after being retained, the Lazard team identi?ed the business and ?nancial rationale for re-?eeting plan as one of the key areas of focus for its business diligence at AMR. On February 9, 2012, once the Business Plan was released and a diligence protocol agreed,44 Lazard submitted its ?rst diligence list to This list included questions on the size, nature and timing of aircraft purchases as well as a request for sensitivities of the Business Plan relating to aircraft purchases. The history of diligence requests, responses and the relative timing of the sharing of purportedly responsive material by AMR is more fully summarized in Appendix of this Declaration. 35. In general, the substance of Lazard?s diligence questions on re??eeting have focused on two major avenues of inquiry: Diligence Area AMR Response Current Status Understanding the impact of the On March 7, 2012 (27 days a?er the Lazard was subsequently orally informed by re-?eeting on AMR if the aircraft request was submitted) that AMR was not planning to purchases were characterized as advisors informed APA and Lazard prepare this analysis and did not see utility ?nanced capital expenditures, that AMR had not performed such an in exploring the issue further. instead of as aircraft leases. illustrative analysis. Since the Business Plan generally characterizes the new aircraft purchases as ?leases,? the request above would have allowed Lazard to understand two things: (1) the actual impact of the purchases on AMR future leverage (as opposed to making imprecise and general assumptions as to how those leases should be ?capitalized?) and (2) the effective cost to AMR of having shorter, 10-year leases instead of more standard 20- or 25- year leases that are more consistent with the average life of the aircraft. 44 In general, it was agreed by all advisors that business diligence requests should be submitted through with subsequent responsive diligence material provided to union and Creditors? Committee advisors through the Intralinks electronic data room. 30 35Ri>?55xhibit 100a: Declaration of Andrew Yearley Pg 35 of 45 Diligence Area AMR Response Current Status Receipt and review of all analyses On April 25, 2012 (Day 3 of the Lazard has requested supporting materials (including management and board Section 1113 trial and 76 days after for the ?one page? analysis, excluding the presentations) performed by AMR Lazard?s ?rst re-?eeting diligence impact of Section 1113 labor savings, as or its advisors that relate to the request), posted to well as presentations or Board materials projected return on investment and Intralinks a one-page document that used to support the re-?eeting decision. net present value associated with purported to summarize the returns on all planned widebody and investment the aircra? purchases. Notably, in the depositions of Mr. Dichter narrowbody aircraft purchases in These return estimates were unhelpful and the in?court testimony of Ms. Goulet the Business Plan. because they were calculated inclusive and Mr. Vahidi it was represented that of assumed labor savings ?om the analyses similar to the ones requested by 1113 proposal. Lazard exist.45 If so, it is unclear why AMR has not shared them. 36. By own admission, the re-?eeting plan is a key foundation of its Business Plan, a key use of operating cash ?ows during the projection period of the Business Plan and therefore a key driver of the 1113 proposal. Although it may be the case that this re-?eeting, its underlying economics, its planned timing and the analyses that support it are reasonable, my team and I have been provided insuf?cient information or analysis by AMR and its advisers to conclude that this is so. Absent a full vetting of the re-?eeting plan and consideration of ?eet alternatives, the 1113 proposal is premature and should be rejected. 45 See 1113 Transcript (134: 16 134: 1 7) (Apr. 24, 2012) (Ms. Goulet testifying that the purchase was ?approved by our board of directors and they were provided with a ?nancial analysis? of the re-?eeting plan this analysis has not, to date, been shared with unions); Dichter Dep. 68:20 68:23 (Apr. 20, 2012) (Mr. Dichter describing having been shown ?presentations? that analyzed the re-?eeting plan none of which have, to date, been shared with unions); 1113 Transcript (276:9 27623) (Apr. 25, 2012) (Mr. Vahidi testifying ?When we make a signi?cant purchase and we have to go to our boards of directors to request authority to spend money for the purchase or to sign an agreement even though in this speci?c case the deal was pre-?nanced by the manufacturer we build what I would refer to as a ?business case? for whether that project made sense, either based on the return on investment or return on the capital invested in the project. So, there was a business case developed and built as to Why that those aircraft agreements that were signed made economic sense?); Resnick Dep. 47:9 47:13 (Apr. 13, 2012) (Mr. Resnick indicating he can ?recall some presentations talking about the re- ?eeting plan? but none that explored ?alternatives? to the re-?eeting plan). 31 37 AWExhibit 100a: Declaration of Andrew Yearley Pg 36 of 45 VI. THE APA HAS NEGOTIATED A CONSENSUAL LABOR AGREEMENT WITH US AIRWAYS THAT EVIDENCES ITS COMMITMENT TO SUPPORTING CONTRACT CONCESSIONS 37. I believe that the evidence shows that 1113 labor proposal was not developed based on the labor terms of most relevant competitors but rather derived from a target pro?tability level. The fact that this approach resulted in a signi?cant increase of the alleged labor savings ?need? from the one AMR had publicly described only days before its bankruptcy ?ling is further evidence of the lack of credibility of 1113 proposal.46 For me, however, the most persuasive evidence that the relief sought in the Motion lacks credibility is the real-time ?market test? of proposal that was provided by arms-length negotiations with US Airways. I was present in Tempe, Arizona during the APA team? negotiations with US Airways and was struck by the ability of the APA and US Airways to consensually resolve a_11 of the very same collective bargaining issues (scope, wages and bene?ts, pension, pro?t sharing, work rules, etc.) on which AMR management has consistently refused to compromise and now describes to the public and this Court as intractable. Notably, the APA agreement with US Airways includes a mechanism whereby future pilot productivity (after Year 3) and future pilot wages and bene?ts (after Year 5) will be indexed to closest competitors, Delta and United. In contrast, in post-petition negotiations between APA and American, I understand that the Company was unwilling to consider a much more limited 46 A well?respected Wall Street analyst of the airline sector has been outspoken in his skepticism about ?new? alleged labor savings need, its relation to the ?market? and the propriety of any 1113 proposal that ignores the ?market? and instead focuses on making AMR more pro?table than its peers. See Jamie Baker, v4.0: Thoughts on 2013 EBITDAR Potential and Exit Multiples,? .P. Morgan (Dec. 15, 2011) (?What we do n_ot envision is an AMR with margins superior to those of Delta and United, as some have suggested. Bankruptcy is not a means by which entities achieve economic superiority, rather it is a process designed to broadly achieve economic parity. Hence, we would strenuously disagree with any suggestion that AMR will emerge with meaningful, relative competitive bene?ts?) (emphasis in original) 32 38Ri>?6Exhibit 100a: Declaration of Andrew Yearley Pg 37 of 45 version of indexing that would have tied hourly pay rates to the market. I believe this highlights both willingness to accept ?market? terms and lack of interest in ?market? terms as a result of the negotiating leverage it believes it has over APA under Section 1113. VII. THE MOTION IS PREMATURE AND AMR HAS SUFFICIENT TIME TO ENSURE IT HAS THE BUSINESS PLAN AND IDENTIFIED THE TRULY LABOR SAVINGS NEED 38. Finally, I believe it is important to remember the bigger picture context of this Chapter 11 case and the current state of ?nances. Unlike most bankrupt network carriers of recent years, AMR does not face any sort of exigent circumstances that require an expedited Section 1113 process. AMR ?led for Chapter 11 without a DIP facility and therefore is not governed by the standard ?nancial covenants or tests that are typically contained in such agreements (and which often have driven the rapid pace of Section 1113 proceedings in other airline bankruptcies). On the contrary, AMR ?led for bankruptcy with over $4 billion of cash a balance that has since the petition date to nearly $5 billion. AMR management recently reassured the Creditors? Committee that AMR performance has been better than management?s expectations. As a result, I believe that this Court should view the professed urgency of the Motion with healthy skepticism. In fact, AMR management has more than suf?cient time to ?get it right? particularly given the well?publicized interest of US Airways (and possibly others) in merger-based business plans that may well generate materially better value for all AMR stakeholders, as well as the commitment to market-based bargaining. CONCLUSION 39. During the course of Lazard?s engagement with APA, it has assisted APA in (1) evaluating Business Plan across a number of different ?nancial metrics both relative to the norms of the US. airline industry and against comparable U.S. network carriers, (2) its 33 11-154gg-Ssehll: RWExhibit 100a: Declaration of Andrew Yearley Pg 38 of 45 negotiations with AMR and (3) the consideration of potential strategic alternatives for AMR. Having reviewed the Motion and the various AMR expert declarations that purport to support it, it is my judgment that the Motion does not satisfy the standards of Section 1113 of the Bankruptcy Code and seeks relief that is far beyond What is ?necessary? for AMR to successfully reorganize and emerge from bankruptcy as a viable competitor. I believe that the Motion should be denied. 34 ?Rij?aExhibit 100a: Declaration of Andrew Yearley Pg 39 of 45 I declare under the penalty of perjury that the forgoing is true and correct to the best of my knowledge and upon information from documents I have reviewed, including those in my custody and control. Executed day of Mayo, 5EnlrelFellF6??i2li?1?6??$?14l RWExhibit 100a: Declaration of Andrew Yearley Pg 40 of 45 Appendix A: Andrew Yearley - Biography Mr. Yearley is a Managing Director and leads Lazard Freres Company?s Restructuring Group in North America. Mr. Yearley joined Lazard Freres in July 1999. Mr. Yearley has been practicing in the restructuring arena for over 18 years. Prior to joining Lazard, Mr. Yearley was a Vice President in Deutsche Banc Alex Brown?s Restructuring Group (originally BT Alex Brown). Before joining BT Alex. Brown, he spent ?ve years in the Restructuring and Reorganization Group at Ernst Young LLP as a senior consultant, manager, and senior manager. Mr. Yearley began his career in 1989 at the Chase Manhattan Bank in the Structured Finance Division, and spent two years as an Assistant Vice President in the Leveraged Transactions Group at BZW, the investment?banking arm of Barclays PLC. During these years, Mr. Yearley developed skills in credit analysis, ?nancial modeling, and structuring loans. While at Chase, Mr. Yearley completed Chase?s credit training program involving an intensive study of ?nance, accounting, valuation, and credit analysis. Mr. Yearley has experience in a Wide range of corporate ?nance activities including restructurings and reorganizations, mergers and acquisitions, and capital raising. Over the past 15 years, Mr. Yearley?s work has focused entirely on working with companies and creditor groups involved in out-of-court and in?court restructurings. Mr. Yearley has provided investment banking services including advising and negotiating consensual restructurings, assisting companies in the sale of businesses or assets, and raising debt and equity capital. Mr. Yearley has been involved in a broad range of in-court and out-of court ?nancial advisory assignments including representing Boston Chicken, Buster Brown Apparel, Conseco, Daewoo, Delphi Automotive, Derby Cycle, Fannie Mae, Finova, Loews Cineplex Entertainment, Masonite, McCrory Stores, Medical Resources, Meridian Automotive, NorthWestern Energy, Perini Corporation, Plastech Automotive, Rickels Home Centers, Shoney?s, Sterling Chemical, 36 5EHterFei59659?B??1?a??Q? 42 RMGExhibit 100a: Declaration of Andrew Yearley Pg 41 of 45 Stone Webster, Inc., TI Automotive, Trism, TV Filme, USN Communications, Washington Group, and WLR Foods. In addition, Mr. Yearley advised Conseco Finance in its sale to Fortress Investments and GE. Capital and National Steel in its sale to US. Steel, representing two of the largest cash bankruptcy sale transactions ever completed. Among other assignments, Mr. Yearley has represented the United Autoworkers in their negotiation with GM, Ford, and in their respective restructuring efforts, the National Association of Letter Carriers in its restructuring discussions with the US. Postal Service, and the US. Treasury in its divestment of its investment in GM and Mr. Yearley graduated with a BA. in Political Science from Duke University magna cum laude in 1989 and received his MBA. from Columbia University with honors in 1999. He has been licensed by the NASD and New York Stock Exchange with a Series 7 General Securities license. Mr. Yearley has been a guest lecturer at the Columbia Business School and New York University?s Stern School of Business teaching case studies on the topic of restructuring and is a frequent speaker at industry seminars and conferences. 37 1 i I AWExhibit 100a: Declaration of Andrew Yearley Pg 42 of 45 Appendix B: History of Lazard Diligence Requests AMR Re-Fleeting and Aircraft Purchases Lazard Diligence Request Response Material Provided Date Requested Item Date Response Date Item Cum. 2/9 12 Seven-page general 2/9/12 M. Chou (R) business diligence list 6- responds Via e?mail, mailed by A. Yearley indicating that (L) to D. Resnick (R) will that included: begin assembling 0 Questions pertaining the requested to ?eet strategy, 2/ 13/1 information including type, 2 number and timing of M. Chou contacts new deliveries A. Chang (L) for A request for clari?cation on Business Plan model certain itemS with aircraft purchases recharacterized as capital expenditures 2/ 16/12 B. Tisdell (L) contacts 2/16/1 M. Chou responds M. Chou via email for 2 indicating that other update on status and ?priority? items timing of 2/9/12 request designated by Lazard/APA (pertaining to scope-related diligence) will be given higher attention by AMR and its advisors 2/17/12 Meeting between Lazard 2/17/1 B. Goulet (AMR) team and AMR 2 and team agree to management in Dallas, at which request for Business Plan model with aircraft purchases recharacterized as capital expenditures is reiterated as a ?priority? item investigate status of this request 38 (L) Lazard (R) I SEhierElleds9fiif?lfe??gi 44Rnfr>?6axmbn 100a: Declaration of Andrew Yearley Pg 43 of 45 Lazard Diligence Request Response Material Provided Date Requested Item Date Response Date Item Cum. Time Ela sed 2/22/12 A. Chang contacts M. 2/23/1 M. Chou emails A. Chou Via email to again 2 Chang seeking emphasize importance clari?cation on of recast Business Plan reason for request model A. Chang replies to 2/23/1 provide rationale 2 for request 3/7/12 Item 25 of AMR 27 days First Supplemental since Set of Responses ?rst advises that ?eet ?American does not request have documents regarding a 6-year model with new aircraft as capital expenditures instead of operating leases? 3/9/12 B. Tisdell phones J. 3/ 13/1 J. Queen con?rms Queen (R) to con?rm 2 AMR is unwilling that 3/7/ 12 response to comply with the means that AMR does request not intend to entertain the request. J. Queen indicates he will consult with AMR. 3/26/12 B. Tisdell emails M. 3/26/1 In follow-up phone Chou and J. Queen 2 conversation M. (copying counsel) APA Supplemental Diligence List, which includes requests for: ?all analyses (including management and board presentations) that relate to the projected return Chou indicates to B. Tisdell that responsive material exists (if not precisely in the form requested) and will be provided as soon as possible 39 pr?lf Exhibit 100a: Declaration of Andrew Yearley Pg 44 of 45 Lazard Diligence Request Response Material Provided Date Requested Item Date Response Date Item Cum. on investment associated with planned widebody and narrowbody aircraft purchases? 4/4/12 B. Tisdell emails M. (L) Lazard (R) . Chou and J. Queen Tisdell indicating (copying counsel) that ?company is A a following up on status working to ?nalize ii i 3.15 of the request its responses so 33; a i hope to have i :3 something to you as i? I soon as possible? . . 4/10/12 B. Tisdell emails M. 4/10/1 M. Chou phones i Chou and J. Queen 2 and emails B. i (copying counsel) Tisdell and j; . following up on status indicates company - i 1 of request and noting the will have a i i lack of responsiveness response soon to all prior requests ti 3?5 4/25/1 l-page document 76 ays 2 posted to Intralinks since purporting to be first (Day 3 responsive to ?eet ?eet of return on request 1113 investment request, Trial) but improperly 30 days including the since impact of Section supp. 1113 savings ?eet request 40 5E??te?b?33?4?i?liezg?i?? 46 100a: Declaration of Andrew Yearley Pg 45 of 45 (L) Lazard (R) Appendix C: Materials Relied Upon I have considered the following categories of documents in forming the conclusions and opinions contained in this declaration: 1. 8. 9.- Public ?lings including SEC ?lings such as 10-K, 8-K ?lings and press releases AMR Business Plan model and ?nancial projections . AMR Investor Presentations on Investor Relations web site? Wall Street research reports from ?nancial institutions and research Disclosure Statements and Plans of Reorganization of other airline bankruptcies Moody?s: Global Passenger Airlines report (Mar. 2009) Key Credit factors: Criteria For Rating The Airline Industry (Oct. 2010) News articles Other American Airlines and Allied Pilots Association 1113 Declarations 10. American Airlines Witness deposition and court testimony transcripts 1 1. Bloomberg 47 Available at 41 Case 1:13-cv-01236-CKK Document 58 Filed 08/29/13 Page 1 of 11 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. ) ______________________________________ ) Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly MEMORANDUM OF LAW OF AMICUS CURIAE OFFICIAL COMMITTEE OF UNSECURED CREDITORS IN SUPPORT OF DEFENDANTS’ MOTION TO SET TRIAL DATE Case 1:13-cv-01236-CKK Document 58 Filed 08/29/13 Page 2 of 11 I. PRELIMINARY STATEMENT The Official Committee of Unsecured Creditors (the “Statutory Committee”) of AMR Corporation (“AMR”) submits this Memorandum of Law in support of Defendants’ Motion to Set Trial Date, ECF No. 11 (the “Motion”). As statutory representatives of the stakeholders that will own a majority equity interest in the airline formed as a result of the proposed merger between AMR and US Airways Group, Inc. (“US Airways”), the Statutory Committee has a unique fiduciary interest in ensuring that the uncertainty surrounding the government’s challenge to the merger—which is particularly disruptive and harmful to AMR and its stakeholders in the bankruptcy setting—is resolved as quickly as possible. Contrary to the government’s blithe assertions in its opposition brief (“Pls.’ Opp.”), the delicate balance of diverse stakeholders in bankruptcy that support this merger necessarily would be jeopardized by the extraordinary pretrial delay the government now seeks. Indeed, under the government’s proposal, trial would begin more than twenty-two months after the Department of Justice (“DOJ”) initiated its investigation of the proposed transaction and ten months after the merging parties substantially complied with the DOJ’s Request for Additional Information (“Second Request”). Further, and again contrary to the government’s assertion, the bankruptcy setting here is distinct from the merger challenges the government highlights, which did not involve transactions that brought together diverse stakeholders with potentially divergent interests, in support of creating a new competitor. In addition, the value created by this merger largely is the result of combining complementary networks much like those the DOJ approved previously in the context of the mergers of Delta Airlines and Northwest Airlines in 2008, United Airlines and Continental Airlines in 2010 and Southwest Airlines and AirTran in 2011. Case 1:13-cv-01236-CKK Document 58 Filed 08/29/13 Page 3 of 11 Finally, the government is completely wrong to suggest that exacerbating the uncertainty regarding AMR’s future is of no moment because AMR has a standalone plan of reorganization. On the contrary, AMR’s current plan of reorganization, which is based on the Merger Agreement, is the only plan proposed to and voted on by creditors and stakeholders that is before the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) presiding over AMR’s pending chapter 11 cases; there is no “Plan B” with regard to reorganization. Instead, as the Statutory Committee—which was actively involved throughout the DOJ’s investigation and attended and participated in all meetings between the DOJ and Defendants—has informed the government in several submissions and communications directly solicited by the DOJ, any injunction here would return the AMR bankruptcy to square one with likely disruption and relative disarray among numerous, financially unaligned stakeholders. It frankly is shocking that the government would knowingly suggest otherwise. In practical terms, the “sooner the better” is an apt approach for resolving this case in order to minimize the harm that the uncertainty inherent in the government’s action already is causing and which only would be compounded by the delay the government contemplates. II. THE INTEREST OF THE STATUTORY COMMITTEE The Statutory Committee is a statutory fiduciary created by Congress to represent the stakeholders that will own the majority interest of the airline that will exist following the proposed merger of AMR and US Airways.1 See 11 U.S.C. § 1102(a)(1) (requiring appointment 1 The Statutory Committee consists of nine members: three indenture trustees (the Bank of New York Mellon, Manufacturers and Traders Trust Company and Wilmington Trust Company); three labor organizations (the Allied Pilots Association, the Association of Professional Flight Attendants and the Transport Workers Union of America); two trade creditors (Boeing Capital Corporation and Hewlett-Packard Enterprise Services, LLC) and the Pension Benefit Guaranty Corporation. The three labor organizations have filed a proposed amicus brief supporting (cont'd) 2 Case 1:13-cv-01236-CKK Document 58 Filed 08/29/13 Page 4 of 11 of a general unsecured creditors’ committee “as soon as practicable” after the commencement of a chapter 11 case). The Statutory Committee exercises a “wide and important array of authority and responsibility . . . [and] the Bankruptcy Code contemplates a significant and central role for committees in the scheme of a business reorganization.” In re Penn-Dixie Indus., Inc., 9 B.R. 941, 944 (Bankr. S.D.N.Y. 1981). The Bankruptcy Code invests the Statutory Committee with oversight responsibilities, and the Statutory Committee is afforded investigatory authority consistent with its mandate to “provide supervision of the debtor in possession and of the trustee.” H.R. Rep. No. 95-595, at 401 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6357; see also 11 U.S.C. § 1103 (defining the powers and responsibilities of creditors’ committees and other statutory committees). Consistent with its statutory mandate, at the outset of AMR’s chapter 11 case, the Statutory Committee announced that its principal objective was “to work with the Debtors to achieve a feasible and expeditious transformation of American Airlines and its related businesses that preserves, and hopefully enhances, business enterprise value.” See In re AMR Corp., Case No. 11-15463 (SHL), ¶ 6 (Bankr. S.D.N.Y. Dec. 20, 2011), ECF No. 403. To advance this objective, the Statutory Committee and AMR worked collaboratively to fairly and systematically evaluate restructuring alternatives.2 On May 1, 2012, the Statutory Committee and AMR agreed ________________________ (cont'd from previous page) Defendants’ Motion. See Motion of Allied Pilots Association, Association of Professional Flight Attendants, Association of Flight Attendants-CWA and Transport Workers Union of America to File Amicus Curiae Brief In Support of Defendant’s Motion To Set Trial Date [ECF No. 11], United States v. US Airways Group, Inc., No. 1:13-cv-01236-CKK (D.D.C.. Aug. 23, 2013), ECF No. 21, Ex. A. 2 The aim of the strategic alternatives exploration process was to compare the AMR’s standalone business plan against a transaction with another airline. During this process, AMR, the (cont'd) 3 Case 1:13-cv-01236-CKK Document 58 Filed 08/29/13 Page 5 of 11 to a formal written protocol to guide their assessment of strategic alternatives. The announcement of a definitive merger agreement (the “Merger Agreement”) between AMR and US Airways on February 14, 2013, marked the culmination of that strategic alternatives process. Pursuant to the Merger Agreement, approximately 72% of the equity of the merged entity, New AAG, will be distributed to the AMR’s economic stakeholders. In addition, the Statutory Committee serves as a “primary negotiating bod[y] for the formulation of the plan of reorganization.” H.R. Rep. No. 95-959, at 401 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6357; see also In re Johns-Manville Corp., 801 F.2d 60, 62 (2d Cir. 1986). The Statutory Committee was therefore intimately involved in the negotiation of the AMR’s plan of reorganization (the “Plan”). In turn, that Plan—the only plan of reorganization before the Bankruptcy Court—is the product of an enormously complex set of related agreements. Specifically, the Plan contemplates the settlement of numerous complicated and contested intercreditor issues; the negotiation of memoranda of understanding between AMR, US Airways and their respective labor organizations concerning the integration of the two companies’ unionized workforces; and other settlements and compromises that are embodied in the Plan, all of which are predicated on the consummation of the merger. ________________________ (cont'd from previous page) Statutory Committee and their respective advisors assessed a number of potential transactions and concluded that a combination with US Airways could create significant incremental value for AMR’s estates by generating incremental traffic and cost synergies that could not be achieved through other means. Thus, in August 2012, AMR, the Statutory Committee and US Airways commenced formal negotiations and information sharing toward a potential merger. The Statutory Committee provided extensive input to both parties throughout their negotiations. 4 Case 1:13-cv-01236-CKK Document 58 Filed 08/29/13 Page 6 of 11 III. THE GOVERNMENT’S PROPOSED SCHEDULE WOULD EXACERBATE HARMFUL UNCERTAINTY The Statutory Committee believes that prompt adjudication of this action according to the schedule Defendants have proposed is in the best interests of AMR’s unsecured creditors and other stakeholders. AMR’s chapter 11 cases involve over 430,000 parties in interest, including investors, current and retired employees, suppliers and other business partners, airport authorities, stockholders and many others. Despite the sheer number of stakeholders and the diversity of interests they hold, all classes of creditors and equity interest holders entitled to vote on the Plan have accepted the Plan by margins that are virtually unprecedented in large chapter 11 cases.3 There is no guarantee, however, that the remarkable consensus the parties have achieved to date would endure over the elongated schedule the government proposes. The Statutory Committee believes that protracted litigation would engender greater uncertainty and could encourage opportunistic and destabilizing behavior. In particular, significant delay in resolving this litigation could lead individual stakeholders to attempt to extract as much value as possible for particular constituencies without maximizing the value of AMR’s estates as a whole. This concern is particularly acute because, as noted above, the Plan is predicated on a global settlement of enormously complex intercreditor issues. The prolonged uncertainty associated with the government’s proposed schedule could undermine these compromises and instead 3 On August 23, 2013, the Statutory Committee submitted a memorandum at the direction of the Bankruptcy Court addressing what impact, if any, the government’s action has on AMR’s outstanding request for entry of an order confirming the Plan. The Statutory Committee’s view, reflected in its submission to the Bankruptcy Court, is that the litigation pending before this Court, and the Plan confirmation proceedings in the Bankruptcy Court, are separate processes that can and should proceed independently. See In re AMR Corp., Case No. 11-15463 (SHL) (Bankr. S.D.N.Y. Aug. 23, 2013), ECF No. 9927. 5 Case 1:13-cv-01236-CKK Document 58 Filed 08/29/13 Page 7 of 11 precipitate factiousness and in-fighting among various constituencies. That AMR and US Airways understood and accounted for the possibility that the DOJ might seek to enjoin the merger in no way negates the risk that protracted litigation could upset the dynamics of AMR’s reorganization. In short, the government should not be permitted to rely on scheduling to block the proposed merger, without even having to prove its entitlement to relief on the merits. IV. THE BANKRUPTCY CONTEXT DISTINGUISHES THIS LITIGATION FROM THE CASES THE GOVERNMENT CITES The Statutory Committee was quite surprised to see the government argue that because there is “some uncertainty” in “every merger challenged by the government” (Pls.’ Opp. at 5), the bankruptcy context here is in no way unique. Nothing could be further from the truth. First and foremost, none of the prior challenges the government references (id. at 9) involved a merger agreement incorporated into a plan of reorganization accepted by creditors and shareholders following a bankruptcy court-approved solicitation process, let alone one that is the result of bringing together numerous and diverse stakeholders in support of creating a new competitor. As noted above, that support has the real potential to erode with the passage of time because stakeholders will respond differently to event risk—i.e., the risk of intervening exogenous events that would disrupt the proposed transaction. As the delay in consummating the proposed merger becomes more protracted, so too does event risk. Because stakeholders respond differently to event risk depending on the certainty of their recovery (e.g., stakeholders that are more certain to recover regardless of whether the proposed merger is consummated are less tolerant of event risk, and vice versa), the divergence of interest among stakeholders increases as the expected delay in merger consummation increases. Second and equally telling, none of the merger challenges identified by the government involved industries in which the DOJ itself was an active participant—through the approval of 6 Case 1:13-cv-01236-CKK Document 58 Filed 08/29/13 Page 8 of 11 three prior mergers—that created competitors capable of offering far more expansive service than AMR and US Airways could provide on their own. This is not to say that the government is legally estopped from abandoning its prior endorsement of merging complementary airline networks, but it is quite another thing for the government to act as if AMR and its creditors anticipated the government’s proposed schedule—under which trial would commence in March 2014, more than twenty-two months after the DOJ initiated its investigation by issuing Civil Investigative Demands in April 2012 and ten months after the parties substantially complied with a Second Request in May 2013—because, as the government now claims, this is a “highly problematic merger” in “highly concentrated markets.” (Pls.’ Opp. at 3.) That proposition is, of course, fanciful in light of the DOJ’s own airline merger precedents. With only seventeen direct flight overlaps (without accounting for the significance of other competitors on those routes), few conceivable slot issues beyond those alleged to exist at Ronald Reagan Washington National Airport and net direct consumer benefits of more than $500 million per year, Defendants and the Statutory Committee had every reason to believe that the December 17, 2013 outside termination date provided more than ample time to resolve any concerns that the DOJ could reasonably raise.4 Indeed, if anything, it was the DOJ that hid the ball from all interested parties and stakeholders during its nearly sixteen-month-long, intensive investigation of the potential (and, later, announced) merger, which in the Statutory Committee’s view leaves the government’s demand for additional massive and lengthy discovery quite hollow. 4 The Merger Agreement accounts for a delay in obtaining antitrust clearance by permitting either party to extend the “Termination Date” (as defined in the Merger Agreement) by up to two months, from October 14, 2013 to December 17, 2013. See In re AMR Corp., Case No. 1115463 (SHL) (Bankr. S.D.N.Y. June 5, 2013), ECF No. 8590, Ex. A § 6.2 (authorizing an extension to December 13, 2013, plus a forward adjustment to reflect time that elapsed during the Second Request process, resulting in a December 17, 2013 Termination Date). 7 Case 1:13-cv-01236-CKK Document 58 Filed 08/29/13 Page 9 of 11 V. THE GOVERNMENT CANNOT JUSTIFY A LENGTHY PRETRIAL SCHEDULE BASED ON A FICTIONAL PLAN “B” Finally, particularly from the Statutory Committee’s perspective, it is ironic that the government takes the position that significant delay and uncertainty cannot harm AMR (and presumably, its creditors) because AMR is, in the government’s view, positioned to “compete as a strong and vibrant standalone firm.” (Pls.’ Opp. at 3.) This presumptuous assertion is both factually unsubstantiated and, more importantly, misunderstands the procedural context of the AMR bankruptcy. Factually, as the Statutory Committee and its advisors analyzed in exhaustive detail and explained to DOJ throughout its lengthy investigation, AMR simply cannot compete as effectively long term against Delta, United, Southwest and others without the scope and breadth of connecting traffic that the DOJ allowed Delta, United and Southwest to attain through their recent mergers. Indeed, the Statutory Committee finds it particularly troubling that the government’s claim under Section 7 of the Clayton Act, 15 U.S.C. § 18, appears to be centered more around the government’s wishful or naive belief that AMR can compete effectively on its own (notwithstanding its current bankruptcy) than on proving that the combination of AMR’s and US Airways’ complementary networks may substantially lessen competition (rather than enhance it) in any economically meaningful market. Procedurally, as the Statutory Committee informed the government in response to one of the DOJ’s several requests for information directly from the Statutory Committee, there is no Plan B before the Bankruptcy Court that AMR, the Statutory Committee and other stakeholders could readily revert to if the present Plan, which is predicated on the Merger Agreement, cannot be consummated. The Statutory Committee conveyed to the government that any injunctive relief would take the bankruptcy back to square one because any confirmation order entered by 8 Case 1:13-cv-01236-CKK Document 58 Filed 08/29/13 Page 10 of 11 the Bankruptcy Court would be vacated, the Plan would be rendered null and void, and AMR would continue in chapter 11 administration. This scenario likely would result in the unwinding of numerous complex, multilateral settlements and contractual arrangements that are dependent on the Merger Agreement (including new union collective bargaining agreements) and a general balkanization of stakeholders that inevitably would impose relative disarray on AMR as a company and as a competitor. Again, presumably some of these issues will be the subject of trial, but the point for this Motion is that the government has no basis to assert, or even suggest, that AMR is a stable, longterm competitor that would be unaffected by the lengthy delay and uncertainty that the government’s schedule so myopically envisions. To the contrary, the government’s schedule only will exacerbate the harm that uncertainty itself creates in relation to the unique and complex balance of interests that culminated in the all but uniform support for this highly procompetitive merger. VI. CONCLUSION For the foregoing reasons, the Statutory Committee respectfully requests that this Court grant the Motion. 9 Case 1:13-cv-01236-CKK Document 58 Filed 08/29/13 Page 11 of 11 Respectfully submitted, Dated: August 28, 2013 John Wm. Butler, Jr. (pro hac vice forthcoming) Albert L. Hogan, III (pro hac vice forthcoming) SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 155 North Wacker Drive Chicago, IL 60606 Tel: (312) 407-0700 Jack.Butler@skadden.com Al.Hogan@skadden.com Jay M. Goffman (pro hac vice forthcoming) James A. Keyte (pro hac vice forthcoming) Kenneth B. Schwartz (pro hac vice forthcoming) SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 4 Times Square New York, NY 10036-6522 Tel: (212) 735-3000 Jay.Goffman@skadden.com James.Keyte@skadden.com Ken.Schwartz@skadden.com 10 /s/ Gregory B. Craig Gregory B. Craig (D.C. Bar No. 164640) SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 1440 New York Avenue, N.W. Washington, DC 20005-2111 Tel: (202) 371-7000 Gregory.Craig@skadden.com Counsel for Official Committee of Unsecured Creditors Case 1:13-cv-01236-CKK Document 59 Filed 08/30/13 Page 1 of 2 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. ) ______________________________________ ) Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly MOTION FOR ADMISSION OF JOHN Wm. BUTLER, JR. PRO HAC VICE Pursuant to Local Civil Rule 83.2(d), Movant Gregory B. Craig, an attorney admitted to the Bar of this Court and in good standing, respectfully moves for the admission of John Wm. Butler, Jr. pro hac vice as co-counsel for the Official Committee of Unsecured Creditors (the “Statutory Committee”) of AMR Corporation, appearing as amicus curiae in the abovecaptioned matter. As grounds, therefore, Movant states: 1. Movant is a member in good standing of the Bar of this Court and licensed to practice in the District of Columbia (D.C. Bar Number 164640). 2. Mr. Butler is a member in good standing of the Bar of the State of Illinois. Mr. Butler is also a member in good standing of the Bar of the State of Michigan. 3. Mr. Butler is not currently and has never previously been the subject of any disciplinary action by any bar. Case 1:13-cv-01236-CKK Document 59 Filed 08/30/13 Page 2 of 2 4. The Declaration of John Wm. Butler, Jr. in Support of Motion for Admission Pro Hac Vice is being filed herewith in compliance with Local Civil Rule 83.2(d). 5. Pursuant to Local Civil Rule 7(m), counsel for the Statutory Committee has conferred with counsel for the Plaintiff Department of Justice (“DOJ”), Plaintiff States and for the Defendants regarding the filing of this motion. The DOJ and Defendants have consented to this filing, and the Plaintiff States have no objection to the filing. WHEREFORE, Movant requests admission of John Wm. Butler, Jr. pro hac vice as counsel for the Statutory Committee. Dated: August 30, 2013 Respectfully submitted, /s/ Gregory B. Craig Gregory B. Craig (D.C. Bar No. 164640) SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 1440 New York Avenue, N.W. Washington, DC 20005-2111 (202) 371-7000 Gregory.Craig@skadden.com Counsel for Official Committee of Unsecured Creditors 2 Case 1:13-cv-01236-CKK Document 59-1 Filed 08/30/13 Page 1 of 2 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ______________________________________ ) ) ) Plaintiffs, ) ) v. ) ) US AIRWAYS GROUP, INC. ) ) and ) ) AMR CORPORATION, ) ) Defendants. ) ______________________________________ ) UNITED STATES OF AMERICA, et. al., Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly DECLARATION OF JOHN Wm. BUTLER, JR. IN SUPPORT OF MOTION FOR ADMISSION PRO HAC VICE I, John Wm. Butler, Jr., hereby declare: 1. My full name is John William Butler, Jr., counsel for the Official Committee of Unsecured Creditors (the “Statutory Committee”) of AMR Corporation, appearing as amicus curiae in the above-captioned matter. I am a partner with the law firm of Skadden, Arps, Slate, Meagher & Flom LLP. 2. My office address is 155 North Wacker Drive, Chicago, IL 60606-1720. My office telephone number is (312) 407-0730. 3. I am a member in good standing of the Bar of the State of Illinois. I am also a member in good standing of the Bar of the State of Michigan. 4. I certify that there are no pending disciplinary proceedings against me before any bar, and that I have not been disciplined by any bar in the past. Case Document 59-1 Filed 08/30/13 Page 2 of 2 S. I have not been admitted pro hac vice in this Court within the last two years. 6. I do not engage in the practice of law from an of?ce located in the District of Columbia. 7. I am not currently a member of the Districth Columbia Bar, and I do not have an application fer membership pending. I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. EXECUTED this 30?h day of August 2013. w?wh john Wm. Butler, Jr. Case 1:13-cv-01236-CKK Document 59-2 Filed 08/30/13 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ______________________________________ ) UNITED STATES OF AMERICA, et. al., ) ) Plaintiffs, ) ) v. ) ) Civil Action No. 1:13-cv-01236 (CKK) US AIRWAYS GROUP, INC. ) Judge Colleen Kollar-Kotelly ) and ) ) AMR CORPORATION, ) ) Defendants. ) ______________________________________ ) [PROPOSED] ORDER GRANTING MOTION FOR ADMISSION OF JOHN Wm. BUTLER, JR. PRO HAC VICE UPON CONSIDERATION of the Motion for Admission of John Wm. Butler, Jr. Pro Hac Vice in the above-captioned matter and the Declaration of John Wm. Butler, Jr. in support thereof, it is this ___ day of _______________, 2013, hereby: ORDERED that the Motion for Admission of John Wm. Butler, Jr. Pro Hac Vice be, and the same hereby is, GRANTED; and it is further ORDERED that John Wm. Butler, Jr. be allowed to appear pro hac vice in court proceedings in the above-captioned matter. ___________________________ Colleen Kollar-Kotelly United States District Judge Case 1:13-cv-01236-CKK Document 60 Filed 08/30/13 Page 1 of 2 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. ) ______________________________________ ) Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly MOTION FOR ADMISSION OF ALBERT L. HOGAN, III PRO HAC VICE Pursuant to Local Civil Rule 83.2(d), Movant Gregory B. Craig, an attorney admitted to the Bar of this Court and in good standing, respectfully moves for the admission of Albert L. Hogan, III pro hac vice as co-counsel for the Official Committee of Unsecured Creditors (the “Statutory Committee”) of AMR Corporation, appearing as amicus curiae in the abovecaptioned matter. As grounds, therefore, Movant states: 1. Movant is a member in good standing of the Bar of this Court and licensed to practice in the District of Columbia (D.C. Bar Number 164640). 2. Mr. Hogan is a member in good standing of the Bar of the State of Illinois. 3. Mr. Hogan is not currently and has never previously been the subject of any disciplinary action by any bar. Case 1:13-cv-01236-CKK Document 60 Filed 08/30/13 Page 2 of 2 4. The Declaration of Albert L. Hogan, III in Support of Motion for Admission Pro Hac Vice is being filed herewith in compliance with Local Civil Rule 83.2(d). 5. Pursuant to Local Civil Rule 7(m), counsel for the Statutory Committee has conferred with counsel for the Plaintiff Department of Justice (“DOJ”), Plaintiff States and for the Defendants regarding the filing of this motion. The DOJ and Defendants have consented to this filing, and the Plaintiff States have no objection to the filing. WHEREFORE, Movant requests admission of Albert L. Hogan, III pro hac vice as counsel for the Statutory Committee. Dated: August 30, 2013 Respectfully submitted, /s/ Gregory B. Craig Gregory B. Craig (D.C. Bar No. 164640) SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 1440 New York Avenue, N.W. Washington, DC 20005-2111 (202) 371-7000 Gregory.Craig@skadden.com Counsel for Official Committee of Unsecured Creditors 2 Case 1:13-cv-01236-CKK Document 60-1 Filed 08/30/13 Page 1 of 2 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ______________________________________ ) ) ) Plaintiffs, ) ) v. ) ) US AIRWAYS GROUP, INC. ) ) and ) ) AMR CORPORATION, ) ) Defendants. ) ______________________________________ ) UNITED STATES OF AMERICA, et. al., Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly DECLARATION OF ALBERT L. HOGAN, III IN SUPPORT OF MOTION FOR ADMISSION PRO HAC VICE I, Albert L. Hogan, III, hereby declare: 1. My full name is Albert Lee Hogan, III, counsel for the Official Committee of Unsecured Creditors (the “Statutory Committee”) of AMR Corporation, appearing as amicus curiae in the above-captioned matter. I am a partner with the law firm of Skadden, Arps, Slate, Meagher & Flom LLP. 2. My office address is 155 North Wacker Drive, Chicago, IL 60606-1720. My office telephone number is (312) 407-0785. 3. I am a member in good standing of the Bar of the State of Illinois. 4. I certify that there are no pending disciplinary proceedings against me before any bar, and that I have not been disciplined by any bar in the past. Case Document 60-1 Filed 08/30/13 Page 2 of 2 5. I have not been admitted pro hac vice in this Court within the last two years. 6. I do not engage in the practice of law from an of?ce located in the District of Columbia. 7. I am not currently a member of the District of Columbia Bar, and I do not have an application for membership pendingt I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. EXECUTED this 30?? day of August 2013. Albert L. Hoga Case 1:13-cv-01236-CKK Document 60-2 Filed 08/30/13 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ______________________________________ ) UNITED STATES OF AMERICA, et. al., ) ) Plaintiffs, ) ) v. ) ) Civil Action No. 1:13-cv-01236 (CKK) US AIRWAYS GROUP, INC. ) Judge Colleen Kollar-Kotelly ) and ) ) AMR CORPORATION, ) ) Defendants. ) ______________________________________ ) [PROPOSED] ORDER GRANTING MOTION FOR ADMISSION OF ALBERT L. HOGAN, III PRO HAC VICE UPON CONSIDERATION of the Motion for Admission of Albert L. Hogan, III Pro Hac Vice in the above-captioned matter and the Declaration of Albert L. Hogan, III in support thereof, it is this ___ day of _______________, 2013, hereby: ORDERED that the Motion for Admission of Albert L. Hogan, III Pro Hac Vice be, and the same hereby is, GRANTED; and it is further ORDERED that Albert L. Hogan, III be allowed to appear pro hac vice in court proceedings in the above-captioned matter. ___________________________ Colleen Kollar-Kotelly United States District Judge Case 1:13-cv-01236-CKK Document 61 Filed 08/30/13 Page 1 of 4 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, v. Civil Action No. 1:13-cv-01236-CKK US AIRWAYS GROUP, INC. 111 W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION 4333 Amon Carter Boulevard Forth Worth, TX 76155 Defendants. MOTION FOR ADMISSION PRO HAC VICE OF PAULA W. RENDER Pursuant to Local Rule 83.2(d) of the Rules of the United States District Court for the District of Columbia, the undersigned moves for the admission pro hac vice of Paula W. Render to represent Defendant AMR Corporation (“AMR”) and to appear and participate in proceedings in this Court in the above-captioned matter. Ms. Render is a partner of the firm Jones Day, attorneys for AMR in this matter. She is a member in good standing of the State of Illinois, as well as the U.S. Courts of Appeal for the Second, Third, Fifth, Seventh, Eighth, and Tenth Circuit, the U.S. District Court for the Eastern District of Michigan, and the U.S. District Court for the Northern District of Illinois, and has not been subject to disciplinary proceedings as a member of the bar in any jurisdiction, nor are any disciplinary proceedings currently pending against her. Ms. Render is not a member of the Case 1:13-cv-01236-CKK Document 61 Filed 08/30/13 Page 2 of 4 District of Columbia bar. In the past two years, Ms. Render has not been admitted pro hac vice in the United States District Court for the District of Columbia. Respectfully submitted, this the 30th day of August, 2013. /s/ Rosanna McCalips Rosanna K. McCalips (D.C. Bar # 482859) Email: rkmccalips@jonesday.com JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 Tel. (202) 879-3939 Fax (202) 626-1700 Attorney for Defendant AMR Corporation Case 1:13-cv-01236-CKK Document 61 Filed 08/30/13 Page 3 of 4 CERTIFICATE OF SERVICE I hereby certify that on this 30th day of August, 2013, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system, which will send a notice of electronic filing to the counsel of record in this matter who are registered on the CM/ECF system, and that I caused a copy of the foregoing and the notice of electronic filing to be served by email and first class mail to the following non-ECF participants: Nancy M. Bonnell Antitrust Unit Chief Office of the Attorney General 1275 West Washington Phoenix, AZ 85007 (602) 542-7728 (phone) (602) 542-9088 (facsimile) Nancy.bonnell@azag.gov Mark Levy Assistant Attorney General Office of the Attorney General 300 W. 15th Street, 7th Floor Austin, TX 78701 (512) 936-1847 (phone) (512) 320-0975 (facsimile) Mark.Levy@texasattorneygeneral.gov James A. Donahue, III Executive Deputy Attorney General Public Protection Division Office of the Attorney General 14th Floor, Strawberry Square Harrisburg, PA 17120 (717) 787-4530 (phone) (717) 787-1190 (facsimile) jdonahue@attorneygeneral.gov Sarah Oxenham Allen Assistant Attorney General Consumer Protection Section Office of the Attorney General 900 East Main Street Richmond, VA 23219 (804) 786-6557 (phone) (804) 786-0122 (facsimile) SOAllen@oag.state.va.us Victor J. Domen, Jr. Senior Antitrust Counsel Office of the Attorney General 500 Charlotte Avenue Nashville, TN 37202 (615) 532-3327 (phone) (615) 532-6951 (facsimile) Vic.Domen@ag.tn.gov Paul T. Denis Steven G. Bradbury Dechert LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 (phone) (202) 261-3333 (facsimile) paul.denis@dechert.com steven.bradbury@dechert.com Case 1:13-cv-01236-CKK Document 61 Filed 08/30/13 Page 4 of 4 Charles F. Rule Cadwalader, Wichersham & Taft LLP 700 Sixth Street, N.W. Washington, DC 20001 (202) 862-2200 (phone) (202) 862-2400 (facsimile) rick.rule@cwt.com John M. Majoras Michael S. Fried Rosanna K. McCalips Jones Day 51 Louisiana Avenue, N.W. Washington, DC 20001 Dated: August 30, 2013 (202) 879-3939 (phone) (202) 626-1700 (facsimile) jmmajoras@jonesday.com msfried@jonesday.com rkmccalips@jonesday.com Mary Jean Moltenbrey Paul Hastings LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 (phone) (202) 551- 0225 (facsimile) mjmoltenbrey@paulhastings.com /s/ Rosanna McCalips Rosanna K. McCalips Document 61-1 Fil?ddeO/ls Page10f2 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, er al. Plainti?fs, V- Civil Action No. US AIRWAYS GROUP, INC. 111 W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION 4333 Amon Carter Boulevard Forth Worth, TX 76155 Defendants. DECLARATION OF PAULA W. RENDER IN SUPPORT OF MOTION FOR ADMISSION PRO HAC VICE Pursuant to Local Rule I declare the following: 1. My full name is PAULA W. RENDER. I am a partner of the law ?rm Jones Day, attorneys for AMR Corporation in this matter. I submit this Declaration in support of a motion for leave to appear and practice before this Court in the above-captioned matter. 2. My of?ce address is Jones Day, 77 West Wacker Drive, Suite 3500, Chicago, IL 60601?1692, telephone (312) 269-1555. 3. I have been admitted to and am a member in good standing of the bar of the State of Illinois, as well as the US. Courts of Appeal for the Second, Third, Fifth, Seventh, Eighth, and Tenth Circuit, the US. District Court for the Eastern District of Michigan, and the US. District Court for the Northern District of Illinois. 4. I have not been subject to disciplinary proceedings as a member of the bar in any Case Document 61-1 Filed 08/30/13 Page 2 of 2 jurisdiction, nor are any disciplinary proceedings currently pending against me. 5. In the past two years, I have not been admitted pro hac vice in the United States District Court for the District of Columbia. 6. I am not a member of the District of Columbia Bar. 7. I certify that I am generally familiar with this Court?s Local Rules. I declare under penalty of perjury that the foregoing is true and correct. Date: August 30, 2013 Signed: Pula W. Render JONES DAY 77 West Wacker Drive, Suite 3500 Chicago, IL 60601-1692 (312) 269-1555 (telephone) (312) 782-8585 (facsimile) Case 1:13-cv-01236-CKK Document 61-2 Filed 08/30/13 Page 1 of 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, v. Civil Action No. 1:13-cv-01236-CKK US AIRWAYS GROUP, INC. 111 W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION 4333 Amon Carter Boulevard Forth Worth, TX 76155 Defendants. [Proposed] ORDER Upon consideration of the Motion of Rosanna McCalips, active member of the Bar of this Court, for the admission pro hac vice of Paula W. Render, and the Declaration of Paula W. Render in support thereof, it is hereby ORDERED: The motion for Admission Pro Hac Vice of Paula W. Render is GRANTED. Ms. Render is hereby admitted to this Court pro hac vice, to represent Defendant AMR Corporation and to appear and participate in proceedings in this Court in the abovecaptioned matter under Local Rule 83.2(d) of the Rules of the United States District Court for the District of Columbia. Dated: ______________________, 2013 ________________________________ HON. COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE Case 1:13-cv-01236-CKK Document 62 Filed 08/30/13 Page 1 of 2 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. ) ______________________________________ ) Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly MOTION FOR ADMISSION OF JAY M. GOFFMAN PRO HAC VICE Pursuant to Local Civil Rule 83.2(d), Movant Gregory B. Craig, an attorney admitted to the Bar of this Court and in good standing, respectfully moves for the admission of Jay M. Goffman pro hac vice as co-counsel for the Official Committee of Unsecured Creditors (the “Statutory Committee”) of AMR Corporation, appearing as amicus curiae in the abovecaptioned matter. As grounds, therefore, Movant states: 1. Movant is a member in good standing of the Bar of this Court and licensed to practice in the District of Columbia (D.C. Bar Number 164640). 2. Mr. Goffman is a member in good standing of the Bar of the State of New York. 3. Mr. Goffman is not currently and has never previously been the subject of any disciplinary action by any bar. Case 1:13-cv-01236-CKK Document 62 Filed 08/30/13 Page 2 of 2 4. The Declaration of Jay M. Goffman in Support of Motion for Admission Pro Hac Vice is being filed herewith in compliance with Local Civil Rule 83.2(d). 5. Pursuant to Local Civil Rule 7(m), counsel for the Statutory Committee has conferred with counsel for the Plaintiff Department of Justice (“DOJ”), Plaintiff States and for the Defendants regarding the filing of this motion. The DOJ and Defendants have consented to this filing, and the Plaintiff States have no objection to the filing. WHEREFORE, Movant requests admission of Jay M. Goffman pro hac vice as counsel for the Statutory Committee. Dated: August 30, 2013 Respectfully submitted, /s/ Gregory B. Craig Gregory B. Craig (D.C. Bar No. 164640) SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 1440 New York Avenue, N.W. Washington, DC 20005-2111 (202) 371-7000 Gregory.Craig@skadden.com Counsel for Official Committee of Unsecured Creditors 2 Case 1:13-cv-01236-CKK Document 62-1 Filed 08/30/13 Page 1 of 2 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ______________________________________ ) ) ) Plaintiffs, ) ) v. ) ) US AIRWAYS GROUP, INC. ) ) and ) ) AMR CORPORATION, ) ) Defendants. ) ______________________________________ ) UNITED STATES OF AMERICA, et. al., Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly DECLARATION OF JAY M. GOFFMAN IN SUPPORT OF MOTION FOR ADMISSION PRO HAC VICE I, Jay M. Goffman, hereby declare: 1. My full name is Jay Michael Goffman, counsel for the Official Committee of Unsecured Creditors (the “Statutory Committee”) of AMR Corporation, appearing as amicus curiae in the above-captioned matter. I am a partner with the law firm of Skadden, Arps, Slate, Meagher & Flom LLP. 2. My office address is 4 Times Square, New York, New York 10036-6522. My office telephone number is (212) 735-2120. 3. I am a member in good standing of the Bar of the State of New York. 4. I certify that there are no pending disciplinary proceedings against me before any bar, and that I have not been disciplined by any bar in the past. Case Document 62-1 Filed 08/30/13 Page 2 of 2 5. I have not been admitted pro hac vice in this Court within the last two years. 6. I do not engage in the practice of law from an of?ce located in the District of Columbia. 7. I am not currently a member of the District of Columbia Bar, and I do not have an application for membership pending. I declare under penalty of petjury under the laws of the United States of America that the foregoing is tme and correct. EXECUTED this 30?h day of August 2013. Goffman Case 1:13-cv-01236-CKK Document 62-2 Filed 08/30/13 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ______________________________________ ) UNITED STATES OF AMERICA, et. al., ) ) Plaintiffs, ) ) v. ) ) Civil Action No. 1:13-cv-01236 (CKK) US AIRWAYS GROUP, INC. ) Judge Colleen Kollar-Kotelly ) and ) ) AMR CORPORATION, ) ) Defendants. ) ______________________________________ ) [PROPOSED] ORDER GRANTING MOTION FOR ADMISSION OF JAY M. GOFFMAN PRO HAC VICE UPON CONSIDERATION of the Motion for Admission of Jay M. Goffman Pro Hac Vice in the above-captioned matter and the Declaration of Jay M. Goffman in support thereof, it is this ___ day of _______________, 2013, hereby: ORDERED that the Motion for Admission of Jay M. Goffman Pro Hac Vice be, and the same hereby is, GRANTED; and it is further ORDERED that Jay M. Goffman be allowed to appear pro hac vice in court proceedings in the above-captioned matter. ___________________________ Colleen Kollar-Kotelly United States District Judge Case 1:13-cv-01236-CKK Document 63 Filed 08/30/13 Page 1 of 4 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, v. Civil Action No. 1:13-cv-01236-CKK US AIRWAYS GROUP, INC. 111 W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION 4333 Amon Carter Boulevard Forth Worth, TX 76155 Defendants. MOTION FOR ADMISSION PRO HAC VICE OF PAULA W. RENDER Pursuant to Local Rule 83.2(d) of the Rules of the United States District Court for the District of Columbia, the undersigned moves for the admission pro hac vice of Paula W. Render to represent Defendant AMR Corporation (“AMR”) and to appear and participate in proceedings in this Court in the above-captioned matter. Ms. Render is a partner of the firm Jones Day, attorneys for AMR in this matter. She is a member in good standing of the State of Illinois, as well as the U.S. Courts of Appeal for the Second, Third, Fifth, Seventh, Eighth, and Tenth Circuit, the U.S. District Court for the Eastern District of Michigan, and the U.S. District Court for the Northern District of Illinois, and has not been subject to disciplinary proceedings as a member of the bar in any jurisdiction, nor are any disciplinary proceedings currently pending against her. Ms. Render is not a member of the Case 1:13-cv-01236-CKK Document 63 Filed 08/30/13 Page 2 of 4 District of Columbia bar. In the past two years, Ms. Render has not been admitted pro hac vice in the United States District Court for the District of Columbia. Respectfully submitted, this the 30th day of August, 2013. /s/ Rosanna McCalips Rosanna K. McCalips (D.C. Bar # 482859) Email: rkmccalips@jonesday.com JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 Tel. (202) 879-3939 Fax (202) 626-1700 Attorney for Defendant AMR Corporation Case 1:13-cv-01236-CKK Document 63 Filed 08/30/13 Page 3 of 4 CERTIFICATE OF SERVICE I hereby certify that on this 30th day of August, 2013, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system, which will send a notice of electronic filing to the counsel of record in this matter who are registered on the CM/ECF system, and that I caused a copy of the foregoing and the notice of electronic filing to be served by email and first class mail to the following non-ECF participants: Nancy M. Bonnell Antitrust Unit Chief Office of the Attorney General 1275 West Washington Phoenix, AZ 85007 (602) 542-7728 (phone) (602) 542-9088 (facsimile) Nancy.bonnell@azag.gov Mark Levy Assistant Attorney General Office of the Attorney General 300 W. 15th Street, 7th Floor Austin, TX 78701 (512) 936-1847 (phone) (512) 320-0975 (facsimile) Mark.Levy@texasattorneygeneral.gov James A. Donahue, III Executive Deputy Attorney General Public Protection Division Office of the Attorney General 14th Floor, Strawberry Square Harrisburg, PA 17120 (717) 787-4530 (phone) (717) 787-1190 (facsimile) jdonahue@attorneygeneral.gov Sarah Oxenham Allen Assistant Attorney General Consumer Protection Section Office of the Attorney General 900 East Main Street Richmond, VA 23219 (804) 786-6557 (phone) (804) 786-0122 (facsimile) SOAllen@oag.state.va.us Victor J. Domen, Jr. Senior Antitrust Counsel Office of the Attorney General 500 Charlotte Avenue Nashville, TN 37202 (615) 532-3327 (phone) (615) 532-6951 (facsimile) Vic.Domen@ag.tn.gov Paul T. Denis Steven G. Bradbury Dechert LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 (phone) (202) 261-3333 (facsimile) paul.denis@dechert.com steven.bradbury@dechert.com Case 1:13-cv-01236-CKK Document 63 Filed 08/30/13 Page 4 of 4 Charles F. Rule Cadwalader, Wichersham & Taft LLP 700 Sixth Street, N.W. Washington, DC 20001 (202) 862-2200 (phone) (202) 862-2400 (facsimile) rick.rule@cwt.com John M. Majoras Michael S. Fried Rosanna K. McCalips Jones Day 51 Louisiana Avenue, N.W. Washington, DC 20001 Dated: August 30, 2013 (202) 879-3939 (phone) (202) 626-1700 (facsimile) jmmajoras@jonesday.com msfried@jonesday.com rkmccalips@jonesday.com Mary Jean Moltenbrey Paul Hastings LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 (phone) (202) 551- 0225 (facsimile) mjmoltenbrey@paulhastings.com /s/ Rosanna McCalips Rosanna K. McCalips Document 63-1 Fil?dbd?O/ls Page10f2 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, er al. Plainti?fs, V- Civil Action No. US AIRWAYS GROUP, INC. 111 W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION 4333 Amon Carter Boulevard Forth Worth, TX 76155 Defendants. DECLARATION OF PAULA W. RENDER IN SUPPORT OF MOTION FOR ADMISSION PRO HAC VICE Pursuant to Local Rule I declare the following: 1. My full name is PAULA W. RENDER. I am a partner of the law ?rm Jones Day, attorneys for AMR Corporation in this matter. I submit this Declaration in support of a motion for leave to appear and practice before this Court in the above-captioned matter. 2. My of?ce address is Jones Day, 77 West Wacker Drive, Suite 3500, Chicago, IL 60601?1692, telephone (312) 269-1555. 3. I have been admitted to and am a member in good standing of the bar of the State of Illinois, as well as the US. Courts of Appeal for the Second, Third, Fifth, Seventh, Eighth, and Tenth Circuit, the US. District Court for the Eastern District of Michigan, and the US. District Court for the Northern District of Illinois. 4. I have not been subject to disciplinary proceedings as a member of the bar in any Case Document 63-1 Filed 08/30/13 Page 2 of 2 jurisdiction, nor are any disciplinary proceedings currently pending against me. 5. In the past two years, I have not been admitted pro hac vice in the United States District Court for the District of Columbia. 6. I am not a member of the District of Columbia Bar. 7. I certify that I am generally familiar with this Court?s Local Rules. I declare under penalty of perjury that the foregoing is true and correct. Date: August 30, 2013 Signed: Pula W. Render JONES DAY 77 West Wacker Drive, Suite 3500 Chicago, IL 60601-1692 (312) 269-1555 (telephone) (312) 782-8585 (facsimile) Case 1:13-cv-01236-CKK Document 63-2 Filed 08/30/13 Page 1 of 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, v. Civil Action No. 1:13-cv-01236-CKK US AIRWAYS GROUP, INC. 111 W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION 4333 Amon Carter Boulevard Forth Worth, TX 76155 Defendants. [Proposed] ORDER Upon consideration of the Motion of Rosanna McCalips, active member of the Bar of this Court, for the admission pro hac vice of Paula W. Render, and the Declaration of Paula W. Render in support thereof, it is hereby ORDERED: The motion for Admission Pro Hac Vice of Paula W. Render is GRANTED. Ms. Render is hereby admitted to this Court pro hac vice, to represent Defendant AMR Corporation and to appear and participate in proceedings in this Court in the abovecaptioned matter under Local Rule 83.2(d) of the Rules of the United States District Court for the District of Columbia. Dated: ______________________, 2013 ________________________________ HON. COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE Case 1:13-cv-01236-CKK Document 64 Filed 08/30/13 Page 1 of 2 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. ) ______________________________________ ) Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly MOTION FOR ADMISSION OF JAMES A. KEYTE PRO HAC VICE Pursuant to Local Civil Rule 83.2(d), Movant Gregory B. Craig, an attorney admitted to the Bar of this Court and in good standing, respectfully moves for the admission of James A. Keyte pro hac vice as co-counsel for the Official Committee of Unsecured Creditors (the “Statutory Committee”) of AMR Corporation, appearing as amicus curiae in the abovecaptioned matter. As grounds, therefore, Movant states: 1. Movant is a member in good standing of the Bar of this Court and licensed to practice in the District of Columbia (D.C. Bar Number 164640). 2. Mr. Keyte is a member in good standing of the Bar of the State of New York. 3. Mr. Keyte is not currently and has never previously been the subject of any disciplinary action by any bar. Case 1:13-cv-01236-CKK Document 64 Filed 08/30/13 Page 2 of 2 4. The Declaration of James A. Keyte in Support of Motion for Admission Pro Hac Vice is being filed herewith in compliance with Local Civil Rule 83.2(d). 5. Pursuant to Local Civil Rule 7(m), counsel for the Statutory Committee has conferred with counsel for the Plaintiff Department of Justice (“DOJ”), Plaintiff States and for the Defendants regarding the filing of this motion. The DOJ and Defendants have consented to this filing, and the Plaintiff States have no objection to the filing. WHEREFORE, Movant requests admission of James A. Keyte pro hac vice as counsel for the Statutory Committee. Dated: August 30, 2013 Respectfully submitted, /s/ Gregory B. Craig Gregory B. Craig (D.C. Bar No. 164640) SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 1440 New York Avenue, N.W. Washington, DC 20005-2111 (202) 371-7000 Gregory.Craig@skadden.com Counsel for Official Committee of Unsecured Creditors 2 Case 1:13-cv-01236-CKK Document 64-1 Filed 08/30/13 Page 1 of 2 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ______________________________________ ) ) ) Plaintiffs, ) ) v. ) ) US AIRWAYS GROUP, INC. ) ) and ) ) AMR CORPORATION, ) ) Defendants. ) ______________________________________ ) UNITED STATES OF AMERICA, et. al., Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly DECLARATION OF JAMES A. KEYTE IN SUPPORT OF MOTION FOR ADMISSION PRO HAC VICE I, James A. Keyte, hereby declare: 1. My full name is James Allen Keyte, counsel for the Official Committee of Unsecured Creditors of AMR Corporation, appearing as amicus curiae in the above-captioned matter. I am a partner with the law firm of Skadden, Arps, Slate, Meagher & Flom LLP. 2. My office address is 4 Times Square, New York, New York 10036-6522. My office telephone number is (212) 735-2583. 3. I am a member in good standing of the Bar of the State of New York. 4. I certify that there are no pending disciplinary proceedings against me before any bar, and that I have not been disciplined by any bar in the past. Case Document 64-1 Filed 08/30/13 Page 2 of 2 5. have been admitted pro hac vice in this Court twice within the last two years. 6. I do not engage in the practice of law from an of?ce located in the District of Columbia. 7. I am not currently a member of the District of Columbia Bar, and I do not have an application for membership pending. I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. EXECUTED this 30?? day of August 2013. iw lulu Jahtes Ai Keyte Case 1:13-cv-01236-CKK Document 64-2 Filed 08/30/13 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ______________________________________ ) UNITED STATES OF AMERICA, et. al., ) ) Plaintiffs, ) ) v. ) ) Civil Action No. 1:13-cv-01236 (CKK) US AIRWAYS GROUP, INC. ) Judge Colleen Kollar-Kotelly ) and ) ) AMR CORPORATION, ) ) Defendants. ) ______________________________________ ) [PROPOSED] ORDER GRANTING MOTION FOR ADMISSION OF JAMES A. KEYTE PRO HAC VICE UPON CONSIDERATION of the Motion for Admission of James A. Keyte Pro Hac Vice in the above-captioned matter and the Declaration of James A. Keyte in support thereof, it is this ___ day of _______________, 2013, hereby: ORDERED that the Motion for Admission of James A. Keyte Pro Hac Vice be, and the same hereby is, GRANTED; and it is further ORDERED that James A. Keyte be allowed to appear pro hac vice in court proceedings in the above-captioned matter. ___________________________ Colleen Kollar-Kotelly United States District Judge Case 1:13-cv-01236-CKK Document 65 Filed 08/30/13 Page 1 of 2 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. ) ______________________________________ ) Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly MOTION FOR ADMISSION OF KENNETH B. SCHWARTZ PRO HAC VICE Pursuant to Local Civil Rule 83.2(d), Movant Gregory B. Craig, an attorney admitted to the Bar of this Court and in good standing, respectfully moves for the admission of Kenneth B. Schwartz pro hac vice as co-counsel for the Official Committee of Unsecured Creditors (the “Statutory Committee”) of AMR Corporation, appearing as amicus curiae in the abovecaptioned matter. As grounds, therefore, Movant states: 1. Movant is a member in good standing of the Bar of this Court and licensed to practice in the District of Columbia (D.C. Bar Number 164640). 2. Mr. Schwartz is a member in good standing of the Bar of the State of New York. 3. Mr. Schwartz is not currently and has never previously been the subject of any disciplinary action by any bar. Case 1:13-cv-01236-CKK Document 65 Filed 08/30/13 Page 2 of 2 4. The Declaration of Kenneth B. Schwartz in Support of Motion for Admission Pro Hac Vice is being filed herewith in compliance with Local Civil Rule 83.2(d). 5. Pursuant to Local Civil Rule 7(m), counsel for the Statutory Committee has conferred with counsel for the Plaintiff Department of Justice (“DOJ”), Plaintiff States and for the Defendants regarding the filing of this motion. The DOJ and Defendants have consented to this filing, and the Plaintiff States have no objection to the filing. WHEREFORE, Movant requests admission of Kenneth B. Schwartz pro hac vice as counsel for the Statutory Committee. Dated: August 30, 2013 Respectfully submitted, /s/ Gregory B. Craig Gregory B. Craig (D.C. Bar No. 164640) SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 1440 New York Avenue, N.W. Washington, DC 20005-2111 (202) 371-7000 Gregory.Craig@skadden.com Counsel for Official Committee of Unsecured Creditors 2 Case 1:13-cv-01236-CKK Document 65-1 Filed 08/30/13 Page 1 of 2 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ______________________________________ ) ) ) Plaintiffs, ) ) v. ) ) US AIRWAYS GROUP, INC. ) ) and ) ) AMR CORPORATION, ) ) Defendants. ) ______________________________________ ) UNITED STATES OF AMERICA, et. al., Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly DECLARATION OF KENNETH B. SCHWARTZ IN SUPPORT OF MOTION FOR ADMISSION PRO HAC VICE I, Kenneth B. Schwartz, hereby declare: 1. My full name is Kenneth Bryan Schwartz, counsel for the Official Committee of Unsecured Creditors (the “Statutory Committee”) of AMR Corporation, appearing as amicus curiae in the above-captioned matter. I am a counsel with the law firm of Skadden, Arps, Slate, Meagher & Flom LLP. 2. My office address is 4 Times Square, New York, New York 10036-6522. My office telephone number is (212) 735-2731. 3. I am a member in good standing of the Bar of the State of New York. 4. I certify that there are no pending disciplinary proceedings against me before any bar, and that I have not been disciplined by any bar in the past. Case Document 65-1 Filed 08/30/13 Page 2 of 2 5. I have not been admitted pro hac vice to this Court within the last two years. 6. I do not engage in the practice of law from an of?ce located in the District of Columbia. 7. I am not Currently a member of the District of Columbia Bar, and I do not have an application for membership pending. I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. EXECUTED this 301h day of August 2013. K?tneth?lit. Schwar? Nu. Case 1:13-cv-01236-CKK Document 65-2 Filed 08/30/13 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ______________________________________ ) UNITED STATES OF AMERICA, et. al., ) ) Plaintiffs, ) ) v. ) ) Civil Action No. 1:13-cv-01236 (CKK) US AIRWAYS GROUP, INC. ) Judge Colleen Kollar-Kotelly ) and ) ) AMR CORPORATION, ) ) Defendants. ) ______________________________________ ) [PROPOSED] ORDER GRANTING MOTION FOR ADMISSION OF KENNETH B. SCHWARTZ PRO HAC VICE UPON CONSIDERATION of the Motion for Admission of Kenneth B. Schwartz Pro Hac Vice in the above-captioned matter and the Declaration of Kenneth B. Schwartz in support thereof, it is this ___ day of _______________, 2013, hereby: ORDERED that the Motion for Admission of Kenneth B. Schwartz Pro Hac Vice be, and the same hereby is, GRANTED; and it is further ORDERED that Kenneth B. Schwartz be allowed to appear pro hac vice in court proceedings in the above-captioned matter. ___________________________ Colleen Kollar-Kotelly United States District Judge Case Document 66 Filed 09/04/13 Page 1 of 1 A0 458 (Rev. 06109) Appearance of Counsel UNITED STATES DISTRICT COURT for the I District of Columbia United States of America. at al. Plaintiff V. US Airwavs Grout). 1110., et at." De?mdant Case No. APPEARANCE OF COUNSEL To: The clerk of court and all parties of record I am admitted or otherwise authorized to practice in this court, and 1 appear in this case as counsel for: Plaintiff Commonwealth of Date: 0910312013 Attorney ?3 Sigrramre James A. Donahue. Ill Printed name and bar number Office of the Attorney General of the Commonwealth of 14th Floor, Strawberry Square Harrisburq. PA 17120 Address E-mai! address (717) 787-4530 Telephone number 787-1190 FAX number Case 1:13-cv-01236-CKK Document 67 Filed 09/04/13 Page 1 of 4 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, v. Case No. 1:13-cv-01236 (CKK) US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants. NOTICE OF LODGING OF PROPOSED SCHEDULING AND CASE MANAGEMENT ORDER Plaintiffs, the United States and the Plaintiff States, and Defendants, US Airways Group, Inc. and AMR Corporation, hereby jointly lodge the proposed Scheduling and Case Management Order attached hereto as Exhibit One. As set forth in the parties’ Joint Report, the parties dispute the number of depositions of fact witnesses that should be allowed to each side of this litigation. Accordingly, the parties have left the number of depositions of fact witnesses in paragraph 6.F blank. The parties respectfully request the Court insert the number of depositions of fact witnesses that the Court decides is appropriate before approving the order. The parties will submit an electronic Word version to the Court. Case 1:13-cv-01236-CKK Document 67 Filed 09/04/13 Page 2 of 4 Dated: September 4, 2013 Respectfully submitted, Attorneys for Defendant US Airways Group, Inc. Attorneys for Defendant AMR Corporation /s/ Richard G. Parker Richard G. Parker (DC Bar #327544) Henry Thumann (DC Bar #474499) Courtney Dyer (DC Bar #490805) O’MELVENY & MYERS LLP 1625 Eye Street, N.W. Washington, D.C. 20006 (202) 383-5300 (Phone) (202) 383-5414 (Facsimile) rparker@omm.com hthumann@omm.com cdyer@omm.com /s/ John M. Majoras John M. Majoras (DC Bar #474267) Paula W. Render (Pro Hac app. pending) Michael S. Fried (DC Bar #458357) Rosanna K. McCalips (DC Bar #482859) JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (Phone) (202) 626-1700 (Facsimile) jmmajoras@jonesday.com msfried@jonesday.com rkmccalips@jonesday.com Kenneth R. O’Rourke (Admitted Pro Hac Vice) O’MELVENY & MYERS LLP 400 South Hope Street Los Angeles, CA 90071 (213) 430-6000 (Phone) (213) 430-6407 (Facsimile) korourke@omm.com Mary Jean Moltenbrey (DC Bar #481127) PAUL HASTINGS LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 (Phone) (202) 551- 0225 (Facsimile) mjmoltenbrey@paulhastings.com Paul T. Denis (DC Bar #437040) Steven G. Bradbury (DC Bar #416430) DECHERT LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 (Phone) (202) 261-3333 (Facsimile) paul.denis@dechert.com steven.bradbury@dechert.com Charles F. Rule (DC Bar #370818) CADWALADER, WICKERSHAM & TAFT LLP 700 Sixth Street, N.W. Washington, DC 20001 (202) 862-2200 (Phone) (202) 862-2400 (Facsimile) rick.rule@cwt.com -2- Case 1:13-cv-01236-CKK Document 67 Filed 09/04/13 Page 3 of 4 FOR THE UNITED STATES FOR THE STATE OF ARIZONA /s/ Ryan Danks Ryan J. Danks Antitrust Division U.S. Department of Justice 450 Fifth Street Northwest, Suite 8000 Washington, DC 20530 Telephone: (202) 305-0128 Facsimile: : (202) 514-6525 E-mail: ryan.danks@usdoj.gov /s/ Nancy Bonnell Nancy M. Bonnell Antitrust Unit Chief Arizona Bar No. 016382 1275 West Washington Phoenix, Arizona 85007 Telephone: 602-542-7728 Facsimile: 602-542-9088 Email: nancy.bonnell@azag.gov FOR THE DISTRICT OF COLUMBIA FOR THE STATE OF FLORIDA /s/ Bennett Rushkoff Bennett Rushkoff (D.C. Bar # 386925) Chief, Public Advocacy Section /s/ Lizabeth A. Brady Lizabeth A. Brady Chief, Multistate Antitrust Enforcement Christopher Hunt Associate Attorney General PL-01, The Capitol Tallahassee, Florida 32399-1050 Telephone: 850-414-3300 Facsimile: 850-488-9134 /s/ Nicholas A. Bush Nicholas A. Bush (D.C. Bar # 1011001) Assistant Attorney General Office of the Attorney General 441 Fourth Street, N.W., Suite 600-S Washington, DC 20001 Telephone: 202-442-9841 Facsimile: 202- 715-7720 E-mail: nicholas.bush@dc.gov FOR THE STATE OF TEXAS FOR THE COMMONWEALTH OF PENNSYLVANIA /s/ Mark A. Levy Mark A. Levy Kayna Stavast-Piper Assistant Attorney General Texas Bar No. 24014555 Office of the Attorney General of Texas 300 W. 15th Street, 7th Floor Austin, Texas 78701 Telephone: 512-936-1847 Facsimile: 512-320-0975 Email:mark.levy@texasattorneygeneral.com /s/ James A. Donahue III James A. Donahue, III Executive Deputy Attorney General PA Bar No. 42624 Jennifer A. Thomson Deputy Attorney General Public Protection Division 14th Floor, Strawberry Square Harrisburg, PA 17120 Telephone: 717-787-4530 Facsimile: 717-787-1190 Email: jdonahue@attorneygeneral.gov -3- Case 1:13-cv-01236-CKK Document 67 Filed 09/04/13 Page 4 of 4 FOR THE COMMONWEALTH OF VIRGINIA FOR THE STATE OF TENNESSEE /s/ Sarah Oxenham Allen Sarah Oxenham Allen (Va. Bar # 33217) Matthew R. Hull (Va. Bar # 80500) Assistant Attorneys General Office of the Attorney General Consumer Protection Section 900 East Main Street Richmond, VA 23219 Telephone: 804-786-6557 Facsimile: 804 786-0122 Email: SOAllen@oag.state.va.us /s/ Victor J. Domen, Jr. Victor J. Domen, Jr. Senior Antitrust Counsel Tennessee Bar No. 015803 500 Charlotte Avenue Nashville, TN 37202 Telephone: 615-253-3327 Facsimile: 615-532-6951 Email: Vic.Domen@ag.tn.gov -4- Case Document 67-1 Filed 09/04/13 Page 1 of 12 Exhibit One Case 1:13-cv-01236-CKK Document 67-1 Filed 09/04/13 Page 2 of 12 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, v. Case No. 1:13-01236-CKK US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants. [PROPOSED] SCHEDULING AND CASE-MANAGEMENT ORDER In accordance with Fed. R. Civ. P. 16(b) and LCvR 16.4 and upon agreement of the parties, the Court ORDERS as follows: Pretrial Schedule: Event Deadline (All dates 2013) Amended Complaint to be filed September 6 Responses to Complaint due September 10 Exchange Preliminary Witness Lists September 30 Status Hearing October 1 (Parties’ joint submission due September 30, noon) Close of Fact Discovery October 25 1 Case 1:13-cv-01236-CKK Document 67-1 Filed 09/04/13 Page 3 of 12 Event Deadline (All dates 2013) Plaintiffs’ Expert Disclosures October 25 Final Deadline for Requests for Admissions to be served October 30 Defendants’ Expert Disclosures November 8 Supplemental and/or Rebuttal Expert Reports November 15 Close of Expert Discovery November 20 First day of trial November 25 Other Provisions: 1. Service of the Complaint. In this action, counsel for Defendants, acting on behalf of Defendants, have accepted service of the Complaint and have waived formal service of a summons. 2. Discovery Conference. The parties’ prior consultations and submission of this stipulated Order relieve the parties of their duty under Fed. R. Civ. P. 26(f) and the Local Rules to confer further about scheduling and a discovery plan. 3. Completion of Transaction. Defendants have agreed that they will not consummate or otherwise complete their planned merger until seven days after this Court enters a final and appealable order from the trial commencing November 25, 2013. 4. Appointment of Special Master. The parties agree to the appointment of the Honorable Richard A. Levie (ret.) to serve as Special Master to oversee discovery in this action. The Court will issue a separate Order outlining the scope of his responsibilities and authority. 2 Case 1:13-cv-01236-CKK Document 67-1 Filed 09/04/13 Page 4 of 12 5. Initial Disclosures. In light of Defendants’ prior submissions to the DOJ, Defendants fulfill all obligations with respect to initial disclosures by providing the information required under Fed. R. Civ. P. 26(a)(1)(A)(i). Plaintiffs too will provide the information required under Fed. R. Civ. P. 26(a)(1)(A)(i) and further agree to satisfy their obligations under Fed. R. Civ. P. 26(a)(1)(A)(ii) by producing to the Defendants by August 30, 2013, all civil investigative demands issued to non-parties during the course of Plaintiffs’ investigation into Defendants’ proposed merger, and producing all documents obtained from non-parties pursuant to those demands - as soon as practical under applicable law and court orders. This Paragraph does not require the production of any party’s attorney work product, factual information learned in nonparty interviews, confidential attorney-client communications, communications with or information provided to any potentially or actually retained expert, or materials subject to the deliberative-process privilege, or any other privilege. The parties shall complete initial disclosures under Fed. R. Civ. P. 26(a)(1)(A)(i) on September 10, 2013, and shall complete initial disclosures under Fed. R. Civ. P. 26(a)(1)(A)(ii) on September 12, 2013, or as otherwise permitted by court order. 6. Discovery. A. Interrogatories: Plaintiffs (collectively) shall be permitted to propound up to 10 interrogatories (including subparts) to each Defendant. Defendants (collectively) shall be permitted to propound up to 15 interrogatories (including subparts) to Plaintiffs collectively. B. Requests for Admission: Plaintiffs (collectively) shall be permitted to serve up to 15 requests for admission on Defendants. Defendants (collectively) shall be permitted to serve the same number on Plaintiffs. 3 Case 1:13-cv-01236-CKK Document 67-1 Filed 09/04/13 Page 5 of 12 C. Written Responses: The parties have agreed to respond in writing to written discovery requests served upon one another within 20 days of service, not 30 as contemplated by the Fed. R. Civ. P. The parties agree they will produce documents 20 days after service of a document request. If a party believes a particular request is so broad or burdensome that it cannot complete production in 20 days, it shall begin producing documents in 20 days, meet and confer, and, if necessary, seek relief from the Special Master. Both parties agree to produce documents on a rolling basis where feasible. D. Authenticity / Admissibility: The parties shall meet and confer in good faith regarding the authentication or admissibility of documents, data, or other evidence. E. Data Compilations: In response to any requests for data or data compilations, the parties shall meet and confer in good faith and, if appropriate, make employees knowledgeable about the content, storage, and production of data available for informal consultations during a meet-and-confer process. To the extent that either party needs such information for evidentiary purposes, that party shall serve formal process. The informal consultations contemplated by this provision shall not constitute admissible evidence. F. Depositions of Fact Witnesses: Plaintiffs (collectively) shall be entitled to notice up to ____ depositions. Defendants (collectively) shall be permitted to notice up to the same number. A notice of a deposition of a party to be taken pursuant to Fed. R. Civ. P. 30(b)(6) shall be limited to a reasonable and related set of issues on a single topic, and shall count as one deposition regardless of the number of witnesses produced to testify. Party witnesses shall be made available for deposition upon seven days’ notice. Party witnesses must be made available on the date the deposition is noticed or on a date within three 4 Case 1:13-cv-01236-CKK Document 67-1 Filed 09/04/13 Page 6 of 12 business days of the date noticed absent agreement of the parties or relief from the Special Master. Plaintiffs may further depose party witnesses whose investigative depositions were taken during the Investigation, and the mere fact that such individuals’ depositions were taken during the investigation may not be used as a basis to object to their deposition during the litigation. During non-party depositions, the non-noticing party shall receive at least two hours of examination time. If the non-party deposition is noticed by both parties then time shall be divided equally. If a party serves on a non-party a subpoena for the production of documents or electronically stored information and a subpoena commanding attendance at a deposition, the scheduled deposition date must be at least 7 days after the original return date for the document subpoena absent good cause shown. 7. Nationwide Service of Trial Subpoenas. To assist the parties in planning discovery, and in view of the geographic dispersion of potential witnesses in this action outside this District, the parties shall be permitted, pursuant to 15 U.S.C. § 23, to issue trial subpoenas that may run into any other federal district requiring witnesses to attend this Court. The availability of nationwide service of process, however, does not make a witness who is otherwise “unavailable” for purposes of Fed. R. Civ. P. 32 and Fed. R. Evid. 804 available under those rules. 8. Discovery of Confidential Information. Discovery and production of confidential information shall be governed by the Stipulated Protective Order Concerning Confidentiality, entered by the Court on August 30, 2013, and a copy of the Order shall be included with any discovery requests, notices, or subpoenas directed to non-parties. 5 Case 1:13-cv-01236-CKK Document 67-1 Filed 09/04/13 Page 7 of 12 9. Preliminary Trial Witness Lists. The parties shall exchange preliminary trial witness lists. These lists are non-binding and are meant to assist the parties to timely complete discovery. 10. Expert Witness Disclosures and Depositions. Expert disclosures shall be governed by Fed. R. Civ. P. 26, except as modified by this Order. Expert disclosures, including each party’s expert reports, shall comply with the requirements of Fed. R. Civ. P. 26(a)(2), except that neither side must preserve or disclose the following documents or materials: a. any form of oral or written communication, correspondence, or work product shared between any of the parties’ counsel and their expert(s), between testifying and non-testifying experts, between non-testifying experts, or between testifying experts; b. any form of oral or written communication, correspondence, or work product shared between an expert(s) and persons assisting the expert; c. expert’s notes, except to the extent that the notes reflect facts or assumptions relied upon by the expert in the opinions contained in his or her final report; d. drafts of expert reports, analyses, or other work product; or e. data formulations, data runs, data analyses, or any database-related operations not relied upon by the expert in the opinions contained in his or her final report. The parties shall disclose the following materials with all expert reports: a. list by Bates number of all documents relied on by the testifying expert(s); and, except for documents or materials exempted from disclosure by subsections a.-e. in the preceding paragraph, copies of any materials relied on by the testifying expert(s) that were not previously produced and are not readily available publicly; and b. for any calculations appearing in the report, all data and programs underlying the calculation, including all programs and codes necessary to recreate the calculation from the initial (“raw”) data files, and any intermediate files. Depositions of each side’s experts may be conducted after the disclosure of all expert reports and materials and must be completed by the close of expert discovery. 6 Case 1:13-cv-01236-CKK Document 67-1 Filed 09/04/13 Page 8 of 12 11. Service of Pleadings and Discovery on Other Parties. Service of all pleadings, discovery requests, including Rule 45 subpoenas for testimony or documents, and delivery of all correspondence in this matter shall be made by email, except when the volume of attachments requires overnight delivery of the attachments or personal delivery, in which case service shall be made to the following individuals designated by the parties (including principal designees) for each side noted below: For Plaintiff United States of America: Ryan Danks Kate Mitchell-Tombras Patrick Hallagan Department of Justice Antitrust Division Transportation, Energy, and Agricultural Section 450 5th Street Northwest, Suite 8000 Washington, DC 20530 ryan.danks@usdoj.gov katharine.mitchell@usdoj.gov f.patrick.hallagan@usdoj.gov Ph. (202) 305-0128 (Mr. Danks) For Plaintiff States: Mark Levy Assistant Attorney General Office of the Attorney General of Texas 300 W. 15th Street, 7th Floor Austin, Texas 78701 mark.levy@texasattorneygeneral.gov Ph: (512) 936-1847 7 Case 1:13-cv-01236-CKK Document 67-1 Filed 09/04/13 Page 9 of 12 For Defendant US Airways Group, Inc.: Kenneth R. O’Rourke Robert M. Swerdlow Courtney Dyer O’MELVENY & MYERS LLP 1625 Eye Street, N.W. Washington, D.C. 20006 korourke@omm.com rswerdlow@omm.com cdyer@omm.com Ph. (202) 383-5215 (Ms. Dyer) For Defendant AMR Corporation: John M. Majoras Rosanna K. McCalips JONES DAY 51 Louisiana Ave. NW Washington D.C. 20001 jmmajoras@JonesDay.com rkmccalips@JonesDay.com Ph. (202) 879-3898 (Ms. McCalips) For purposes of calculating discovery response times under the Federal Rules, electronic delivery at the time the email was received shall be treated in the same manner as hand delivery at that time. However, for any service other than service of court filings, email service that is delivered after 6:00 pm Eastern Time shall be treated as if it was served the following business day. Any productions made by parties to other parties shall be made pursuant to the formats used for productions in response to the Plaintiff United States’ Requests for Additional Information issued on March 4, 2013, except for non-party material obtained in response to subpoenas, which shall be treated as described below. A party serving a subpoena on a nonparty for the production of documents, including electronically stored information, need not provide advance notice of the subpoena to the other parties. 8 Case 1:13-cv-01236-CKK Document 67-1 Filed 09/04/13 Page 10 of 12 Each side shall copy and produce materials obtained in discovery, in the format they were received, from any non-party to the other side, within three business days after receipt by the party initiating the discovery request; except that if a non-party produces documents or electronic information that are not Bates-stamped, the party receiving the documents may Bates-stamp them before producing a copy to other parties, and shall produce the documents or electronic information in a timeframe appropriate to the volume and complexity of the files received. Service of materials too voluminous to be emailed shall be delivered to Plaintiffs: Ryan Danks Trial Attorney United States Department of Justice 450 Fifth Street Northwest, Suite 8000 Washington, DC 20530 (20001 for courier and overnight deliveries) Ph: (202) 305-0128 with a duplicate copy to: Mark Levy Assistant Attorney General Office of the Attorney General of Texas 300 W. 15th Street, 7th Floor Austin, Texas 78701 Ph: (512) 936-1847 Service of materials too voluminous to be emailed shall be delivered to Defendants: For Defendant US Airways Group, Inc.: Kenneth R. O’Rourke Robert M. Swerdlow Courtney Dyer O’MELVENY & MYERS LLP 1625 Eye Street, N.W. Washington, D.C. 20006 korourke@omm.com rswerdlow@omm.com cdyer@omm.com Ph. (202) 383-5215 (Ms. Dyer) 9 Case 1:13-cv-01236-CKK Document 67-1 Filed 09/04/13 Page 11 of 12 For Defendant AMR Corporation: John M. Majoras Rosanna K. McCalips JONES DAY 51 Louisiana Ave. NW Washington D.C. 20001 jmmajoras@JonesDay.com rkmccalips@JonesDay.com Ph. (202) 879-3898 (Ms. McCalips) or by alternative arrangement. 12. Pre-Trial Order and Exhibit Lists. On or before October 25, 2013, the parties shall negotiate the timing, method, and manner of the exchange of exhibit lists and objections and deposition designations, objections and counter-designations, and objections and countercounter designations. 13. Evidentiary Presumptions. Documents produced by nonparties from their own files shall be presumed to be authentic within the meaning of Fed. R. Evid. 901. Any good faith objection to a document’s authenticity must be provided at the same time as other objections to intended trial exhibits. If the opposing side serves a specific good-faith written objection to the document’s authenticity, the above presumption will no longer apply to that document and the parties will promptly meet and confer to attempt to resolve any objection. Any objections that are not resolved through this means or the discovery process will be resolved by the Court. 14. Demonstrative exhibits. Demonstrative exhibits, other than those to be used by experts, do not need to be included on exhibit lists, but unless otherwise agreed or ordered, need to be provided to trial counsel for the parties at least 24 hours before any such exhibit may be 10 Case 1:13-cv-01236-CKK Document 67-1 Filed 09/04/13 Page 12 of 12 introduced, or otherwise used, at trial. However, (1) text-only handouts and PowerPoint slides and (2) demonstratives created in court need not be pre-disclosed to the opposing party. 15. Modification of Scheduling and Case Management Order. Any party may seek modification of this Order for good cause. IT IS SO ORDERED. __________________________________ UNITED STATES DISTRICT JUDGE DATED: September _____, 2013 11 Case 1:13-cv-01236-CKK Document 68 Filed 09/04/13 Page 1 of 4 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, v. Case No. 1:13-cv-01236 (CKK) US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants. NOTICE OF LODGING OF PROPOSED ORDER APPOINTING SPECIAL MASTER Plaintiffs, the United States and the Plaintiff States, and Defendants, US Airways Group, Inc. and AMR Corporation, hereby jointly lodge the proposed Order Appointing Special Master attached hereto as Exhibit One. The parties will submit an electronic Word version to the Court. Case 1:13-cv-01236-CKK Document 68 Filed 09/04/13 Page 2 of 4 Dated: September 3, 2013 Respectfully submitted, Attorneys for Defendant US Airways Group, Inc. Attorneys for Defendant AMR Corporation /s/ Richard G. Parker Richard G. Parker (DC Bar #327544) Henry Thumann (DC Bar #474499) Courtney Dyer (DC Bar #490805) O’MELVENY & MYERS LLP 1625 Eye Street, N.W. Washington, D.C. 20006 (202) 383-5300 (Phone) (202) 383-5414 (Facsimile) rparker@omm.com hthumann@omm.com cdyer@omm.com /s/ John M. Majoras John M. Majoras (DC Bar #474267) Paul W. Render (Pro. Hac. app. pending) Michael S. Fried (DC Bar #458357) Rosanna K. McCalips (DC Bar #482859) JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (Phone) (202) 626-1700 (Facsimile) jmmajoras@jonesday.com msfried@jonesday.com rkmccalips@jonesday.com Kenneth R. O’Rourke (Admitted Pro Hac Vice) O’MELVENY & MYERS LLP 400 South Hope Street Los Angeles, CA 90071 (213) 430-6000 (Phone) (213) 430-6407 (Facsimile) korourke@omm.com Mary Jean Moltenbrey (DC Bar #481127) PAUL HASTINGS LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 (Phone) (202) 551- 0225 (Facsimile) mjmoltenbrey@paulhastings.com Paul T. Denis (DC Bar #437040) Steven G. Bradbury (DC Bar #416430) DECHERT LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 (Phone) (202) 261-3333 (Facsimile) paul.denis@dechert.com steven.bradbury@dechert.com Charles F. Rule (DC Bar #370818) CADWALADER, WICKERSHAM & TAFT LLP 700 Sixth Street, N.W. Washington, DC 20001 (202) 862-2200 (Phone) (202) 862-2400 (Facsimile) rick.rule@cwt.com -2- Case 1:13-cv-01236-CKK Document 68 Filed 09/04/13 Page 3 of 4 FOR THE UNITED STATES FOR THE STATE OF ARIZONA /s/ Ryan Danks Ryan J. Danks Antitrust Division U.S. Department of Justice 450 Fifth Street Northwest, Suite 8000 Washington, DC 20530 Telephone: (202) 305-0128 Facsimile: : (202) 514-6525 E-mail: ryan.danks@usdoj.gov /s/ Nancy Bonnell Nancy M. Bonnell Antitrust Unit Chief Arizona Bar No. 016382 1275 West Washington Phoenix, Arizona 85007 Telephone: 602-542-7728 Facsimile: 602-542-9088 Email: nancy.bonnell@azag.gov FOR THE DISTRICT OF COLUMBIA FOR THE STATE OF FLORIDA /s/ Bennett Rushkoff Bennett Rushkoff (D.C. Bar # 386925) Chief, Public Advocacy Section /s/ Lizabeth A. Brady Lizabeth A. Brady Chief, Multistate Antitrust Enforcement Christopher Hunt Associate Attorney General PL-01, The Capitol Tallahassee, Florida 32399-1050 Telephone: 850-414-3300 Facsimile: 850-488-9134 /s/ Nicholas A. Bush Nicholas A. Bush (D.C. Bar # 1011001) Assistant Attorney General Office of the Attorney General 441 Fourth Street, N.W., Suite 600-S Washington, DC 20001 Telephone: 202-442-9841 Facsimile: 202- 715-7720 E-mail: nicholas.bush@dc.gov FOR THE STATE OF TEXAS FOR THE COMMONWEALTH OF PENNSYLVANIA /s/ Mark A. Levy Mark A. Levy Kayna Stavast-Piper Assistant Attorney General Texas Bar No. 24014555 Office of the Attorney General of Texas 300 W. 15th Street, 7th Floor Austin, Texas 78701 Telephone: 512-936-1847 Facsimile: 512-320-0975 Email:mark.levy@texasattorneygeneral.com /s/ James A. Donahue III James A. Donahue, III Executive Deputy Attorney General PA Bar No. 42624 Jennifer A. Thomson Deputy Attorney General Public Protection Division 14th Floor, Strawberry Square Harrisburg, PA 17120 Telephone: 717-787-4530 Facsimile: 717-787-1190 Email: jdonahue@attorneygeneral.gov -3- Case 1:13-cv-01236-CKK Document 68 Filed 09/04/13 Page 4 of 4 FOR THE COMMONWEALTH OF VIRGINIA FOR THE STATE OF TENNESSEE /s/ Sarah Oxenham Allen Sarah Oxenham Allen (Va. Bar # 33217) Matthew R. Hull (Va. Bar # 80500) Assistant Attorneys General Office of the Attorney General Consumer Protection Section 900 East Main Street Richmond, VA 23219 Telephone: 804-786-6557 Facsimile: 804 786-0122 Email: SOAllen@oag.state.va.us /s/ Victor J. Domen, Jr. Victor J. Domen, Jr. Senior Antitrust Counsel Tennessee Bar No. 015803 500 Charlotte Avenue Nashville, TN 37202 Telephone: 615-253-3327 Facsimile: 615-532-6951 Email: Vic.Domen@ag.tn.gov -4- Case Document 68-1 Filed 09/04/13 Page 1 of 5 Exhibit One Case 1:13-cv-01236-CKK Document 68-1 Filed 09/04/13 Page 2 of 5 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, Case No. 1:13-cv-01236 (CKK) v. US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants. ORDER APPOINTING SPECIAL MASTER Upon consideration of the representations of counsel for the plaintiffs and defendants,1 the applicable case law, the record herein, and with the consent of all parties, it is this 4th day of September, 2013, hereby ORDERED that: 1. The Hon. Richard A. Levie (Ret.) (“Special Master”) shall be appointed pursuant to Rule 53 of the Federal Rules of Civil Procedure as Special Master in this action for the purpose of considering matters referred to him as described in Paragraph 2 below. The Special Master shall have the rights, powers, and duties provided in Rule 53 and may adopt such procedures as are not inconsistent with that Rule or with this or other Orders of the Court. 1 The parties to this action are defined as: the United States of America, the State of Arizona, the District of Columbia, the State of Florida, the Commonwealth of Pennsylvania, the State of Tennessee, the State of Texas, and the Commonwealth of Virginia, US Airways Group, Inc. and AMR Corporation. Any additional parties who are permitted to join this lawsuit will be subject to this Order, including responsibility for proportional sharing of costs, unless the Court permits, upon motion, the party to opt out. Case 1:13-cv-01236-CKK Document 68-1 Filed 09/04/13 Page 3 of 5 2. Scope of Reference: The following matters are referred to the Special Master for him to consider and rule upon: All disputes or matters relating to discovery in the above-captioned case, including but not limited to claims of privilege, motions to compel, motions for protective order, scheduling, e-discovery, and expert discovery. 3. Discovery Motions: Motions by any party or nonparty subject to discovery shall be filed with the Special Master following a substantive meet and confer. Responses must be filed within 48 hours after e-mail service on opposing counsel and the Special Master, except that responses to motions filed on Fridays or, Saturdays by 5:00 p.m., shall be due by 5 p.m. eastern on Monday. Each side shall have a maximum of 750 words per issue2 for moving and opposing submissions. Replies shall be limited to 250 words per issue and shall be served no later than 24 hours after receipt of the opposition. Plaintiffs and Defendants may each choose up to three issues during the course of this litigation as to which each side shall have 2,500 words, with the reply limited to 1,000 words. Service shall be by e-mail and in Word format, with two hard copies (including copies of all cases and other cited materials) delivered to the Special Master by either hand or overnight delivery. All papers filed for consideration by the Special Master shall also be filed with the Clerk, subject to the Stipulated Protective Order Concerning Confidentiality or any superseding Order. 4. In light of the expedited schedule for trial of this matter, the Special Master shall in his discretion rule on the papers or hear argument in person or by teleconference. Any party seeking a hearing on any motion shall set forth in the motion or the opposition the reasons why argument is necessary. Movants and Respondents shall make counsel available for any hearing or 2 For the purposes of this Order, word limits include the text in related footnotes or endnotes. -2- Case 1:13-cv-01236-CKK Document 68-1 Filed 09/04/13 Page 4 of 5 teleconference scheduled by the Special Master. The Special Master shall file with the Clerk copies of all written orders, subject to the Protective Order or any superseding Order. Consistent with the Special Master’s schedule, it is anticipated that rulings will be made within 3 or 4 days of either the completion of briefing on a motion or oral argument. 5. The rulings of the Special Master on matters referred to him under paragraph 2 shall be final unless the Special Master certifies the ruling for appeal to this Court. Any party or nonparty seeking certification shall submit its reasons, in a writing of no more than 250 words per issue and within 24 hours of the ruling for which certification is sought. Any party or nonparty opposing certification may also submit a writing of no more than 250 words per issue within 24 hours of the certification request. Upon notice of certification by the Special Master, the party or nonparty seeking to appeal shall within 48 hours file a brief of no more than 2,000 words per issue, except upon good cause shown. Responses of similar length shall be filed within 48 hours, except that responses to appeals filed on Fridays, or Saturdays by 5:00 p.m., shall be due by 5 p.m. eastern on Monday. The Special Master shall certify any order denying any claim of privilege if a party requests him to do so and, as such, the denial of any claim of privilege may be appealed, as of right, to the District Court. 6. The Special Master may communicate ex parte with the Court on matters of procedure, but shall not otherwise engage in ex parte discussions. 7. Compensation at rates mutually agreeable to the Special Master and the parties shall be paid to the Special Master on a monthly basis by the parties, together with reimbursement for reasonable expenses incurred including the cost of the Special Master’s law clerk(s). Plaintiffs will be jointly responsible for paying one-half of the fees and expenses described herein; -3- Case 1:13-cv-01236-CKK Document 68-1 Filed 09/04/13 Page 5 of 5 Defendants will be jointly responsible for paying the other half of the fees and expenses described herein. 8. The parties shall have weekly in-person or telephonic conferences with the Special Master beginning no later than Tuesday, September 10, at 8:30 a.m. eastern and continuing thereafter every week on Tuesday at 8:30 a.m. eastern, or as otherwise scheduled by the Special Master. Counsel with authority as to the matters on the agenda for the conference shall participate in every conference. Copies served upon: ________________________ Hon. Colleen Kollar-Kotelly United States District Judge Hon. Richard A. Levie (Ret.) Electronic Service List -4- Case 1:13-cv-01236-CKK Document 69 Filed 09/04/13 Page 1 of 4 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, Civil Action No. 13-1236 v. US AIRWAYS GROUP, INC., et al., Defendants. ORDER APPOINTING SPECIAL MASTER (September 4, 2013) Upon consideration of the representations of counsel for the Plaintiffs and Defendants,1 the applicable case law, the record herein, and with the consent of all parties, it is this 4th day of September, 2013, hereby ORDERED that: 1. The Hon. Richard A. Levie (Ret.) (“Special Master”) shall be appointed pursuant to Rule 53 of the Federal Rules of Civil Procedure as Special Master in this action for the purpose of considering matters referred to him as described in Paragraph 2 below. The Special Master shall have the rights, powers, and duties provided in Rule 53 and may adopt such procedures as are not inconsistent with that Rule or with this or other Orders of the Court. 1 The parties to this action are defined as: the United States of America, the State of Arizona, the District of Columbia, the State of Florida, the Commonwealth of Pennsylvania, the State of Tennessee, the State of Texas, and the Commonwealth of Virginia, US Airways Group, Inc. and AMR Corporation. Any additional parties who are permitted to join this lawsuit will be subject to this Order, including responsibility for proportional sharing of costs, unless the Court permits, upon motion, the party to opt out. Case 1:13-cv-01236-CKK Document 69 Filed 09/04/13 Page 2 of 4 2. Scope of Reference: The following matters are referred to the Special Master for him to consider and rule upon: All disputes or matters relating to discovery in the above-captioned case, including but not limited to claims of privilege, motions to compel, motions for protective order, scheduling, e-discovery, and expert discovery. 3. Discovery Motions: Motions by any party or nonparty subject to discovery shall be filed with the Special Master following a substantive meet and confer. Responses must be filed within 48 hours after e-mail service on opposing counsel and the Special Master, except that responses to motions filed on Fridays or, Saturdays by 5:00 p.m., shall be due by 5 p.m. eastern on Monday. Each side shall have a maximum of 750 words per issue2 for moving and opposing submissions. Replies shall be limited to 250 words per issue and shall be served no later than 24 hours after receipt of the opposition. Plaintiffs and Defendants may each choose up to three issues during the course of this litigation as to which each side shall have 2,500 words, with the reply limited to 1,000 words. Service shall be by e-mail and in Word format, with two hard copies (including copies of all cases and other cited materials) delivered to the Special Master by either hand or overnight delivery. All papers filed for consideration by the Special Master shall also be filed with the Clerk, subject to the Stipulated Protective Order Concerning Confidentiality or any superseding Order. 4. In light of the expedited schedule for trial of this matter, the Special Master shall in his discretion rule on the papers or hear argument in person or by teleconference. Any party seeking a hearing on any motion shall set forth in the motion or the opposition the reasons why argument is necessary. Movants and Respondents shall make counsel available for any hearing or teleconference scheduled by the Special Master. The Special Master shall file with the Clerk 2 For the purposes of this Order, word limits include the text in related footnotes or endnotes. 2 Case 1:13-cv-01236-CKK Document 69 Filed 09/04/13 Page 3 of 4 copies of all written orders, subject to the Protective Order or any superseding Order. Consistent with the Special Master’s schedule, it is anticipated that rulings will be made within 3 or 4 days of either the completion of briefing on a motion or oral argument. 5. The rulings of the Special Master on matters referred to him under paragraph 2 shall be final unless the Special Master certifies the ruling for appeal to this Court. Any party or nonparty seeking certification shall submit its reasons, in a writing of no more than 250 words per issue and within 24 hours of the ruling for which certification is sought. Any party or nonparty opposing certification may also submit a writing of no more than 250 words per issue within 24 hours of the certification request. Upon notice of certification by the Special Master, the party or nonparty seeking to appeal shall within 48 hours file a brief of no more than 2,000 words per issue, except upon good cause shown. Responses of similar length shall be filed within 48 hours, except that responses to appeals filed on Fridays, or Saturdays by 5:00 p.m., shall be due by 5 p.m. eastern on Monday. The Special Master shall certify any order denying any claim of privilege if a party requests him to do so and, as such, the denial of any claim of privilege may be appealed, as of right, to the District Court. 6. The Special Master may communicate ex parte with the Court on matters of procedure, but shall not otherwise engage in ex parte discussions. 7. Compensation at rates mutually agreeable to the Special Master and the parties shall be paid to the Special Master on a monthly basis by the parties, together with reimbursement for reasonable expenses incurred including the cost of the Special Master’s law clerk(s). Plaintiffs will be jointly responsible for paying one-half of the fees and expenses described herein; Defendants will be jointly responsible for paying the other half of the fees and expenses described herein. 3 Case Document 69 Filed 09/04/13 Page 4 of 4 8. The parties shall have weekly in-person or telephonic conferences with the Special Master beginning no later than Tuesday, September 10, at 8:30 a.1n. eastern and continuing thereafter every week on Tuesday at 8:30 am. eastern, or as otherwise scheduled by the Special Master. Counsel with authority as to the matters on the agenda for the conference shall participate in every conference. SO ORDERED. data ?a ma COLLEEN UNITED STATES DISTRICT JUDGE Copies to: Hon. Richard A. Levie (Ret) Electronic Service List Case Document 70 Filed 09/04/13 Page 1 of 2 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AM ERICA, STATE OF ARIZONA, DISTRICT OF COLUMBIA, STATE OF FLORIDA, COMMONWEALTH OF STATE OF TENNESSEE, STATE OF TEXAS, COMMONWEALTH OF VIRGINIA, Plaintiffs, v. Civil No. 13-1236 (CKK) US AIRWAYS GROUP, INC. AMR CORPORATION, Defendants. AFFIDAVIT OF HON. RICHARD A. LEVIE (RET.) PURSUANT TO F. R. CIV. P. 53(b)(3) and 28 U.S.C. 455 1. My name is Richard A. Levie. I am over the age of 21, and I have personal knowledge of and am competent to testify to the matters contained herein. 2. I currently serve as a Mediator, Arbitrator and Special Master with JAMS. My business address is 555 13th Street, Washington, DC 20004. 3. I previously served for 15 years as a judge in the Superior Court for the District of Columbia from 1985 to 2000, including as presiding judge for the Civil Division. I also sat by designation on the DC. Court of Appeals in 1994 and 1997. I have served, or am serving, as a Special Master in a number of civil cases and one criminal case. 4. I submit this Af?davit in connection with and pursuant to the Order designating me as Special Master. 5. I have previously disclosed to counsel all matters in which I have served as a mediator, arbitrator or special master involving any party to or counsel for any party in this action. Case Document 70 Filed 09/04/13 Page 2 of 2 6. Pursuant to 28 U.S.C. 455 and Fed. R. Civ. P. I know of no matters and there are no reasons disqualifying me from serving as Special Master in this case. FURTHER SAYETH NOT. RICHARD A. LEVIE Dated: September 3, 2013 State of Washington, District ofColurnbia, ss: Before me, the undersigned authority, on this day personally appeared Richard A. Levie, known to me to be the person whose name is subscribed to the foregoing instrument, and upon his oath acknowledged to me that he executed the same for the purposes and consideration therein expressed. Subscribed to and Sworn to before me, in my presence, this ?5?1 day of September, 2013. (SEAL) qy?e Notary Public, D.C. My commission expires on {Sam/en! 31 201:2. IQ Case 1:13-cv-01236-CKK Document 71 Filed 09/04/13 Page 1 of 11 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, Civil Action No. 13-1236 v. US AIRWAYS GROUP, INC., et al., Defendants. SCHEDULING AND CASE MANAGEMENT ORDER (September 4, 2013) In order to administer this civil action in a manner fair to the litigants and consistent with the parties’ interest in completing this litigation in the shortest possible time and at the least possible cost, it is, this 4th day of September, 2013, hereby ORDERED that the parties shall comply with each of the directives set forth in this Order. The Court will hold the parties responsible for following these directives; failure to conform to this Order’s directives may, when appropriate, result in the imposition of sanctions. IT IS FURTHER ORDERED that the parties shall adhere to the following schedule: Event Deadline (All dates 2013) Amended Complaint to be filed September 6 Responses to Complaint due September 10 Exchange Preliminary Witness Lists September 30 Case 1:13-cv-01236-CKK Document 71 Filed 09/04/13 Page 2 of 11 Event Deadline (All dates 2013) Status Hearing October 1 (Parties’ joint submission due September 30, noon) Close of Fact Discovery October 25 Plaintiffs’ Expert Disclosures October 25 Final Deadline for Requests for Admissions to be served October 30 Defendants’ Expert Disclosures November 8 Supplemental and/or Rebuttal Expert Reports November 15 Close of Expert Discovery November 20 First day of trial November 25 Other Provisions: 1. Service of the Complaint. In this action, counsel for Defendants, acting on behalf of Defendants, have accepted service of the Complaint and have waived formal service of a summons. 2. Discovery Conference. The parties’ prior consultations and submission of this stipulated Order relieve the parties of their duty under Fed. R. Civ. P. 26(f) and the Local Rules to confer further about scheduling and a discovery plan. 3. Completion of Transaction. Defendants have agreed that they will not consummate or otherwise complete their planned merger until seven days after this Court enters a final and appealable order from the trial commencing November 25, 2013. 2 Case 1:13-cv-01236-CKK Document 71 Filed 09/04/13 Page 3 of 11 4. Appointment of Special Master. The parties agree to the appointment of the Honorable Richard A. Levie (ret.) to serve as Special Master to oversee discovery in this action. The Court will issue a separate Order outlining the scope of his responsibilities and authority. 5. Initial Disclosures. In light of Defendants’ prior submissions to the DOJ, Defendants fulfill all obligations with respect to initial disclosures by providing the information required under Fed. R. Civ. P. 26(a)(1)(A)(i). Plaintiffs too will provide the information required under Fed. R. Civ. P. 26(a)(1)(A)(i) and further agree to satisfy their obligations under Fed. R. Civ. P. 26(a)(1)(A)(ii) by producing to the Defendants by August 30, 2013, all civil investigative demands issued to non-parties during the course of Plaintiffs’ investigation into Defendants’ proposed merger, and producing all documents obtained from non-parties pursuant to those demands as soon as practical under applicable law and court orders. This Paragraph does not require the production of any party’s attorney work product, factual information learned in nonparty interviews, confidential attorney-client communications, communications with or information provided to any potentially or actually retained expert, or materials subject to the deliberative-process privilege, or any other privilege. The parties shall complete initial disclosures under Fed. R. Civ. P. 26(a)(1)(A)(i) on September 10, 2013, and shall complete initial disclosures under Fed. R. Civ. P. 26(a)(1)(A)(ii) on September 12, 2013, or as otherwise permitted by court order. 6. Discovery. A. Interrogatories: Plaintiffs (collectively) shall be permitted to propound up to 10 interrogatories (including subparts) to each Defendant. Defendants (collectively) shall be permitted to propound up to 15 interrogatories (including subparts) to Plaintiffs collectively. 3 Case 1:13-cv-01236-CKK Document 71 Filed 09/04/13 Page 4 of 11 B. Requests for Admission: Plaintiffs (collectively) shall be permitted to serve up to 15 requests for admission on Defendants. Defendants (collectively) shall be permitted to serve the same number on Plaintiffs. C. Requests for Production: There shall be no limit on the number of requests for the production of documents that may be served by the parties. D. Written Responses: The parties have agreed to respond in writing to written discovery requests served upon one another within 20 days of service, not 30 as contemplated by the Fed. R. Civ. P. The parties agree they will produce documents 20 days after service of a document request. If a party believes a particular request is so broad or burdensome that it cannot complete production in 20 days, it shall meet and confer before the 20-day deadline, begin producing documents in 20 days, and, if necessary, seek relief from the Special Master. Both parties agree to produce documents on a rolling basis where feasible. E. Authenticity / Admissibility: The parties shall meet and confer in good faith regarding the authentication or admissibility of documents, data, or other evidence. F. Data Compilations: In response to any requests for data or data compilations, the parties shall meet and confer in good faith and, if appropriate, make employees knowledgeable about the content, storage, and production of data available for informal consultations during a meet-and-confer process. To the extent that either party needs such information for evidentiary purposes, that party shall serve formal process. The informal consultations contemplated by this provision shall not constitute admissible evidence. G. Depositions of Fact Witnesses: Plaintiffs (collectively) shall be entitled to notice up to forty (40) depositions. Defendants (collectively) shall be permitted to notice up to the same number. A notice of a deposition of a party to be taken pursuant to Fed. R. Civ. P. 30(b)(6) shall 4 Case 1:13-cv-01236-CKK Document 71 Filed 09/04/13 Page 5 of 11 be limited to a reasonable and related set of issues on a single topic, and shall count as one deposition regardless of the number of witnesses produced to testify. Party witnesses shall be made available for deposition upon seven days’ notice. Party witnesses must be made available on the date the deposition is noticed or on a date within three business days of the date noticed absent agreement of the parties or relief from the Special Master. Plaintiffs may further depose party witnesses whose investigative depositions were taken during the Investigation, and the mere fact that such individuals’ depositions were taken during the investigation may not be used as a basis to object to their deposition during the litigation. During non-party depositions, the non-noticing party shall receive at least two hours of examination time. If the non-party deposition is noticed by both parties then time shall be divided equally. If a party serves on a non-party a subpoena for the production of documents or electronically stored information and a subpoena commanding attendance at a deposition, the scheduled deposition date must be at least 7 days after the original return date for the document subpoena absent good cause shown. 7. Nationwide Service of Trial Subpoenas. To assist the parties in planning discovery, and in view of the geographic dispersion of potential witnesses in this action outside this District, the parties shall be permitted, pursuant to 15 U.S.C. § 23, to issue trial subpoenas that may run into any other federal district requiring witnesses to attend this Court. The availability of nationwide service of process, however, does not make a witness who is otherwise “unavailable” for purposes of Fed. R. Civ. P. 32 and Fed. R. Evid. 804 available under those rules. 5 Case 1:13-cv-01236-CKK Document 71 Filed 09/04/13 Page 6 of 11 8. Discovery of Confidential Information. Discovery and production of confidential information shall be governed by the Stipulated Protective Order Concerning Confidentiality, entered by the Court on August 30, 2013, and a copy of the Order shall be included with any discovery requests, notices, or subpoenas directed to non-parties. 9. Preliminary Trial Witness Lists. The parties shall exchange preliminary trial witness lists. These lists are non-binding and are meant to assist the parties to timely complete discovery. 10. Expert Witness Disclosures and Depositions. Expert disclosures shall be governed by Fed. R. Civ. P. 26, except as modified by this Order. Expert disclosures, including each party’s expert reports, shall comply with the requirements of Fed. R. Civ. P. 26(a)(2), except that neither side must preserve or disclose the following documents or materials: a. any form of oral or written communication, correspondence, or work product shared between any of the parties’ counsel and their expert(s), between testifying and non-testifying experts, between non-testifying experts, or between testifying experts; b. any form of oral or written communication, correspondence, or work product shared between an expert(s) and persons assisting the expert; c. expert’s notes, except to the extent that the notes reflect facts or assumptions relied upon by the expert in the opinions contained in his or her final report; d. drafts of expert reports, analyses, or other work product; or e. data formulations, data runs, data analyses, or any database-related operations not relied upon by the expert in the opinions contained in his or her final report. The parties shall disclose the following materials with all expert reports: a. list by Bates number of all documents relied on by the testifying expert(s); and, except for documents or materials exempted from disclosure by subsections a.-e. in the preceding paragraph, copies of any materials relied on by the testifying expert(s) that were not previously produced and are not readily available publicly; and 6 Case 1:13-cv-01236-CKK Document 71 Filed 09/04/13 Page 7 of 11 b. for any calculations appearing in the report, all data and programs underlying the calculation, including all programs and codes necessary to recreate the calculation from the initial (“raw”) data files, and any intermediate files. Depositions of each side’s experts may be conducted after the disclosure of all expert reports and materials and must be completed by the close of expert discovery. 11. Service of Pleadings and Discovery on Other Parties. Service of all pleadings, discovery requests, including Rule 45 subpoenas for testimony or documents, and delivery of all correspondence in this matter shall be made by email, except when the volume of attachments requires overnight delivery of the attachments or personal delivery, in which case service shall be made to the following individuals designated by the parties (including principal designees) for each side noted below: For Plaintiff United States of America: Ryan Danks Kate Mitchell-Tombras Patrick Hallagan Department of Justice Antitrust Division Transportation, Energy, and Agricultural Section 450 5th Street Northwest, Suite 8000 Washington, DC 20530 ryan.danks@usdoj.gov katharine.mitchell@usdoj.gov f.patrick.hallagan@usdoj.gov Ph. (202) 305-0128 (Mr. Danks) For Plaintiff States: Mark Levy Assistant Attorney General Office of the Attorney General of Texas 300 W. 15th Street, 7th Floor Austin, Texas 78701 mark.levy@texasattorneygeneral.gov Ph: (512) 936-1847 7 Case 1:13-cv-01236-CKK Document 71 Filed 09/04/13 Page 8 of 11 For Defendant US Airways Group, Inc.: Kenneth R. O’Rourke Robert M. Swerdlow Courtney Dyer O’MELVENY & MYERS LLP 1625 Eye Street, N.W. Washington, D.C. 20006 korourke@omm.com rswerdlow@omm.com cdyer@omm.com Ph. (202) 383-5215 (Ms. Dyer) For Defendant AMR Corporation: John M. Majoras Rosanna K. McCalips JONES DAY 51 Louisiana Ave. NW Washington D.C. 20001 jmmajoras@JonesDay.com rkmccalips@JonesDay.com Ph. (202) 879-3898 (Ms. McCalips) For purposes of calculating discovery response times under the Federal Rules, electronic delivery at the time the email was received shall be treated in the same manner as hand delivery at that time. However, for any service other than service of court filings, email service that is delivered after 6:00 pm Eastern Time shall be treated as if it was served the following business day. Any productions made by parties to other parties shall be made pursuant to the formats used for productions in response to the Plaintiff United States’ Requests for Additional Information issued on March 4, 2013, except for non-party material obtained in response to subpoenas, which shall be treated as described below. A party serving a subpoena on a nonparty for the production of documents, including electronically stored information, need not provide advance notice of the subpoena to the other parties. 8 Case 1:13-cv-01236-CKK Document 71 Filed 09/04/13 Page 9 of 11 Each side shall copy and produce materials obtained in discovery, in the format they were received, from any non-party to the other side, within three business days after receipt by the party initiating the discovery request; except that if a non-party produces documents or electronic information that are not Bates-stamped, the party receiving the documents may Bates-stamp them before producing a copy to other parties, and shall produce the documents or electronic information in a timeframe appropriate to the volume and complexity of the files received. Service of materials too voluminous to be emailed shall be delivered to Plaintiffs: Ryan Danks Trial Attorney United States Department of Justice 450 Fifth Street Northwest, Suite 8000 Washington, DC 20530 (20001 for courier and overnight deliveries) Ph: (202) 305-0128 with a duplicate copy to: Mark Levy Assistant Attorney General Office of the Attorney General of Texas 300 W. 15th Street, 7th Floor Austin, Texas 78701 Ph: (512) 936-1847 Service of materials too voluminous to be emailed shall be delivered to Defendants: For Defendant US Airways Group, Inc.: Kenneth R. O’Rourke Robert M. Swerdlow Courtney Dyer O’MELVENY & MYERS LLP 1625 Eye Street, N.W. Washington, D.C. 20006 korourke@omm.com rswerdlow@omm.com cdyer@omm.com Ph. (202) 383-5215 (Ms. Dyer) 9 Case 1:13-cv-01236-CKK Document 71 Filed 09/04/13 Page 10 of 11 For Defendant AMR Corporation: John M. Majoras Rosanna K. McCalips JONES DAY 51 Louisiana Ave. NW Washington D.C. 20001 jmmajoras@JonesDay.com rkmccalips@JonesDay.com Ph. (202) 879-3898 (Ms. McCalips) or by alternative arrangement. 12. Pre-Trial Order and Exhibit Lists. On or before October 25, 2013, the parties shall negotiate the timing, method, and manner of the exchange of exhibit lists and objections and deposition designations, objections and counter-designations, and objections and countercounter designations. 13. Evidentiary Presumptions. Documents produced by nonparties from their own files shall be presumed to be authentic within the meaning of Fed. R. Evid. 901. Any good faith objection to a document’s authenticity must be provided at the same time as other objections to intended trial exhibits. If the opposing side serves a specific good-faith written objection to the document’s authenticity, the above presumption will no longer apply to that document and the parties will promptly meet and confer to attempt to resolve any objection. Any objections that are not resolved through this means or the discovery process will be resolved by the Court. 14. Demonstrative Exhibits. Demonstrative exhibits, other than those to be used by experts, do not need to be included on exhibit lists, but unless otherwise agreed or ordered, need to be provided to trial counsel for the parties at least 24 hours before any such exhibit may be introduced, or otherwise used, at trial. However, (1) text-only handouts and PowerPoint slides and (2) demonstratives created in court need not be pre-disclosed to the opposing party. 10 Case 1:13-cv-01236-CKK Document 71 Filed 09/04/13 Page 11 of 11 15. Courtesy Copies. The parties shall deliver one (1) courtesy copy of any submission to the Court that is over twenty (20) pages in length or that includes more than one (1) exhibit to the Court Security Officer at the loading dock located on C Street near the corner of Third and C Streets (not the Clerk’s Office or Chambers). Courtesy copies shall be appropriately bound and tabbed for ease of reference. All courtesy copies shall be delivered as soon as possible but in any event by 12:00 PM the next business day. 16. Appearance at Hearings. Lead trial counsel shall appear at all hearings unless excused by the Court in advance. 17. Modification of Scheduling and Case Management Order. Any party may seek modification of this Order for good cause. SO ORDERED. /s/ COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE 11 Case 1:13-cv-01236-CKK Document 72 Filed 09/05/13 Page 1 of 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, Case No. 1:13-cv-01236 (CKK) v. US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants. NOTICE OF AMENDED COMPLAINT Please take notice that pursuant to the Scheduling and Case Management Order entered by the Court on September 4, 2013, Plaintiffs filed an Amended Complaint. The Amended Complaint adds the State of Michigan as a plaintiff. The Amended Complaint also corrects certain calculation errors in Appendix A, which changed some of the HHIs in Appendix A. As a result, 29 city pairs have been removed from Appendix A. Based on the corrected data, 3 city pairs have also been added to Appendix A. Further, nine city pairs that include a city not served in 2013 by one of the defendants have been removed. Respectfully submitted on the 5th of September, 2013. /s Ryan J. Danks Attorney U.S. Department of Justice Antitrust Division 450 Fifth Street Northwest, Suite 8000 Washington, DC 20530 Phone: 202-305-0128 Fax: 202-307-2784 ryan.danks@usdoj.gov 1 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 1 of 57 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA 450 Fifth Street Northwest, Suite 8000 Washington, DC 20530 STATE OF ARIZONA 1275 West Washington Phoenix, AZ 85007 DISTRICT OF COLUMBIA 441 Fourth Street Northwest, Suite 600 South Washington, DC 20001 STATE OF FLORIDA PL-01, The Capitol Tallahassee, FL 32399 STATE OF MICHIGAN 525 W. Ottawa Street Lansing, MI 48933 COMMONWEALTH OF PENNSYLVANIA 14th Floor, Strawberry Square Harrisburg, PA 17120 STATE OF TENNESSEE 500 Charlotte Avenue Nashville, TN 37202 STATE OF TEXAS 300 W.15th Street, 7th Floor Austin, TX 78701 and Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 2 of 57 COMMONWEALTH OF VIRGINIA 900 East Main Street Richmond, VA 23219 Plaintiffs, v. US AIRWAYS GROUP, INC. 111 W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION 4333 Amon Carter Boulevard Fort Worth, TX 76155 Defendants. AMENDED COMPLAINT The United States of America, acting under the direction of the Attorney General of the United States, and the States of Arizona, Florida, Michigan, Tennessee, Texas, the Commonwealths of Pennsylvania and Virginia, and the District of Columbia (“Plaintiff States”), acting by and through their respective Attorneys General, bring this civil action under federal antitrust law to enjoin the planned merger of two of the nation’s five major airlines, US Airways Group, Inc. (“US Airways”) and AMR Corporation (“American”), and to obtain equitable and other relief as appropriate. 2 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 3 of 57 I. INTRODUCTION 1. Millions of passengers depend on the airline industry to travel quickly, efficiently, and safely between various cities in the United States and throughout the world. Since 1978, the nation has relied on competition among airlines to promote affordability, innovation, and service and quality improvements. In recent years, however, the major airlines have, in tandem, raised fares, imposed new and higher fees, and reduced service. Competition has diminished and consumers have paid a heavy price. This merger—by creating the world’s largest airline— would, in the words of US Airways’ management, “finish[ ] industry evolution.” It would reduce the number of major domestic airlines from five to four, and the number of “legacy” airlines—today, Delta, United, American, and US Airways—from four to three. In so doing, it threatens substantial harm to consumers. Because of the size of the airline industry, if this merger were approved, even a small increase in the price of airline tickets, checked bags, or flight change fees would cause hundreds of millions of dollars of harm to American consumers annually. 2. American and US Airways compete directly on thousands of heavily traveled nonstop and connecting routes. Millions of passengers benefit each year from head-to-head competition that this merger would eliminate. With less competition, airlines can cut service and raise prices with less fear of competitive responses from rivals. 3. This merger will leave three very similar legacy airlines—Delta, United, and the new American—that past experience shows increasingly prefer tacit coordination over full-throated competition. By further reducing the number of legacy airlines and aligning the economic incentives of those that remain, the merger of US Airways and American would make it easier for the remaining airlines to cooperate, rather than compete, on price and service. That enhanced 3 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 4 of 57 cooperation is unlikely to be significantly disrupted by Southwest and JetBlue, which, while offering important competition on the routes they fly, have less extensive domestic and international route networks than the legacy airlines. 4. US Airways’ own executives—who would run the new American—have long been “proponents of consolidation.” US Airways believes that the industry—before 2005—had “too many” competitors, causing an “irrational business model.” Since 2005, there has been a wave of consolidation in the industry. US Airways has cheered these successive mergers, with its CEO stating in 2011 that “fewer airlines” is a “good thing.” US Airways’ President explained this thinking that same year: “Three successful fare increases – [we are] able to pass along to customers because of consolidation.” (emphasis added). Similarly, he boasted at a 2012 industry conference: “Consolidation has also . . . allowed the industry to do things like ancillary revenues [e.g., checked bag and ticket change fees] . . . . That is a structural permanent change to the industry and one that’s impossible to overstate the benefit from it.” In essence, industry consolidation has left fewer, more-similar airlines, making it easier for the remaining airlines to raise prices, impose new or higher baggage and other ancillary fees, and reduce capacity and service. This merger positions US Airways’ management to continue the trend—at the expense of consumers. 5. US Airways intends to do just that. If this merger were approved, US Airways would no longer need to offer low-fare options for certain travelers. For example, US Airways employs “Advantage Fares,” an aggressive discounting strategy aimed at undercutting the other legacy airlines’ nonstop fares with cheaper connecting service. US Airways’ hubs are in cities that generate less lucrative nonstop traffic than the other legacy airlines’ hubs. To compensate, US 4 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 5 of 57 Airways uses its Advantage Fares to attract additional passengers on flights connecting through its hubs. 6. The other legacy airlines take a different approach. If, for example, United offers nonstop service on a route, and Delta and American offer connecting service on that same route, Delta and American typically charge the same price for their connecting service as United charges for its nonstop service. As American executives observed, the legacy airlines “generally respect the pricing of the non-stop carrier [on a given route],” even though it means offering connecting service at the same price as nonstop service. But American, Delta, and United frequently do charge lower prices for their connecting service on routes where US Airways offers nonstop service. They do so to respond to US Airways’ use of Advantage Fares on other routes. 7. If the merger were approved, US Airways’ economic rationale for offering Advantage Fares would likely go away. The merged airline’s cost of sticking with US Airways’ one-stop, low-price strategy would increase. Delta and United would likely undercut the merged firm on a larger number of nonstop routes. At the same time, the revenues generated from Advantage Fares would shrink as American’s current nonstop routes would cease to be targets for Advantage Fares. The bottom line is that the merged airline would likely abandon Advantage Fares, eliminating significant competition and causing consumers to pay hundreds of millions of dollars more. 8. Consumers will likely also be harmed by the planned merger because American had a standalone plan to emerge from bankruptcy poised to grow. American planned to expand domestically and internationally, adding service on nearly 115 new routes. To support its plan, American recently made the largest aircraft order in industry history. 5 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 6 of 57 9. American’s standalone plan would have bucked current industry trends toward capacity reductions and less competition. US Airways called American’s growth plan “industry destabilizing” and worried that American’s plan would cause other carriers to react “with their own enhanced growth plans . . . .” The result would be to increase competitive pressures throughout the industry. After the merger, US Airways’ current executives—who would manage the merged firm—would be able to abandon American’s efforts to expand and instead continue the industry’s march toward higher prices and less service. As its CEO candidly stated earlier this year, US Airways views this merger as “the last major piece needed to fully rationalize the industry.” 10. Passengers to and from the Washington, D.C. area are likely to be particularly hurt. To serve Ronald Reagan Washington National Airport (“Reagan National”), a carrier must have “slots,” which are government-issued rights to take off and land. US Airways currently holds 55% of the slots at Reagan National and the merger would increase the percentage of slots held by the combined firm to 69%. The combined airline would have a monopoly on 63% of the nonstop routes served out of the airport. Competition at Reagan National cannot flourish where one airline increasingly controls an essential ingredient to competition. Without slots, other airlines cannot enter or expand the number of flights that they offer on other routes. As a result, Washington, D.C. area passengers would likely see higher prices and fewer choices if the merger were approved. 11. Notwithstanding their prior unequivocal statements about the effects of consolidation, the defendants will likely claim that the elimination of American as a standalone competitor will benefit consumers. They will argue that Advantage Fares will continue, existing capacity levels and growth plans will be maintained, and unspecified or unverified “synergies” will materialize, 6 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 7 of 57 creating the possibility of lower fares. The American public has seen this before. Commenting on a commitment to maintain service levels made by two other airlines seeking approval for a merger in 2010, the CEO of US Airways said: “I’m hopeful they’re just saying what they need . . . to get this [transaction] approved.” By making claims about benefits that are at odds with their prior statements on the likely effects of this merger, that is precisely what the merging parties’ executives are doing here—saying what they believe needs to be said to pass antitrust scrutiny. 12. There is no reason to accept the likely anticompetitive consequences of this merger. Both airlines are confident they can and will compete effectively as standalone companies. A revitalized American is fully capable of emerging from bankruptcy proceedings on its own with a competitive cost structure, profitable existing business, and plans for growth. US Airways today is competing vigorously and earning record profits. Executives of both airlines have repeatedly stated that they do not need this merger to succeed. 13. The merger between US Airways and American would likely substantially lessen competition, and tend to create a monopoly, in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. Therefore, this merger should be permanently enjoined. II. JURISDICTION, INTERSTATE COMMERCE, AND VENUE 14. The United States brings this action, and this Court has subject-matter jurisdiction over this action, under Section 15 of the Clayton Act, as amended, 15 U.S.C. § 25, to prevent and restrain US Airways and American Airlines from violating Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18. 15. The Plaintiff States bring this action under Section 16 of the Clayton Act, 15 U.S.C. § 26, to prevent and restrain US Airways and American Airlines from violating Section 7 of the 7 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 8 of 57 Clayton Act, as amended, 15 U.S.C. § 18. The Plaintiff States, by and through their respective Attorneys General, bring this action as parens patriae on behalf of the citizens, general welfare, and economy of each of their states. 16. The defendants are engaged in, and their activities substantially affect, interstate commerce, and commerce in each of the Plaintiff States. US Airways and American Airlines each annually transport millions of passengers across state lines throughout this country, generating billions of dollars in revenue while doing so. 17. Venue is proper under Section 12 of the Clayton Act, 15 U.S.C. § 22. This Court also has personal jurisdiction over each defendant. Both defendants are found and transact business in this judicial district. III. THE DEFENDANTS AND THE TRANSACTION 18. Defendant US Airways Group, Inc., is a Delaware corporation headquartered in Tempe, Arizona. Last year, it flew over fifty million passengers to approximately 200 locations worldwide, taking in more than $13 billion in revenue. US Airways operates hubs in Phoenix, Charlotte, Philadelphia, and Washington, D.C. 19. US Airways is performing exceptionally well. In 2012, it enjoyed record profits. It is operating at high load factors—the percentage of seats sold on its flights—and has a national and international route network, alliances with international airlines, a strong brand name, modern equipment, and a competitive cost structure. In mid-2012, US Airways’ CEO, touting the airline’s “record second quarter results,” told Dow Jones that the company “has a great business model that works and we certainly don’t need to merge with another airline.” 20. Defendant AMR Corporation is a Delaware corporation headquartered in Fort Worth, Texas. AMR Corporation is the parent company of American Airlines. Last year, American 8 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 9 of 57 flew over eighty million passengers to approximately 250 locations worldwide, taking in more than $24 billion in revenue. American operates hubs in New York, Los Angeles, Chicago, Dallas, and Miami. The American Airlines brand is “one of the most recognized . . . in the world.” 21. In November 2011, American filed for bankruptcy reorganization and is currently under the supervision of the Bankruptcy Court for the Southern District of New York. American adopted and implemented a standalone business plan designed “to restore American to industry leadership, profitability and growth.” While in bankruptcy, American management “pursued and successfully implemented” key provisions of this plan, including revenue and network enhancements, as well as “restructuring efforts [that] have encompassed labor cost savings, managerial efficiencies, fleet reconfiguration, and other economies . . . .” That work has paid off. American reported that its revenue growth has “outpaced” the industry since entering bankruptcy and in its most recent quarterly results reported a company record-high $5.6 billion in revenues, with $357 million in profits. Under experienced and sophisticated senior management, American’s restructuring process has positioned it to produce “industry leading profitability.” As recently as January 8, 2013, American’s management presented plans to emerge from bankruptcy that would increase the destinations American serves in the United States and the frequency of its flights, and position American to compete independently as a profitable airline with aggressive plans for growth. 22. US Airways sees American the same way. Its CEO observed in December 2011 that “A[merican] is not going away, they will be stronger post-bankruptcy because they will have less debt and reduced labor costs.” A US Airways’ executive vice president similarly wrote in July 2012 that “[t]here is NO question about AMR’s ability to survive on a standalone basis.” 9 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 10 of 57 23. US Airways and American agreed to merge on February 13, 2013. US Airways shareholders would own 28 percent of the combined airline, while American shareholders, creditors, labor unions, and employees would own 72 percent. The merged airline would operate under the American brand name, but the new American would be run by US Airways management. IV. THE RELEVANT MARKETS A. Scheduled Air Passenger Service Between Cities 24. Domestic scheduled air passenger service enables consumers to travel quickly and efficiently between various cities in the United States. Air travel offers passengers significant time savings and convenience over other forms of travel. For example, a flight from Washington, D.C. to Detroit takes just over an hour of flight time. Driving between the two cities takes at least eight hours. A train between the two cities takes more than fifteen hours. 25. Due to time savings and convenience afforded by scheduled air passenger service, few passengers would substitute other modes of transportation (car, bus, or train) for scheduled air passenger service in response to a small but significant industry-wide fare increase. Another way to say this, as described in the Fed. Trade Comm’n & U.S. Dep’t of Justice Horizontal Merger Guidelines (2010), and endorsed by courts in this Circuit, is that a hypothetical monopolist of all domestic scheduled air passenger service likely would increase its prices by at least a small but significant and non-transitory amount. Scheduled air passenger service, therefore, constitutes a line of commerce and a relevant product market within the meaning of Section 7 of the Clayton Act. 26. A “city pair” is comprised of a flight’s departure and arrival cities. For example, a flight departing from Washington and arriving in Chicago makes up the Washington-Chicago city pair. 10 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 11 of 57 Passengers seek to depart from airports close to where they live and work, and arrive at airports close to their intended destinations. Most airline travel is related to business, family events, and vacations. Thus, most passengers book flights with their origins and destinations predetermined. Few passengers who wish to fly from one city to another would likely switch to flights between other cities in response to a small but significant and non-transitory fare increase. 27. Airlines customarily set fares on a city pair basis. For each city pair, the degree and nature of the competition from other airlines generally plays a large role in an airline’s pricing decision. 28. Therefore, a hypothetical monopolist of scheduled air passenger service between specific cities likely would increase its prices by at least a small but significant and non-transitory amount. Accordingly, each city pair is a relevant geographic market and section of the country under Section 7 of the Clayton Act. 29. Consumer preferences also play a role in airline pricing and are relevant for the purpose of analyzing the likely effects of the proposed merger. Some passengers prefer nonstop service because it saves travel time; some passengers prefer buying tickets at the last minute; others prefer service at a particular airport within a metropolitan area. For example, most business customers traveling to and from downtown Washington prefer service at Reagan National over other airports in the Washington, D.C. metropolitan area. Through a variety of fare restrictions and rules, airlines can profitably raise prices for some of these passengers without raising prices for others. Thus, the competitive effects of the proposed merger may vary among passengers depending on their preferences for particular types of service or particular airports. 11 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 12 of 57 B. Takeoff and Landing Slots at Reagan National Airport 30. Reagan National is one of only four airports in the country requiring slots for takeoffs and landings. Slots are expensive (often valued at over $2 million per slot), difficult to obtain, and only rarely change hands between airlines. There are no alternatives to slots for airlines seeking to enter or expand their service at Reagan National. 31. Reagan National is across the Potomac River from Washington, D.C., and, due to its proximity to the city and direct service via the Metro, airlines actively seek to serve passengers flying into and out of Reagan National. Airlines do not view service at other airports as adequate substitutes for service offered at Reagan National for certain passengers, and thus they are unlikely to switch away from buying or leasing slots at Reagan National in response to a small but significant increase in the price of slots. Airlines pay significant sums for slots at Reagan National, despite having the option of serving passengers through the region’s other airports. A hypothetical monopolist of slots at Reagan National likely would increase its prices by at least a small but significant and non-transitory amount. Thus, slots at Reagan National Airport constitute a line of commerce, section of the country, and relevant market within the meaning of Section 7 of the Clayton Act. V. THE MERGER IS LIKELY TO RESULT IN ANTICOMPETITIVE EFFECTS A. Industry Background 32. Today, four network or “legacy” airlines remain in the United States: American, US Airways, United, and Delta. These four have extensive national and international networks, connections to hundreds of destinations, established brand names, and strong frequent flyer reward programs. In addition, there are non-network airlines, including Southwest Airlines and a handful of smaller firms, which typically do not offer “hub-and-spoke” service. 12 Case Document 73 Filed 09/05/13 Page 13 of 57 33. Airlines compete in many ways. One is the price of a ticket. Airlines also compete based on: nonstop versus connecting ?ights; number of destinations served; convenient ?ight schedules; passenger comfort and seating policies; choices for classes of service; carry-on baggage policies; the degree of personal service at ticket counters and boarding areas; onboard meal and drink service; entertainment; and the quality and generosity of frequent ?yer programs. 34. Since 2005, the US. airline industry has lmdergone signi?cant consolidation. The consolidation ?wave? started with the 2005 merger between US Airways and America West, creating today?s US Airways. In 2008, Delta and Northwest Airlines merged; in 2010, United and Continental merged; and in 2011, Southwest Airlines and Air?Tran merged. The chart below, in which one of US Airways? executive vice presidents referred to industry consolidation as the ?New Holy Grail,? demonstrates that since 2005 the munber of major airlines has dropped ??om nine to ?ve. New Order: New Holy Grail - Industry Consolidation The major airlines have consolidated to 5 from 9 since 2005 2005 2008 2010 Al outnumn Hy with, A 95 A LTA IT ?mama 4 (lirTrun b? AmericanAirlines' 53 US AIRWAYS l3 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 14 of 57 35. Increasing consolidation among large airlines has hurt passengers. The major airlines have copied each other in raising fares, imposing new fees on travelers, reducing or eliminating service on a number of city pairs, and downgrading amenities. An August 2012 presentation from US Airways observes that consolidation has resulted in “Fewer and Larger Competitors.” The structural change to “fewer and larger competitors” has allowed “[t]he industry” to “reap the benefits.” Those benefits to the industry are touted by US Airways in the same presentation as including “capacity reductions” and new “ancillary revenues” like bag fees. B. Many Relevant Markets Are Highly Concentrated and the Planned Merger Would Significantly Increase that Concentration 36. In 2005, there were nine major airlines. If this merger were approved, there would be only four. The three remaining legacy airlines and Southwest would account for over 80% of the domestic scheduled passenger service market, with the new American becoming the biggest airline in the world. 37. Market concentration is one useful indicator of the level of competitive vigor in a market, and the likely competitive effects of a merger. The more concentrated a market, and the more a transaction would increase concentration in a market, the more likely it is that a transaction would result in a meaningful reduction in competition. Concentration in relevant markets is typically measured by the Herfindahl-Hirschman Index (“HHI”). Markets in which the HHI exceeds 2,500 points are considered highly concentrated. Post-merger increases in HHI of more than 200 points are considered to be significant increases in concentration. 38. In more than 1,000 of the city pair markets in which American and US Airways currently compete head-to-head, the post-merger HHI would exceed 2,500 points and the merger would increase the HHI by more than 200 points. For example, on the Charlotte-Dallas city pair, the post-merger HHI will increase by 4,653 to 9,324 (out of 10,000). In these markets, US Airways 14 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 15 of 57 and American annually serve more than 14 million passengers and collect more than $6 billion in fares. The substantial increases in concentration in these highly concentrated markets demonstrate that in these relevant markets, the merger is presumed, as a matter of law, to be anticompetitive. The relevant markets described in this paragraph are listed in Appendix A. 39. Other city pairs across the country would likely be affected by the loss of competition stemming from this planned merger. In some of these markets, US Airways and American compete head-to-head, often offering consumers discounted fares. If approved, this merger will likely end much of that discounting, significantly harming consumers in the process. Moreover, the loss of competition in these markets would increase the likelihood that the remaining airlines can coordinate to raise price, reduce output, and diminish the quality of their services. In these relevant markets, the merger is likely also to substantially lessen competition. 40. In the market for slots at Reagan National, the merger would result in a highly concentrated market, with a post-merger HHI of 4,959. The merger would also significantly increase concentration by 1,493 points. As a result, the merger should be presumed, as a matter of law, to be anticompetitive. C. This Merger Would Increase the Likelihood of Coordinated Behavior Among the Remaining Network Airlines Causing Higher Fares, Higher Fees, and More Limited Service 41. The structure of the airline industry is already conducive to coordinated behavior: Few large players dominate the industry; each transaction is small; and most pricing is readily transparent. 42. For example, the legacy airlines closely watch the pricing moves of their competitors. When one airline “leads” a price increase, other airlines frequently respond by following with price increases of their own. The initiating carrier will lead the price increase and then see if the 15 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 16 of 57 other carriers will match the increase. If they do not, the initiating carrier will generally withdraw the increase shortly thereafter. 43. The legacy airlines also use what they call “cross-market initiatives,” or “CMIs,” to deter aggressive discounting and prevent fare wars. A CMI occurs where two or more airlines compete against each other on multiple routes. If an airline offers discounted fares in one market, an affected competitor often responds with discounts in another market—a CMI—where the discounting airline prefers a higher fare. CMIs often cause an airline to withdraw fare discounts. For example, in the fall of 2009, US Airways lowered fares and relaxed restrictions on flights out of Detroit (a Delta stronghold) to Philadelphia. Delta responded by offering lower fares and relaxed restrictions from Boston to Washington (a US Airways stronghold). US Airways’ team lead for pricing observed Delta’s move and concluded “[w]e have more to lose in BOSWAS . . . I think we need to bail on the [Detroit-Philadelphia] changes.” 44. There is also past express coordinated behavior in the industry. For example, all airlines have complete, accurate, and real-time access to every detail of every airline’s published fare structure on every route through the airline-owned Airline Tariff Publishing Company (“ATPCO”). US Airways’ management has called ATPCO “a dedicated price-telegraph network for the industry.” The airlines use ATPCO to monitor and analyze each other’s fares and fare changes and implement strategies designed to coordinate pricing. Airlines have previously used ATPCO to engage in coordinated behavior. In 1992, the United States filed a lawsuit to stop several airlines, including both defendants, from using their ATPCO filings as a signaling device to facilitate agreements on fares. That lawsuit resulted in a consent decree, now expired. 45. US Airways also has communicated directly with a competitor when it was upset by that competitor’s efforts to compete more aggressively. In 2010, one of US Airways’ larger rivals 16 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 17 of 57 extended a “triple miles” promotion that set off a market share battle among legacy carriers. The rival airline was also expanding into new markets and was rumored to be returning planes to its fleet that had been mothballed during the recession. US Airways’ CEO complained about these aggressive maneuvers, stating to his senior executives that such actions were “hurting [the rival airline’s] profitability – and unfortunately everyone else’s.” US Airways’ senior management debated over email about how best to get the rival airline’s attention and bring it back in line with the rest of the industry. In that email thread, US Airways’ CEO urged the other executives to “portray[ ] these guys as idiots to Wall Street and anyone else who’ll listen.” Ultimately, to make sure the message was received, US Airways’ CEO forwarded the email chain—and its candid discussion about how aggressive competition would be bad for the industry—directly to the CEO of the rival airline. (The rival’s CEO immediately responded that it was an inappropriate communication that he was referring to his general counsel.) 46. Coordination becomes easier as the number of major airlines dwindles and their business models converge. If not stopped, the merger would likely substantially enhance the ability of the industry to coordinate on fares, ancillary fees, and service reductions by creating, in the words of US Airways executives, a “Level Big 3”of network carriers, each with similar sizes, costs, and structures. 47. Southwest, the only major, non-network airline, and other smaller carriers have networks and business models that differ significantly from the legacy airlines. Traditionally, Southwest and other smaller carriers have been less likely to participate in coordinated pricing or service reductions. For example, Southwest does not charge customers for a first checked bag or ticket change fees. Yet that has not deterred the legacy carriers from continuing, and even increasing, those fees. In November 2011, a senior US Airways executive explained to her boss the reason: 17 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 18 of 57 “Our employees know full well that the real competition for us is [American], [Delta], and [United]. Yes we compete with Southwest and JetBlue, but the product is different and the customer base is also different.” 1. The Merger Would Likely Result in the Elimination of US Airways’ Advantage Fares 48. On routes where one legacy airline offers nonstop service, the other legacies “generally respect the pricing of the non-stop carrier,” as American has put it. Thus, if American offers nonstop service from Washington to Dallas at $800 round-trip, United and Delta will, “[d]espite having a service disadvantage,” price their connecting fares at the level of American’s nonstop fares. The legacy carriers do this because if one airline, say Delta, were to undercut fares in markets where American offers nonstop service, American would likely do the same in Delta’s nonstop markets. To Delta, the cost of being undercut in its nonstop markets exceeds the benefit it would receive from winning additional passengers in American nonstop markets. 49. US Airways, alone among the legacy carriers, has a different cost-benefit analysis for pricing connecting routes. Although it too is a national network carrier, US Airways has hubs in cities that generate less revenue from passengers flying nonstop than the other legacy airlines’ hubs. Because US Airways’ hubs generate less revenue from passengers flying nonstop, US Airways must gain more revenue from connecting passengers. It gets that revenue by offering connecting service that is up to 40% cheaper than other airlines’ nonstop service. US Airways calls this program “Advantage Fares.” 50. Millions of consumers have benefitted. Advantage Fares offer consumers, especially those who purchase tickets at the last minute, meaningfully lower fares. The screenshot below from ITA Software, Airfare Matrix (“ITA”), taken on August 12, 2013, for travel departing on 18 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 19 of 57 August 13 and returning August 14 from Miami to Cincinnati, shows the benefits of US Airways’ Advantage Fare program to passengers 1: American is the only airline on this route to offer nonstop service, charging $740. Delta and United do not meaningfully compete. Both charge more for their connecting service than American charges for nonstop service. Thus, on this particular route, a passenger who chose Delta or United would pay more for an inferior product. In contrast, US Airways’ fares today are significantly lower than American’s fares, and offer consumers a real choice. Those consumers who are more price conscious receive the benefit of a substantially lower-fare option. In this case, a customer who purchased a US Airways one-stop ticket would save $269 compared to American’s nonstop service. 51. The benefits from Advantage Fares extend to hundreds of other routes, including those where more than one carrier offers nonstop service. The screenshot below from ITA, taken on August 12, 2013, for travel departing on August 13 and returning August 14 from New York to Houston, demonstrates just how dramatic the savings can be: 1 “Multiple Airlines” refers to an itinerary where a passenger uses different airlines for their departing and returning flights. 19 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 20 of 57 US Airways’ connecting fare is $870 cheaper than the other legacy carriers’ nonstop flights, and beats JetBlue and AirTran’s fares by more than $300. Although Southwest does not participate in the standard online travel sites, a cross-check against the Southwest website demonstrates that US Airways also beats Southwest’s $887 nonstop fare by more than $300. 52. Other airlines have chosen to respond to Advantage Fares with their own low connecting fares in markets where US Airways has nonstop service. That is, the other legacy airlines undercut US Airways’ nonstop fares the same way that US Airways undercuts their nonstop fares. The screenshot below from ITA, taken on August 12, 2013, for travel on August 13 and returning August 14 from Charlotte to Syracuse, shows how the other legacy carriers respond to Advantage Fares to the benefit of consumers: Here, US Airways is the only airline to offer nonstop service, charging $685. Delta and United undercut that price by charging $375 and $395, respectively, for connecting service. Once again, 20 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 21 of 57 consumers benefit by having the option of far less expensive connecting service. A customer who buys a Delta one-stop flight saves $310 over US Airways’ nonstop service. 53. There are over 100 routes where other carriers offer nonstop service on which US Airways does not offer Advantage Fares. Consumers in these markets are not given the option of a low-cost connecting alternative and are forced to pay significantly more for service. For example, US Airways does not currently offer Advantage Fares on flights from Cincinnati to Pittsburgh. Without the option of a low connecting fare, consumers see significantly higher prices, as illustrated by a screenshot from ITA, taken on August 12, 2013, for travel on August 13 and returning August 14: . 54. Advantage Fares have proven highly disruptive to the industry’s overall coordinated pricing dynamic. An American executive expressed her frustration in September 2011 with US Airways’ Advantage Fares, noting that US Airways was “still way undercutting us [on flights from Boston and New York to Dallas] and getting significant share.” One response American considered was to lower its fares on the same route. Another option was “to take up this battle w/them again,” in an attempt to force US Airways to limit or abandon its strategy. 55. US Airways’ President acknowledged in September 2010 that its Advantage Fare strategy “would be different if we had a different route network . . . .” Currently, US Airways’ 21 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 22 of 57 network structure precludes Delta and United from preventing US Airways’ aggressive “onestop pricing.” Because US Airways’ hubs have relatively less nonstop traffic, the other legacy airlines cannot respond sufficiently to make Advantage Fares unprofitable. But by increasing the size and scope of US Airways’ network, the merger makes it likely that US Airways will have to discontinue its Advantage Fares. 56. American’s executives agree. American believes that Advantage Fares will be eliminated because of the merger. Internal analysis at American in October 2012 concluded that “[t]he [Advantage Fares] program would have to be eliminated in a merger with American, as American’s large non-stop markets would now be susceptible to reactionary pricing from Delta and United.” Another American executive observed that same month: “The industry will force alignment to a single approach—one that aligns with the large legacy carriers as it is revenue maximizing.” 57. US Airways believes that it currently gains “most of its advantage fare value from AA,” meaning that Advantage Fares provide substantial value for US Airways on routes where American is the legacy airline offering nonstop service. Post-merger, continuing Advantage Fares would mean that US Airways was taking that value away from itself by undercutting its own nonstop prices. Plainly, this would make no sense. Thus, for US Airways post-merger, the benefits of Advantage Fares would go down, and its costs would go up. 58. By ending Advantage Fares, the merger would eliminate lower fares for millions of consumers. Last year, more than 2.5 million round-trip passengers—including more than 250,000 passengers from the greater Washington, D.C. area; another 250,000 passengers in the Dallas-Fort Worth area; half a million passengers in the greater New York City area; and 175,000 passengers from Detroit—bought an Advantage Fare ticket. Hundreds of thousands of 22 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 23 of 57 other passengers flying nonstop on US Airways, particularly from their hubs in Phoenix, Charlotte, and Philadelphia, benefited from responsive fares offered by the legacy airlines. 2. The Merger Would Likely Lead to Increased Industry-Wide “Capacity Discipline,” Resulting in Higher Fares and Less Service 59. Legacy airlines have taken advantage of increasing consolidation to exercise “capacity discipline.” “Capacity discipline” has meant restraining growth or reducing established service. The planned merger would be a further step in that industry-wide effort. In theory, reducing unused capacity can be an efficient decision that allows a firm to reduce its costs, ultimately leading to lower consumer prices. In the airline industry, however, recent experience has shown that capacity discipline has resulted in fewer flights and higher fares. 60. Each significant legacy airline merger in recent years has been followed by substantial reductions in service and capacity. These capacity reductions have not consisted simply of cancellation of empty planes or empty seats; rather, when airlines have cut capacity after a merger, the number of passengers they carry on the affected routes has also decreased. 61. US Airways has recognized that it benefitted from this industry consolidation and the resulting capacity discipline. US Airways has long taken the position that the capacity cuts achieved through capacity discipline “enabled” fare increases and that “pricing power” results from “reduced industry capacity.” US Airways’ CEO explained to investors in 2006 that there is an “inextricable link” between removing seats and raising fares. 62. In 2005, America West—managed then by many of the same executives who currently manage US Airways—merged with US Airways. America West had hubs in Phoenix and Las Vegas while the former US Airways had hubs in Pittsburgh, Charlotte, and Philadelphia. Following the merger, the combined firm reduced capacity, including significant cuts in Pittsburgh and Las Vegas. In 2010, the Chief Financial Officer for US Airways explained: 23 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 24 of 57 We believe in the hub system. I just think there’s too many hubs. If you look across the country, you can probably pick a few that are smaller hubs and maybe duplicative to other hubs that airlines have that they could probably get out of. In our example, we merged with US Airways [and] . . . what we have done over time, which is unfortunate for the cities, but we couldn’t hold a hub in Pittsburgh and we couldn’t hold a hub in Las Vegas. So over time we have consolidated and condensed our operation back, which is really important, condensed it back to our major hubs. A post-merger US Airways analysis confirmed that it succeeded in obtaining a “3% to 4% capacity reduction.” 63. In 2006, on the heels of the America West/US Airways merger, the combined firm submitted an ultimately unsuccessful hostile bid for Delta Air Lines. US Airways’ management had concluded that a merged US Airways/Delta could reduce the combined carrier’s capacity by 10 percent, which would lead to higher revenues for the combined firm and for the industry. In 2007, following the rejection of the hostile bid, US Airways’ CEO explained to investors how the deal would have increased industry profits: It’s part of what we tried to impress upon people as we were going through our run at Delta, was that . . . it was good for US Airways [and] good for the entire industry. We’re going to take out 4% of the industry capacity as we did that. Everyone’s 2008 numbers would look a (expletive) of a lot better had that transaction happened . . . . 64. In 2008, Delta merged with Northwest Airlines. Despite promises to the contrary, the combined airline reduced capacity, including significant cuts at its former hubs in Cincinnati and Memphis. US Airways’ CEO was “quite happy” to see the merger and advocated for further consolidation. He explained that an industry structure of “five different hub and spoke airlines with who knows how many hubs across the United States . . . results in all of us fighting for the same connecting passengers over numerous hubs.” Left unsaid was that fewer airlines meant less competition and higher fares. 24 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 25 of 57 65. In May 2010, United Airlines and Continental Airlines announced their planned merger. The announcement caused speculation about the future of each airline’s hubs, including Continental’s Cleveland hub. In Congressional testimony, an industry analyst stated that he did not believe the merger would cause reductions in Cleveland. On June 18, 2010, upon seeing the testimony, US Airways’ CEO wrote an email to other US Airways executives stating, “[s]urely these guys [United/Continental] aren’t really planning to keep Cleveland open. I’m hopeful they’re just saying what they need to (including to [the analyst]) to get this approved.” United and Continental closed their deal on October 1, 2010. The combined firm has reduced capacity at nearly all of its major hubs (including Cleveland) and at many other airports where the two airlines previously competed. Similarly, Southwest/AirTran has reduced service in a number of its focus cities and on many of AirTran’s former routes following its 2011 merger. 66. The defendants are fully aware of these earlier mergers’ effects. A 2012 American Airlines analysis concluded that “following a merger, carriers tend to remove capacity or grow more slowly than the rest of the industry.” US Airways’ management concluded that although industry consolidation has been a success, as its CEO stated publicly in 2010, the industry had yet to hit its “sweet spot,” and additional consolidation was needed because the industry remained “overly fragmented.” 67. A merger with American would allow US Airways to hit the “sweet spot.” For consumers, however, it would be anything but sweet. US Airways believes that merging with American “finishes industry evolution” by accomplishing US Airways’ goal of “reduc[ing] capacity more efficiently.” When first considering a combination with American, US Airways projected that the merged firm could reduce capacity by as much as 10 percent. Similarly, American expects that the merger will lead to capacity reductions that would negatively impact 25 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 26 of 57 “communities,” “people,” “customers,” and “suppliers.” Higher fares would be right around the corner. 3. The Planned Merger Would Likely Block American’s Standalone Expansion Plans, Thwarting Likely Capacity Increases 68. American does not need this merger to thrive, let alone survive. Before the announcement of this merger, a key component of American’s standalone plan for exiting bankruptcy revolved around substantial expansion, including increases in both domestic and international flights. Thus, in 2011, American placed the largest order for new aircraft in the industry’s history. 69. US Airways executives feared that American’s standalone growth plan would disrupt the industry’s capacity discipline “momentum.” In a 2012 internal presentation, US Airways executives recognized that while “[i]ndustry mergers and capacity discipline expand margins,” American’s standalone “growth plan has potential to disrupt the new dynamic” and would “Reverse Industry Capacity Trends.” Moreover, US Airways believed that if American implemented its growth plans, other airlines would “react to AMRs plans with their own enhanced growth plans destabilizing industry.” US Airways believed that American’s standalone capacity growth would “negatively impact” industry revenues and threaten industry pricing. 70. US Airways thought that a merger with American was a “lower risk alternative” than letting American’s standalone plan come to fruition because US Airways management could maintain capacity discipline. American’s executives have observed that “the combined network would likely need to be rationalized,” especially given the merged carrier’s numerous hubs, and that it is “unlikely that [a combined US Airways/American] would pursue growth . . . .” 26 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 27 of 57 4. The Merger Would Likely Result in Higher Fees 71. Since 2008, the airline industry has increasingly charged consumers fees for services that were previously included in the price of a ticket. These so-called ancillary fees, including those for checked bags and flight changes, have become very profitable. In 2012 alone, airlines generated over $6 billion in fees for checked bags and flight changes. Even a small increase in these fees would cost consumers millions. 72. Increased consolidation has likely aided the implementation of these fees. The levels of the ancillary fees charged by the legacy carriers have been largely set in lockstep. One airline acts as the “price leader,” with others following soon after. Using this process, as a US Airways strategic plan observed, the airlines can raise their fees without suffering “market share impacts.” For example, American announced that it would charge for a first checked bag on May 21, 2008. On June 12, 2008, both United and US Airways followed American’s lead. Similarly, over a period of just two weeks this spring, all four legacy airlines increased their ticket change fee for domestic travel from $150 to $200. 73. The legacy airlines recognize that the success of any individual attempt to impose a new fee or fee increase depends on whether the other legacies follow suit. When, in July 2009, American matched the other legacy carriers by raising its checked bag fee to $20, but did not join the others in offering a $5 web discount, US Airways was faced with the decision of whether to “match” American by either eliminating its own web discount, or raising its price to $25, with a $5 discount. US Airways’ CEO gave his view: I can’t believe I’m saying this, but I think we should stand still on this for now. I recognize that increases the chances of everyone standing still . . . the [dollars] aren’t compelling enough for us to stick our necks out first. I do think D[elta] or U[nited] won’t let them have an advantage, so it’ll get matched – I’m just not sure we should go first. If a couple weeks go by and no one’s moved, we can always jump in. 27 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 28 of 57 74. Similarly, when US Airways was considering whether to raise its second checked bag fee to $100 to match Delta’s fee, a US Airways executive observed: “Wow - $100 is a lot for second bag. I would think there’s big passenger gag reflex associated with that, but if we can get it, we should charge it. Do you think we should wait for [United] or [American] to move first, though?” 75. Conversely, in 2008, when US Airways began charging passengers for soft drinks, the other legacy airlines did not follow its lead, and US Airways backed off. US Airways’ CEO explained: “With US Airways being the only network carrier to charge for drinks, we are at a disadvantage.” Had US Airways not rescinded this fee, it would have lost passengers to the other legacy airlines. 76. At times, the airlines consider new fees or fee increases, but hold off implementing them while they wait to see if other airlines will move first. For example, on April 18, United announced that it was increasing its ticket change fee from $150 to $200. American decided that “waiting for [Delta] and then moving to match if [Delta] comes along” would be its best strategy. Over the next two weeks, US Airways, Delta, and American each fell in line, leading a US Airways executive to observe on May 1: “A[merican] increased their change fees this morning. The network carriers now have the same $200 domestic . . . change fees.” 77. Post-merger, the new American would likely lead new fee increases. A December 2012 discussion between US Airways executives included the observation that after the merger, “even as the world’s largest airline we’d want to consider raising some of the baggage fees a few dollars in some of the leisure markets.” 78. New checked bag fees on flights from the United States to Europe are a likely target. Both US Airways and American have considered imposing a first checked bag fee on flights to 28 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 29 of 57 Europe but have refrained from doing so. US Airways seriously considered leading such a price move but was concerned that other airlines would not match: “We would hope that [other airlines] would follow us right away . . . but there is no guarantee . . . .” Ultimately, US Airways concluded it was “too small” to lead additional checked bag fees for flights to Europe. Postmerger, that would no longer be true. The merged firm would be the world’s largest airline, giving it sufficient size to lead industry fee and price increases across the board. 79. Some fee increases are likely to result from US Airways raising American’s existing fees. Today, “US Airways generally charges higher bag fees than AA” for travel from the United States to international destinations. Post-merger, US Airways would likely raise American’s ancillary fees to US Airways’ higher fee levels as part of a “fee harmonization” process. US Airways’ own documents estimate that “fee harmonization” would generate an additional $280 million in revenue annually—directly harming consumers by the same amount. A US Airways presentation from earlier this year analyzing the merger identifies American’s lower bag fees as a “value lever” that US Airways “will likely manage differently with tangible financial upside.” The analysis concludes that “[i]ncreasing AA baggage fees to match US creates significant revenue impact.” US Airways also plans to institute its fees ($40 on average) for the redemption of frequent flyer tickets on American’s existing frequent fliers, who currently are not charged for mileage redemption. 80. The merger would also likely reduce the quality and variety of ancillary services offered by the legacy airlines—a side effect of consolidation anticipated and embraced by US Airways’ CEO. In a 2011 email exchange lamenting the need for US Airways to deploy wireless internet on all of its airplanes, a senior US Airways executive groused: 29 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 30 of 57 [N]ext it will be more legroom. Then industry standard labor contracts. Then better wines. Then the ability to book on Facebook. Penultimately, television commercials. Then, finally, we will pay the NYSE an exorbitant fee to change our ticker symbol [from LCC]. US Airways’ CEO responded: “Easy now. Consolidation will help stop much of the stupid stuff but inflight internet is not one of them.” 81. If the planned merger is enjoined, both American and US Airways will have to compete against two larger legacy rivals, and against each other. The four legacy airlines will not look exactly the same. As the smallest of the legacy airlines, American and US Airways will have greater incentives to grow and compete aggressively through lower ancillary fees, new services, and lower fares. D. The Merger Would Eliminate Head-to-Head Competition in Hundreds of Relevant Markets and Entrench US Airways’ Dominance at Reagan National Airport 82. American and US Airways engage in head-to-head competition with nonstop service on 17 domestic routes representing about $2 billion in annual industry-wide revenues. American and US Airways also compete directly on more than a thousand routes where one or both offer connecting service, representing billions of dollars in annual revenues. The merger’s elimination of this head-to-head competition would create strong incentives for the merged airline to reduce capacity and raise fares where they previously competed. 83. The combined firm would control 69% of the slots at Reagan National Airport, almost six times more than its closest competitor. This would eliminate head-to-head competition at the airport between American and US Airways. It would also effectively foreclose entry or expansion by other airlines that might increase competition at Reagan National. 84. The need for slots is a substantial barrier to entry at Reagan National. The FAA has occasionally provided a limited number of slots for new service. In almost all cases, however, a 30 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 31 of 57 carrier wishing to begin or expand service at Reagan National must buy or lease slots from an airline that already owns them. 85. This merger would thwart any prospect for future entry or expansion at Reagan National. US Airways, which already has 55% of the airport’s slots, does not sell or lease them because any slot that goes to another airline will almost certainly be used to compete with US Airways. The merger would only increase US Airways’ incentives to hoard its slots. Today, US Airways provides nonstop service to 71 airports from Reagan National, and it faces no nonstop competitors on 55 of those routes. After this merger, the number of US Airways routes with no nonstop competition would increase to 59, leaving, at best, only 21 routes at the entire airport with more than one nonstop competitor. Unsurprisingly, Reagan National is US Airways’ second most-profitable airport. 86. Potential entrants would likely not be able to turn to other airlines to obtain slots. When allocating their slots, airlines prioritize their most profitable routes, typically those where they have a frequent, significant pattern of service. If a carrier has a small portfolio of slots, it is likely to allocate almost all of its slots to its most profitable routes. If it has additional slots beyond what is needed to serve those routes, a carrier will then work its way down to other routes or sell or lease those slots to other airlines. Over the last several years, US Airways has purchased nearly all of the slots that might otherwise be available to interested buyers. Thus, before this planned merger, American was the only airline at Reagan National with the practical ability to sell or lease additional slots. 87. In March 2010, American and JetBlue entered into an arrangement in which JetBlue traded slots at New York’s JFK International Airport to American in exchange for American trading slots at Reagan National to JetBlue. And until American reached agreement with 31 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 32 of 57 US Airways to merge, it had been negotiating to sell those slots and ten other Reagan National slots to JetBlue. 88. JetBlue’s entry on four routes, particularly Reagan National to Boston, has generated stiff price competition. Fares on the route have dropped dramatically. US Airways estimated that after JetBlue’s entry, the last-minute fare for travel between Reagan National and Boston dropped by over $700. The combined firm will have the right to terminate the JetBlue leases and thereby eliminate, or at least diminish, JetBlue as a competitor on some or all of these routes. 89. The merger would also eliminate the potential for future head-to-head competition between US Airways and American on flights at Reagan National. In 2011, US Airways planned to start service from Reagan National to Miami and St. Louis, which would directly compete with American’s existing service. US Airways argued to the Department of Transportation that this new competition would “substantial[ly] benefit[]” consumers, and so asked DOT to approve the purchase of slots from Delta that would make the service possible. DOT ultimately approved that purchase. When it developed its plan to merge with American, however, US Airways abandoned its plans to enter those markets and deprived consumers of the “substantial benefits” it had promised. 90. By acquiring American’s slot portfolio, US Airways would eliminate existing and future head-to-head competition, and effectively block other airlines’ competitive entry or expansion. VI. ABSENCE OF COUNTERVAILING FACTORS 91. New entry, or expansion by existing competitors, is unlikely to prevent or remedy the merger’s likely anticompetitive effects. New entrants into a particular market face significant barriers to success, including difficulty in obtaining access to slots and gate facilities; the effects of corporate discount programs offered by dominant incumbents; loyalty to existing frequent 32 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 33 of 57 flyer programs; an unknown brand; and the risk of aggressive responses to new entry by the dominant incumbent carrier. In addition, entry is highly unlikely on routes where the origin or destination airport is another airline’s hub, because the new entrant would face substantial challenges attracting sufficient local passengers to support service. 92. United and Delta are unlikely to expand in the event of anticompetitive price increases or capacity reductions by the merged airline. Indeed, those carriers are likely to benefit from and participate in such conduct by coordinating with the merged firm. 93. The remaining airlines in the United States, including Southwest and JetBlue, have networks and business models that are significantly different from the legacy airlines. In particular, most do not have hub-and-spoke networks. In many relevant markets, these airlines do not offer any service at all, and in other markets, many passengers view them as a less preferred alternative to the legacy carriers. Therefore, competition from Southwest, JetBlue, or other airlines would not be sufficient to prevent the anticompetitive consequences of the merger. 94. There are not sufficient acquisition-specific and cognizable efficiencies that would be passed through to U.S. consumers to rebut the presumption that competition and consumers would likely be harmed by this merger. VII. VIOLATION ALLEGED 95. The effect of the proposed merger, if approved, likely will be to lessen competition substantially, or tend to create a monopoly, in interstate trade and commerce in the relevant markets, in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. 96. Unless enjoined, the proposed merger likely would have the following effects in the relevant markets, among others: 33 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 34 of 57 (a) actual and potential competition between US Airways and American Airlines would be eliminated; (b) competition in general among network airlines would be lessened substantially; (c) ticket prices and ancillary fees would be higher than they otherwise would; (d) industry capacity would be lower than it otherwise would; (e) service would be lessened; and (f) the availability of slots at Reagan National would be significantly impaired. VIII. REQUEST FOR RELIEF 97. Plaintiffs request: (a) that US Airways’ proposed merger with American Airlines be adjudged to violate Section 7 of the Clayton Act, 15 U.S.C. § 18; (b) that Defendants be permanently enjoined from and restrained from carrying out the planned merger of US Airways and American or any other transaction that would combine the two companies; (c) that Plaintiffs be awarded their costs of this action, including attorneys’ fees to Plaintiff States; and (d) that Plaintiffs be awarded such other relief as the Court may deem just and proper. Respectfully submitted this 5th day of September, 2013. 34 Case Document 73 Filed 09/05/13 Page 35 of 57 WILLIAM J. BAE (DC. BAR 324723) I Assistant Attorne General for Antitrust Att ey i Antitrust Division LM US. Department of Justice 450 Fifth Street; N.W., Suite 4100 RENATA B. HESSE (DC. BAR #466107) Washington, DC 20530 Deputy Assistant Attorney General Telephone: (202) 305-0128 Facsimile: (202) 3072784 E-mail: Ryan.Danks@ustj . gov DAVID I. GELFAND (EEOC. BAR #416596) MICHAEL D. BILLIEL (D.C. BAR 394377) Deputy Assistant Attorney General KATHERINE A. CELESTE I J. RICHARD DOIDGE TRACY L. FISHER DAVID Z. GRINGER AMANDA D. KLOVERS CAROLINE E. LAISE JOHN M. (D.C. BAR 418313) WILLIAM M. MARTIN JOSEPH c. MAZUMDAR ROBERT YOUNG (Dc. BAR 248260) ARK w. (D. Di ctor of itiga?on 4' Attorneys for the United States (D.C. BAR #444924) *Attorney of Record Chief TRANSPORTATION, ENERGY AGRICULTURE SECTION KATHLEENS Assistant Chief TRANSPORTATION, ENERGY AGRICULTURE SECTION Case Document 73 Filed 09/05/13 Page 36 of 57 FOR PLAINTIFF STATE OF ARIZONA THOMAS C. HORNE Attorney General ERIC J. BISTROW Chief Deputy THOMAS CHENAL Chief, Public Advocacy Civil Rights Division DENA BENJAMIN Chief3 Consumer Protection Advocacy Section 1M BO ELL Antitrust Be ief Arizona Bar No. 0163 82 1275 West Washington Phoenix, Arizona 85007 Phone: 602?542-7728 Fax: 602-542-9088 Nancybonnell?aazagoov Case Document 73 Filed 09/05/13 Page 37 of 57 FOR PLAINTIFF DISTRICT OF COLUMBIA IRVIN B. NATHAN Attorney General for the District of Columbia ELLEN A. EFROS Deputy Attorney General, Public Interest Division RUSHKOFF (DC. Bar go; $6925) Chief, Public Advocacy Section AEWW NICHOLAS A. BUSH (D.C. Bar No. 1011001) Assistant Attorney General 441 4th Street, N.W., Suite 600 South Washington, DC 20001 Ph: 202-442-9841 Fax: 202-715-7720 nicholas.bush@dc. gov Attorneys for the District of Columbia Case Document 73 Filed 09/05/13 Page 38 of 57 FOR PLAINTIFF STATE OF FLORIDA PAMELA JO BONDI Attorney General of the State of Florida PATRICIA A. Associate Deputy Attorney General Antitrust Division LIZABETH A. BRADY Chief, Multistate Antitrust Enforcement Antitrust Division CHRISTOPHER A. HUNT Assistant Attorney General Antitrust Division 9 Wk- A. BRADY Chief, Mul'tistate Antitrust Enforcement Florida Bar No. 045 7991 The Capitol Tallahassee, FL 32399-1050 Ph: 850?414?2918 Fax: 850-488-9134 Case Document 73 Filed 09/05/13 Page 39 of 57 For Plaintiff State of Michigan Bill Schuette Attorney General . I. . 7 DJ. Pascoe Assistant Attorney General Michigan Bar No. Corporate Oversight Division PO. Box 30755 Lansing, Michigan 48909 Phone: (517) 373-1160 Fax: (517) 335?6755 PascoeDl @Michigan.gov Case Document 73 Filed 09/05/13 Page 40 of 57 FOR PLAINTIFF COMMONWEAITH OF KATHLEEN G. KANE Attorney General ADRIAN R. KING, JR. First Deputy Attorney General JAMES A. DONAHUE, Executive Deputy Attorney General Public Protection Division TRACY W. WERTZ Acting Chief Deputy Attorney General Antitrust Section JENNIFER A. THOMSON Deputy Attorney General Antitrust Segtwion . WINK - a I Met life/v6, ?me: AMES A. DONAHUE, Executive Deputy Attorney Attorney General PA Bar No. 42624 Public Protection Division 14th Floor, Strawberry Square Harrisburg, PA 17120 Ph: 717?787?4530 Fax: 717-787-1190 jdonahue@attorneygeneral. gov Case Document 73 Filed 09/05/13 Page 41 of 57 FOR PLAINTIFF STATE OF TENNESSEE ROBERT E. COOPER, JR. Attorney General and Reporter DOMEN, Senior Antitrust Counsel Tennessee Bar No. 015803 500 Charlotte Avenue Nashville, TN 37202 Ph: 615-253-3327 Fax: 615-532-6951 Vic.Domen@ag.tn. gov Case Document 73 Filed 09/05/13 Page 42 of 57 FOR PLAINTIFF STATE OF TEXAS GREG ABBOTT Attorney General DANIEL HODGE First Assistant Attorney General JOHN B. SCOTT Deputy Attorney General for Civil Litigation JOHN T. Chief, Consumer Protection Division KIM VAN WINKLE Chief, Antitrust Section Consumer Protection Division MARK LEVY Assistant Attorney Gen Texas Bar No. 24014555 300 w. 15th Street, 7'h Floor Austin, Texas 78701 Ph: 512-936-1847 Fax: 512-320-0975 Case Document 73 Filed 09/05/13 Page 43 of 57 FOR PLAINTIFF COMMONWEALTH OF VIRGINIA KENNETH T. CUCCINELLI, II Attorney General PATRICIA L. WEST Chief Deputy Attorney General WESLEY G. RUSSELL, JR. Deputy Attorney General Civil Litigation Division DAVID B. IRVIN Senior Assistant Attorney General and Chief Consumer Protection Section SARAH OXENHAM ALLEN Assistant Attorney General Consumer Protection Section Virginia Bar No. 33217 Of?ce of the Attorney General 900 East Main Street Richmond, VA 23219 Ph: (804) 786-45557 Fax: (804) 786-0122 SOAllen@oa2.state.va.us Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 44 of 57 APPENDIX A CITY PAIRS WHERE THE MERGER IS PRESUMPTIVELY ILLEGAL • HHIs in this appendix are calculated based on publicly available non-stop and onestop airline ticket revenue data for 2012 from Department of Transportation’s Airline Origin and Destination Survey (DB1B) database, available at: http://www.transtats.bts.gov/DatabaseInfo.asp?DB ID=125&Link=0 • Routes are listed only once but include flights at all airports within the metropolitan area and in both directions. For example, the entry CITY PAIR Charlotte, NC (CLT) - Dallas, TX (DFW) Post-Merger HHI 9,324 HHI 4,653 includes flights from Charlotte, North Carolina, to airports in and around Dallas, Texas, including both Dallas-Fort Worth International Airport (DFW) and Love Field (DAL), and it includes flights from both airports to Charlotte. Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 45 of 57 APPENDIX A -- CITY PAIRS WHERE THE MERGER IS PRESUMPTIVELY ILLEGAL CITY PAIR Charlotte, NC (CLT) - Durango, CO (DRO) Charlotte, NC (CLT) - Dallas, TX (DFW) Charlotte, NC (CLT) - St. Croix, VI (STX) Dallas, TX (DFW) - Philadelphia, PA (PHL) Kahului, HI (OGG) - Tampa, FL (TPA) Kapaa, HI (LIH) - St. Louis, MO (STL) Fresno, CA (FAT) - Tampa, FL (TPA) Dallas, TX (DFW) - Phoenix, AZ (PHX) Miami, FL (MIA) - Monterey, CA (MRY) Indianapolis, IN (IND) - Kahului, HI (OGG) El Paso, TX (ELP) - Fresno, CA (FAT) Columbus, OH (CMH) - Palm Springs, CA (PSP) Miami, FL (MIA) - Santa Barbara, CA (SBA) Kapaa, HI (LIH) - Miami, FL (MIA) El Paso, TX (ELP) - Monterey, CA (MRY) Pittsburgh, PA (PIT) - St. Croix, VI (STX) Dallas, TX (DFW) - Greensboro, NC (GSO) Hilo, HI (KOA) - Miami, FL (MIA) Hilo, HI (KOA) - St. Louis, MO (STL) Kahului, HI (OGG) - St. Louis, MO (STL) Dallas, TX (DFW) - Norfolk-Virginia Beach, VA (ORF) Greensboro, NC (GSO) - St. Croix, VI (STX) Monterey, CA (MRY) - St. Louis, MO (STL) El Paso, TX (ELP) - Kapaa, HI (LIH) Charlotte, NC (CLT) - Palm Springs, CA (PSP) Charlotte, NC (CLT) - Fresno, CA (FAT) Fresno, CA (FAT) - Milwaukee, WI (MKE) Palm Springs, CA (PSP) - St. Louis, MO (STL) Austin, TX (AUS) - Santa Barbara, CA (SBA) Dallas, TX (DFW) - Richmond, VA (RIC) Charleston, WV (CRW) - New York, NY (NYC) Kahului, HI (OGG) - Omaha, NE (OMA) Austin, TX (AUS) - Monterey, CA (MRY) Charlotte, NC (CLT) - Kahului, HI (OGG) Austin, TX (AUS) - Kapaa, HI (LIH) Palm Springs, CA (PSP) - Tampa, FL (TPA) Milwaukee, WI (MKE) - Palm Springs, CA (PSP) Chicago, IL (CHI) - Charlottesville, VA (CHO) Fresno, CA (FAT) - Miami, FL (MIA) Post-Merger HHI 10,000 9,324 10,000 9,083 9,040 8,930 8,659 8,921 9,540 8,174 8,320 7,704 8,042 8,439 8,415 10,000 8,120 7,329 7,785 8,888 7,786 10,000 6,982 9,185 8,016 7,903 7,185 6,753 6,499 8,372 6,407 6,897 6,547 10,000 6,499 6,968 6,319 8,865 9,061 ∆ HHI 4,742 4,653 4,647 4,497 4,478 4,448 4,259 4,205 4,079 4,006 3,866 3,703 3,634 3,619 3,612 3,600 3,557 3,528 3,418 3,331 3,312 3,299 3,277 3,206 3,185 3,165 3,164 3,085 3,068 3,048 3,034 3,033 3,027 3,022 3,006 2,985 2,966 2,949 2,948 CITY PAIR Dallas, TX (DFW) - Monterey, CA (MRY) Pittsburgh, PA (PIT) - Palm Springs, CA (PSP) El Paso, TX (ELP) - Honolulu, HI (HNL) Fresno, CA (FAT) - Indianapolis, IN (IND) Fresno, CA (FAT) - San Antonio, TX (SAT) Dallas, TX (DFW) - Kapaa, HI (LIH) Raleigh-Durham, NC (RDU) - St. Thomas, VI (STT) Phoenix, AZ (PHX) - St. Thomas, VI (STT) Austin, TX (AUS) - Palm Springs, CA (PSP) El Paso, TX (ELP) - Kahului, HI (OGG) Columbus, OH (CMH) - Fresno, CA (FAT) Austin, TX (AUS) - Fresno, CA (FAT) Dallas, TX (DFW) - Fresno, CA (FAT) Kansas City, MO (MCI) - Kahului, HI (OGG) Dallas, TX (DFW) - Ontario, CA (ONT) Des Moines, IA (DSM) - Kahului, HI (OGG) Milwaukee, WI (MKE) - Kahului, HI (OGG) Kapaa, HI (LIH) - Tucson, AZ (TUS) Charlotte, NC (CLT) - Reno, NV (RNO) Dallas, TX (DFW) - Hilo, HI (KOA) Detroit, MI (DTW) - Fresno, CA (FAT) Santa Barbara, CA (SBA) - St. Louis, MO (STL) Columbus, OH (CMH) - St. Croix, VI (STX) Albuquerque, NM (ABQ) - Monterey, CA (MRY) El Paso, TX (ELP) - Hilo, HI (KOA) Atlanta, GA (ATL) - Fresno, CA (FAT) Charlotte, NC (CLT) - Tucson, AZ (TUS) Charlotte, NC (CLT) - Ontario, CA (ONT) Fresno, CA (FAT) - Pittsburgh, PA (PIT) Detroit, MI (DTW) - Palm Springs, CA (PSP) Albuquerque, NM (ABQ) - Kapaa, HI (LIH) Charlotte, NC (CLT) - Grand Junction, CO (GJT) Kansas City, MO (MCI) - Palm Springs, CA (PSP) Albuquerque, NM (ABQ) - Santa Barbara, CA (SBA) Hilo, HI (KOA) - Orlando, FL (MCO) Hartford, CT (BDL) - St. Thomas, VI (STT) Charlottesville, VA (CHO) - St. Louis, MO (STL) Dallas, TX (DFW) - Palm Springs, CA (PSP) Miami, FL (MIA) - Palm Springs, CA (PSP) Post-Merger HHI 7,448 6,446 8,116 6,099 6,197 7,991 6,493 6,178 6,428 6,861 6,320 7,074 8,423 6,274 8,978 6,793 6,867 6,680 6,887 6,671 6,057 5,691 8,177 6,759 9,515 5,717 5,647 5,750 6,024 5,443 6,473 6,077 5,473 6,410 5,588 5,373 6,691 8,959 7,592 ∆ HHI 2,938 2,932 2,923 2,905 2,895 2,892 2,845 2,843 2,839 2,808 2,801 2,795 2,774 2,772 2,770 2,753 2,717 2,700 2,672 2,664 2,662 2,656 2,621 2,575 2,574 2,571 2,567 2,503 2,501 2,491 2,484 2,475 2,455 2,455 2,454 2,444 2,438 2,428 2,423 Appendix Page 1 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 46 of 57 APPENDIX A -- CITY PAIRS WHERE THE MERGER IS PRESUMPTIVELY ILLEGAL CITY PAIR Denver, CO (DEN) - St. Thomas, VI (STT) Minneapolis, MN (MSP) - St. Croix, VI (STX) Miami, FL (MIA) - Kahului, HI (OGG) Columbus, OH (CMH) - Kahului, HI (OGG) Philadelphia, PA (PHL) - St. Thomas, VI (STT) Indianapolis, IN (IND) - St. Croix, VI (STX) Dallas, TX (DFW) - Raleigh-Durham, NC (RDU) Palm Springs, CA (PSP) - San Antonio, TX (SAT) Albuquerque, NM (ABQ) - Fresno, CA (FAT) Greensboro, NC (GSO) - Miami, FL (MIA) Charlotte, NC (CLT) - Key West, FL (EYW) Charlotte, NC (CLT) - Orange County, CA (SNA) Albuquerque, NM (ABQ) - Hilo, HI (KOA) Albuquerque, NM (ABQ) - Honolulu, HI (HNL) Monterey, CA (MRY) - Tucson, AZ (TUS) Indianapolis, IN (IND) - Palm Springs, CA (PSP) Dallas, TX (DFW) - Pittsburgh, PA (PIT) Fresno, CA (FAT) - St. Louis, MO (STL) Dallas, TX (DFW) - Westchester County, NY (HPN) Philadelphia, PA (PHL) - Palm Springs, CA (PSP) Atlanta, GA (ATL) - Palm Springs, CA (PSP) Hartford, CT (BDL) - Dallas, TX (DFW) Columbia, SC (CAE) - Dallas, TX (DFW) Raleigh-Durham, NC (RDU) - San Juan, PR (SJU) Philadelphia, PA (PHL) - Tucson, AZ (TUS) Miami, FL (MIA) - Phoenix, AZ (PHX) Phoenix, AZ (PHX) - San Juan, PR (SJU) Chicago, IL (CHI) - Charlotte, NC (CLT) Detroit, MI (DTW) - St. Croix, VI (STX) Chattanooga, TN (CHA) - Chicago, IL (CHI) Charleston, SC (CHS) - Miami, FL (MIA) St. Thomas, VI (STT) - Washington, DC (WAS) Austin, TX (AUS) - Hilo, HI (KOA) Santa Barbara, CA (SBA) - Tucson, AZ (TUS) Boston, MA (BOS) - Key West, FL (EYW) Norfolk-Virginia Beach, VA (ORF) - St. Thomas, VI (STT) Dallas, TX (DFW) - Reno, NV (RNO) San Juan, PR (SJU) - Sacramento, CA (SMF) Boston, MA (BOS) - Palm Springs, CA (PSP) Post-Merger HHI 5,838 5,878 7,973 7,136 9,203 8,140 7,889 5,514 5,708 5,699 5,573 5,196 7,026 5,692 7,706 5,055 8,393 5,756 5,037 6,764 5,169 8,326 7,648 4,765 4,757 4,928 4,755 5,982 8,834 6,818 5,380 4,617 5,363 7,273 6,327 5,239 8,668 4,709 4,922 ∆ HHI 2,407 2,402 2,388 2,383 2,362 2,349 2,341 2,313 2,305 2,278 2,268 2,265 2,237 2,227 2,199 2,198 2,191 2,185 2,168 2,137 2,119 2,118 2,113 2,109 2,098 2,090 2,075 2,051 2,039 2,039 2,037 2,022 2,008 2,004 1,984 1,968 1,953 1,950 1,947 CITY PAIR Kapaa, HI (LIH) - Orlando, FL (MCO) Greensboro, NC (GSO) - St. Thomas, VI (STT) Dallas, TX (DFW) - Savannah, GA (SAV) Hartford, CT (BDL) - Key West, FL (EYW) Dallas, TX (DFW) - Santa Barbara, CA (SBA) Kahului, HI (OGG) - San Antonio, TX (SAT) Las Vegas, NV (LAS) - San Juan, PR (SJU) Nashville, TN (BNA) - St. Thomas, VI (STT) Charlotte, NC (CLT) - Honolulu, HI (HNL) Charleston, SC (CHS) - St. Thomas, VI (STT) Orlando, FL (MCO) - Kahului, HI (OGG) Dallas, TX (DFW) - Sacramento, CA (SMF) Fresno, CA (FAT) - Philadelphia, PA (PHL) Cincinnati, OH (CIN) - St. Croix, VI (STX) Charlotte, NC (CLT) - San Jose, CA (SJC) El Paso, TX (ELP) - Santa Barbara, CA (SBA) Miami, FL (MIA) - Norfolk-Virginia Beach, VA (ORF) Kahului, HI (OGG) - Pittsburgh, PA (PIT) Omaha, NE (OMA) - Palm Springs, CA (PSP) Austin, TX (AUS) - Kahului, HI (OGG) Anchorage, AK (ANC) - El Paso, TX (ELP) Boston, MA (BOS) - Tucson, AZ (TUS) Houston, TX (HOU) - St. Thomas, VI (STT) Dallas, TX (DFW) - Greenville, SC (GSP) Fresno, CA (FAT) - Orlando, FL (MCO) Kahului, HI (OGG) - Tucson, AZ (TUS) Boston, MA (BOS) - Fresno, CA (FAT) Fresno, CA (FAT) - Minneapolis, MN (MSP) Charlottesville, VA (CHO) - Fayetteville, AR (XNA Key West, FL (EYW) - Philadelphia, PA (PHL) Austin, TX (AUS) - Charlotte, NC (CLT) Austin, TX (AUS) - Tucson, AZ (TUS) San Diego, CA (SAN) - San Juan, PR (SJU) Charlottesville, VA (CHO) - Minneapolis, MN (MSP) Fresno, CA (FAT) - Tucson, AZ (TUS) Las Vegas, NV (LAS) - St. Thomas, VI (STT) Charlotte, NC (CLT) - Miami, FL (MIA) San Juan, PR (SJU) - St. Louis, MO (STL) San Antonio, TX (SAT) - Tucson, AZ (TUS) Post-Merger HHI 5,457 5,466 7,094 4,983 6,048 5,275 4,883 5,903 5,637 5,230 4,514 7,494 5,844 8,601 5,038 8,179 4,355 5,506 4,635 5,961 7,220 5,168 7,185 6,372 5,123 5,099 5,173 4,959 5,258 4,530 5,600 5,300 4,198 4,883 7,380 7,530 7,087 4,512 4,923 ∆ HHI 1,946 1,944 1,936 1,931 1,909 1,901 1,885 1,877 1,845 1,844 1,834 1,833 1,831 1,831 1,815 1,805 1,801 1,800 1,799 1,791 1,789 1,780 1,771 1,759 1,750 1,728 1,713 1,705 1,702 1,697 1,693 1,687 1,678 1,669 1,667 1,665 1,646 1,599 1,597 Appendix Page 2 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 47 of 57 APPENDIX A -- CITY PAIRS WHERE THE MERGER IS PRESUMPTIVELY ILLEGAL CITY PAIR Dallas, TX (DFW) - Knoxville, TN (TYS) Greensboro, NC (GSO) - San Juan, PR (SJU) Orlando, FL (MCO) - Palm Springs, CA (PSP) Buffalo, NY (BUF) - Fayetteville, AR (XNA) Syracuse, NY (SYR) - Fayetteville, AR (XNA) Miami, FL (MIA) - Philadelphia, PA (PHL) Honolulu, HI (HNL) - San Antonio, TX (SAT) St. Louis, MO (STL) - St. Thomas, VI (STT) Albuquerque, NM (ABQ) - Charlotte, NC (CLT) Honolulu, HI (HNL) - Omaha, NE (OMA) Charlotte, NC (CLT) - San Antonio, TX (SAT) Norfolk-Virginia Beach, VA (ORF) - San Juan, PR (SJU) Miami, FL (MIA) - Reno, NV (RNO) Orlando, FL (MCO) - Monterey, CA (MRY) Dallas, TX (DFW) - San Jose, CA (SJC) Chattanooga, TN (CHA) - Dallas, TX (DFW) Westchester County, NY (HPN) - Phoenix, AZ (PHX) Charlottesville, VA (CHO) - Dallas, TX (DFW) Richmond, VA (RIC) - St. Thomas, VI (STT) Little Rock, AR (LIT) - Syracuse, NY (SYR) Savannah, GA (SAV) - St. Croix, VI (STX) Seattle, WA (SEA) - San Juan, PR (SJU) Charleston, SC (CHS) - Dallas, TX (DFW) Cleveland, OH (CLE) - St. Croix, VI (STX) Chicago, IL (CHI) - Huntsville, AL (HSV) Cleveland, OH (CLE) - St. Thomas, VI (STT) Minneapolis, MN (MSP) - Kahului, HI (OGG) Chicago, IL (CHI) - St. Thomas, VI (STT) Chicago, IL (CHI) - Palm Springs, CA (PSP) New Orleans, LA (MSY) - St. Thomas, VI (STT) Durango, CO (DRO) - Miami, FL (MIA) Dallas, TX (DFW) - Syracuse, NY (SYR) Charlottesville, VA (CHO) - Des Moines, IA (DSM) Denver, CO (DEN) - San Juan, PR (SJU) Honolulu, HI (HNL) - Tucson, AZ (TUS) Philadelphia, PA (PHL) - Fayetteville, AR (XNA) Des Moines, IA (DSM) - Honolulu, HI (HNL) Minneapolis, MN (MSP) - St. Thomas, VI (STT) Des Moines, IA (DSM) - Reno, NV (RNO) Post-Merger HHI 7,796 4,835 4,336 4,703 4,609 5,610 4,711 6,580 4,986 4,545 5,158 5,474 4,566 5,045 9,421 6,641 4,437 4,745 5,002 4,209 5,215 3,824 5,316 7,993 4,974 4,286 4,426 4,065 6,637 5,276 5,283 4,010 5,161 3,816 4,340 4,537 4,983 4,568 4,282 ∆ HHI 1,589 1,574 1,571 1,555 1,545 1,543 1,541 1,541 1,540 1,531 1,519 1,517 1,502 1,492 1,489 1,489 1,484 1,476 1,466 1,462 1,462 1,462 1,457 1,449 1,446 1,431 1,430 1,425 1,420 1,418 1,417 1,409 1,397 1,381 1,380 1,377 1,371 1,370 1,350 CITY PAIR Philadelphia, PA (PHL) - St. Croix, VI (STX) Honolulu, HI (HNL) - Indianapolis, IN (IND) Boston, MA (BOS) - Fayetteville, AR (XNA) Albuquerque, NM (ABQ) - Kahului, HI (OGG) Charlottesville, VA (CHO) - Phoenix, AZ (PHX) Charlotte, NC (CLT) - El Paso, TX (ELP) Des Moines, IA (DSM) - Fresno, CA (FAT) Dallas, TX (DFW) - San Diego, CA (SAN) Dallas, TX (DFW) - Jacksonville, FL (JAX) Dallas, TX (DFW) - San Juan, PR (SJU) Palm Springs, CA (PSP) - Washington, DC (WAS) Des Moines, IA (DSM) - Tucson, AZ (TUS) Fresno, CA (FAT) - Omaha, NE (OMA) St. Louis, MO (STL) - Tucson, AZ (TUS) Nashville, TN (BNA) - San Juan, PR (SJU) Austin, TX (AUS) - Honolulu, HI (HNL) Key West, FL (EYW) - Raleigh-Durham, NC (RDU) Charlottesville, VA (CHO) - Omaha, NE (OMA) Chattanooga, TN (CHA) - San Francisco, CA (SFO) Columbus, OH (CMH) - Honolulu, HI (HNL) Des Moines, IA (DSM) - Palm Springs, CA (PSP) Washington, DC (WAS) - Fayetteville, AR (XNA) Dallas, TX (DFW) - Huntsville, AL (HSV) Miami, FL (MIA) - Louisville, KY (SDF) Philadelphia, PA (PHL) - San Jose, CA (SJC) Boston, MA (BOS) - Kapaa, HI (LIH) Kahului, HI (OGG) - Philadelphia, PA (PHL) St. Thomas, VI (STT) - Tallahassee, FL (TLH) Raleigh-Durham, NC (RDU) - Fayetteville, AR (XNA) Honolulu, HI (HNL) - Milwaukee, WI (MKE) Fresno, CA (FAT) - Kansas City, MO (MCI) Des Moines, IA (DSM) - Ontario, CA (ONT) Indianapolis, IN (IND) - St. Thomas, VI (STT) Boston, MA (BOS) - Santa Barbara, CA (SBA) New York, NY (NYC) - Palm Springs, CA (PSP) Dallas, TX (DFW) - Washington, DC (WAS) Dallas, TX (DFW) - Tallahassee, FL (TLH) Columbus, OH (CMH) - St. Thomas, VI (STT) Westchester County, NY (HPN) - Louisville, KY (SDF) Post-Merger HHI 9,330 3,926 4,474 5,134 6,867 5,268 5,037 6,869 7,106 7,234 4,360 4,786 3,874 4,306 4,957 4,531 4,746 5,087 5,000 3,984 4,797 4,214 8,135 3,843 3,728 5,009 5,157 5,006 4,878 4,656 3,980 4,661 4,761 5,013 3,955 7,095 5,582 4,530 4,898 ∆ HHI 1,331 1,328 1,327 1,322 1,319 1,317 1,311 1,310 1,304 1,303 1,300 1,292 1,292 1,273 1,262 1,259 1,247 1,237 1,225 1,225 1,223 1,221 1,218 1,217 1,215 1,210 1,199 1,192 1,190 1,187 1,184 1,179 1,179 1,174 1,174 1,163 1,152 1,146 1,145 Appendix Page 3 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 48 of 57 APPENDIX A -- CITY PAIRS WHERE THE MERGER IS PRESUMPTIVELY ILLEGAL CITY PAIR Post-Merger HHI Cincinnati, OH (CIN) - Dallas, TX (DFW) 6,098 Charlotte, NC (CLT) - New York, NY (NYC) 5,427 Hilo, HI (KOA) - Tucson, AZ (TUS) 4,981 Los Angeles, CA (LAX) - St. Thomas, VI (STT) 7,828 Dallas, TX (DFW) - Fort Myers, FL (RSW) 7,652 Dallas, TX (DFW) - Harrisburg, PA (MDT) 3,722 Tampa, FL (TPA) - Tucson, AZ (TUS) 3,663 Dallas, TX (DFW) - Lexington, KY (LEX) 7,647 El Paso, TX (ELP) - Minneapolis, MN (MSP) 5,393 Detroit, MI (DTW) - Kahului, HI (OGG) 4,623 Dallas, TX (DFW) - Tucson, AZ (TUS) 8,370 Orlando, FL (MCO) - Santa Barbara, CA (SBA) 4,729 Chicago, IL (CHI) - Philadelphia, PA (PHL) 3,773 Pittsburgh, PA (PIT) - St. Thomas, VI (STT) 6,199 Chicago, IL (CHI) - Phoenix, AZ (PHX) 3,835 Boston, MA (BOS) - Reno, NV (RNO) 3,228 Miami, FL (MIA) - Washington, DC (WAS) 3,354 Miami, FL (MIA) - Fayetteville, AR (XNA) 5,213 Tampa, FL (TPA) - Fayetteville, AR (XNA) 4,809 Chicago, IL (CHI) - Kapaa, HI (LIH) 4,812 Charlottesville, VA (CHO) - Seattle, WA (SEA) 3,998 Fort Myers, FL (RSW) - Fayetteville, AR (XNA) 4,835 Orlando, FL (MCO) - Tucson, AZ (TUS) 3,508 Dallas, TX (DFW) - Orange County, CA (SNA) 9,283 Charlottesville, VA (CHO) - San Diego, CA (SAN) 3,640 New York, NY (NYC) - Fayetteville, AR (XNA) 4,353 Dallas, TX (DFW) - St. Thomas, VI (STT) 6,531 Norfolk-Virginia Beach, VA (ORF) - Fayetteville, AR (XNA 4,322 Dallas, TX (DFW) - Honolulu, HI (HNL) 6,579 Orlando, FL (MCO) - Fayetteville, AR (XNA) 4,751 Fresno, CA (FAT) - New York, NY (NYC) 4,255 Santa Barbara, CA (SBA) - Salt Lake City, UT (SLC 4,720 Austin, TX (AUS) - Columbia, SC (CAE) 4,351 Fresno, CA (FAT) - Washington, DC (WAS) 4,112 Fresno, CA (FAT) - Houston, TX (HOU) 4,575 Detroit, MI (DTW) - Tucson, AZ (TUS) 3,293 Chicago, IL (CHI) - San Juan, PR (SJU) 4,623 Philadelphia, PA (PHL) - Orange County, CA (SNA) 3,113 Phoenix, AZ (PHX) - Richmond, VA (RIC) 3,462 ∆ HHI 1,143 1,141 1,138 1,136 1,136 1,134 1,128 1,128 1,121 1,115 1,111 1,110 1,110 1,105 1,105 1,097 1,097 1,089 1,089 1,089 1,073 1,066 1,059 1,057 1,055 1,054 1,050 1,049 1,049 1,047 1,046 1,043 1,043 1,038 1,036 1,027 1,023 1,021 1,018 CITY PAIR Cleveland, OH (CLE) - Dallas, TX (DFW) Indianapolis, IN (IND) - Tucson, AZ (TUS) Los Angeles, CA (LAX) - San Juan, PR (SJU) Dallas, TX (DFW) - West Palm Beach (PBI) San Francisco, CA (SFO) - San Juan, PR (SJU) Durango, CO (DRO) - San Antonio, TX (SAT) San Juan, PR (SJU) - Fayetteville, AR (XNA) San Francisco, CA (SFO) - St. Thomas, VI (STT) Ontario, CA (ONT) - Tampa, FL (TPA) Charlotte, NC (CLT) - Los Angeles, CA (LAX) Boston, MA (BOS) - St. Thomas, VI (STT) Boston, MA (BOS) - Little Rock, AR (LIT) Key West, FL (EYW) - Phoenix, AZ (PHX) Westchester County, NY (HPN) - San Diego, CA (SAN) New York, NY (NYC) - Tucson, AZ (TUS) Knoxville, TN (TYS) - Fayetteville, AR (XNA) Harrisburg, PA (MDT) - St. Louis, MO (STL) Louisville, KY (SDF) - San Juan, PR (SJU) New York, NY (NYC) - Ontario, CA (ONT) Boston, MA (BOS) - Ontario, CA (ONT) Charlotte, NC (CLT) - San Diego, CA (SAN) Honolulu, HI (HNL) - Philadelphia, PA (PHL) Pittsburgh, PA (PIT) - Fayetteville, AR (XNA) Ontario, CA (ONT) - San Antonio, TX (SAT) Charleston, SC (CHS) - San Juan, PR (SJU) Dallas, TX (DFW) - Rochester, NY (ROC) Chicago, IL (CHI) - Fresno, CA (FAT) Honolulu, HI (HNL) - St. Louis, MO (STL) Atlanta, GA (ATL) - Grand Junction, CO (GJT) Nashville, TN (BNA) - New York, NY (NYC) Kansas City, MO (MCI) - Tucson, AZ (TUS) St. Louis, MO (STL) - Syracuse, NY (SYR) Birmingham, AL (BHM) - St. Thomas, VI (STT) Huntsville, AL (HSV) - Phoenix, AZ (PHX) Charlottesville, VA (CHO) - Kansas City, MO (MCI) Dallas, TX (DFW) - Kahului, HI (OGG) Detroit, MI (DTW) - St. Thomas, VI (STT) Grand Junction, CO (GJT) - Philadelphia, PA (PHL) Austin, TX (AUS) - Philadelphia, PA (PHL) Post-Merger HHI 4,486 3,763 4,164 8,081 3,252 5,052 4,985 4,846 3,341 5,485 4,575 3,387 5,114 3,559 3,967 4,759 3,526 4,899 3,084 3,066 5,734 3,978 4,235 4,014 5,048 3,776 4,549 4,515 3,588 3,481 3,780 3,539 5,001 3,944 5,451 8,258 3,512 4,499 2,915 ∆ HHI 1,013 1,013 1,012 1,010 1,009 1,007 1,000 995 992 989 979 969 968 965 963 958 954 951 950 928 926 925 917 914 912 910 908 907 893 892 890 890 889 885 883 882 879 878 878 Appendix Page 4 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 49 of 57 APPENDIX A -- CITY PAIRS WHERE THE MERGER IS PRESUMPTIVELY ILLEGAL CITY PAIR Chicago, IL (CHI) - Santa Barbara, CA (SBA) Boston, MA (BOS) - Dallas, TX (DFW) Charlotte, NC (CLT) - San Juan, PR (SJU) Philadelphia, PA (PHL) - San Antonio, TX (SAT) Richmond, VA (RIC) - Fayetteville, AR (XNA) Honolulu, HI (HNL) - Kansas City, MO (MCI) Detroit, MI (DTW) - El Paso, TX (ELP) New York, NY (NYC) - Santa Barbara, CA (SBA) Westchester County, NY (HPN) - Fayetteville, AR (XNA) Chicago, IL (CHI) - West Palm Beach (PBI) Harrisburg, PA (MDT) - Fayetteville, AR (XNA) Columbus, OH (CMH) - Orange County, CA (SNA) Chicago, IL (CHI) - El Paso, TX (ELP) Austin, TX (AUS) - Greensboro, NC (GSO) Montgomery, AL (MGM) - Fayetteville, AR (XNA) Montgomery, AL (MGM) - Phoenix, AZ (PHX) El Paso, TX (ELP) - Philadelphia, PA (PHL) Austin, TX (AUS) - Orange County, CA (SNA) Phoenix, AZ (PHX) - Knoxville, TN (TYS) Westchester County, NY (HPN) - St. Louis, MO (STL) Miami, FL (MIA) - Ontario, CA (ONT) Little Rock, AR (LIT) - Philadelphia, PA (PHL) Dallas, TX (DFW) - Grand Junction, CO (GJT) Birmingham, AL (BHM) - St. Croix, VI (STX) Lexington, KY (LEX) - Phoenix, AZ (PHX) Houston, TX (HOU) - Palm Springs, CA (PSP) Charlotte, NC (CLT) - Fayetteville, AR (XNA) Las Vegas, NV (LAS) - Santa Barbara, CA (SBA) Little Rock, AR (LIT) - Miami, FL (MIA) Orlando, FL (MCO) - Ontario, CA (ONT) Fort Myers, FL (RSW) - St. Thomas, VI (STT) New Orleans, LA (MSY) - San Juan, PR (SJU) Little Rock, AR (LIT) - Rochester, NY (ROC) Kapaa, HI (LIH) - Washington, DC (WAS) Louisville, KY (SDF) - St. Thomas, VI (STT) Columbus, OH (CMH) - Tucson, AZ (TUS) Des Moines, IA (DSM) - Phoenix, AZ (PHX) Charlottesville, VA (CHO) - Denver, CO (DEN) Boston, MA (BOS) - Gainesville, FL (GNV) Post-Merger HHI 4,819 5,606 7,386 2,927 4,157 3,287 4,561 4,872 4,657 6,093 4,567 3,066 5,120 4,490 5,064 5,152 3,902 3,439 3,700 3,322 3,305 3,482 7,233 10,000 4,181 4,929 5,930 5,004 3,847 2,953 5,127 5,674 3,500 4,887 4,886 3,397 5,219 4,302 5,346 ∆ HHI 878 877 875 874 873 869 864 863 863 860 860 855 853 852 848 846 843 843 838 838 837 832 823 821 819 817 816 814 807 805 801 799 799 796 795 785 784 784 783 CITY PAIR Charlottesville, VA (CHO) - Los Angeles, CA (LAX) Charlotte, NC (CLT) - Sacramento, CA (SMF) Austin, TX (AUS) - Richmond, VA (RIC) Pittsburgh, PA (PIT) - Tucson, AZ (TUS) Key West, FL (EYW) - Washington, DC (WAS) Hartford, CT (BDL) - Fayetteville, AR (XNA) Tucson, AZ (TUS) - Washington, DC (WAS) Charlottesville, VA (CHO) - Milwaukee, WI (MKE) Kahului, HI (OGG) - Washington, DC (WAS) Dallas, TX (DFW) - Portland, OR (PDX) Greensboro, NC (GSO) - San Antonio, TX (SAT) Little Rock, AR (LIT) - Harrisburg, PA (MDT) Seattle, WA (SEA) - St. Thomas, VI (STT) San Antonio, TX (SAT) - Orange County, CA (SNA) Dallas, TX (DFW) - Montgomery, AL (MGM) Los Angeles, CA (LAX) - St. Louis, MO (STL) Omaha, NE (OMA) - Tucson, AZ (TUS) Birmingham, AL (BHM) - Miami, FL (MIA) Honolulu, HI (HNL) - Pittsburgh, PA (PIT) El Paso, TX (ELP) - Seattle, WA (SEA) Honolulu, HI (HNL) - Miami, FL (MIA) Honolulu, HI (HNL) - Tampa, FL (TPA) Miami, FL (MIA) - Raleigh-Durham, NC (RDU) Gainesville, FL (GNV) - San Juan, PR (SJU) Dallas, TX (DFW) - New York, NY (NYC) Westchester County, NY (HPN) - Indianapolis, IN (IND) Des Moines, IA (DSM) - San Jose, CA (SJC) Chattanooga, TN (CHA) - Phoenix, AZ (PHX) Columbia, SC (CAE) - Fayetteville, AR (XNA) Detroit, MI (DTW) - Grand Junction, CO (GJT) Little Rock, AR (LIT) - New York, NY (NYC) Chattanooga, TN (CHA) - Los Angeles, CA (LAX) Buffalo, NY (BUF) - Dallas, TX (DFW) Chicago, IL (CHI) - Hilo, HI (KOA) Rochester, NY (ROC) - Fayetteville, AR (XNA) Detroit, MI (DTW) - Ontario, CA (ONT) Miami, FL (MIA) - Tucson, AZ (TUS) Little Rock, AR (LIT) - Raleigh-Durham, NC (RDU) Raleigh-Durham, NC (RDU) - Washington, DC (WAS) Post-Merger HHI 3,900 3,986 3,835 3,255 3,876 4,199 3,981 5,375 4,700 4,765 4,719 4,050 4,204 3,570 8,376 4,736 3,272 3,586 4,474 4,387 4,481 3,403 3,319 6,576 5,162 3,744 3,651 5,224 5,277 3,495 2,997 5,159 3,590 4,809 4,513 2,905 4,278 3,707 3,411 ∆ HHI 782 777 776 773 772 772 767 764 761 756 751 750 748 748 746 744 736 733 729 728 726 725 724 724 723 723 718 718 716 714 712 711 708 708 705 699 696 693 692 Appendix Page 5 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 50 of 57 APPENDIX A -- CITY PAIRS WHERE THE MERGER IS PRESUMPTIVELY ILLEGAL CITY PAIR San Jose, CA (SJC) - St. Louis, MO (STL) Pittsburgh, PA (PIT) - Orange County, CA (SNA) Hartford, CT (BDL) - Phoenix, AZ (PHX) Chicago, IL (CHI) - Tucson, AZ (TUS) West Palm Beach (PBI) - San Francisco, CA (SFO) Durango, CO (DRO) - Tampa, FL (TPA) Boston, MA (BOS) - Kahului, HI (OGG) Miami, FL (MIA) - San Diego, CA (SAN) Richmond, VA (RIC) - St. Louis, MO (STL) Chicago, IL (CHI) - Syracuse, NY (SYR) Philadelphia, PA (PHL) - San Diego, CA (SAN) Columbus, OH (CMH) - New York, NY (NYC) Nashville, TN (BNA) - St. Croix, VI (STX) Phoenix, AZ (PHX) - Fort Myers, FL (RSW) Westchester County, NY (HPN) - Seattle, WA (SEA) Reno, NV (RNO) - Tampa, FL (TPA) Columbus, OH (CMH) - Dallas, TX (DFW) Savannah, GA (SAV) - Fayetteville, AR (XNA) Little Rock, AR (LIT) - Pittsburgh, PA (PIT) Columbia, SC (CAE) - Los Angeles, CA (LAX) New York, NY (NYC) - Reno, NV (RNO) Orange County, CA (SNA) - Tampa, FL (TPA) Albuquerque, NM (ABQ) - Philadelphia, PA (PHL) Westchester County, NY (HPN) - Las Vegas, NV (LAS) Cleveland, OH (CLE) - San Juan, PR (SJU) San Juan, PR (SJU) - Tallahassee, FL (TLH) Cincinnati, OH (CIN) - St. Thomas, VI (STT) Des Moines, IA (DSM) - Philadelphia, PA (PHL) Houston, TX (HOU) - Kahului, HI (OGG) Richmond, VA (RIC) - San Francisco, CA (SFO) Boston, MA (BOS) - Monterey, CA (MRY) Atlanta, GA (ATL) - Kahului, HI (OGG) Dallas, TX (DFW) - Indianapolis, IN (IND) Detroit, MI (DTW) - Key West, FL (EYW) Orlando, FL (MCO) - San Jose, CA (SJC) Gainesville, FL (GNV) - Los Angeles, CA (LAX) Huntsville, AL (HSV) - Syracuse, NY (SYR) Columbus, OH (CMH) - San Jose, CA (SJC) Cincinnati, OH (CIN) - Westchester County, NY (HPN) Post-Merger HHI 3,553 2,862 3,045 4,811 3,238 5,017 4,044 2,993 2,976 4,598 4,906 3,140 9,444 2,711 3,511 3,854 7,592 4,952 3,419 3,605 2,886 2,872 3,204 2,975 3,338 5,177 4,816 3,270 5,285 3,125 5,303 4,665 7,197 5,219 2,754 5,109 4,545 3,066 4,686 ∆ HHI 689 687 687 686 684 682 682 682 681 678 676 674 671 670 668 663 662 659 659 657 656 655 655 655 653 651 649 645 645 645 644 643 643 641 640 639 636 635 634 CITY PAIR West Palm Beach (PBI) - Phoenix, AZ (PHX) Boston, MA (BOS) - Lexington, KY (LEX) Chicago, IL (CHI) - Richmond, VA (RIC) San Juan, PR (SJU) - Knoxville, TN (TYS) Jacksonville, FL (JAX) - Fayetteville, AR (XNA) Pensacola, FL (PNS) - Fayetteville, AR (XNA) Ontario, CA (ONT) - Philadelphia, PA (PHL) Chattanooga, TN (CHA) - Denver, CO (DEN) Kansas City, MO (MCI) - San Juan, PR (SJU) Orange County, CA (SNA) - St. Louis, MO (STL) Columbia, SC (CAE) - San Antonio, TX (SAT) Boston, MA (BOS) - Orange County, CA (SNA) Indianapolis, IN (IND) - San Juan, PR (SJU) Charlottesville, VA (CHO) - San Francisco, CA (SF Ontario, CA (ONT) - Washington, DC (WAS) Milwaukee, WI (MKE) - Tucson, AZ (TUS) Westchester County, NY (HPN) - Little Rock, AR (LIT) Detroit, MI (DTW) - Orange County, CA (SNA) Hartford, CT (BDL) - Little Rock, AR (LIT) Westchester County, NY (HPN) - Minneapolis, MN (MSP) Columbus, OH (CMH) - San Juan, PR (SJU) Chicago, IL (CHI) - Monterey, CA (MRY) Key West, FL (EYW) - San Francisco, CA (SFO) Westchester County, NY (HPN) - Knoxville, TN (TYS) Chattanooga, TN (CHA) - St. Louis, MO (STL) Philadelphia, PA (PHL) - Reno, NV (RNO) Detroit, MI (DTW) - San Juan, PR (SJU) Chicago, IL (CHI) - Harrisburg, PA (MDT) Kansas City, MO (MCI) - Knoxville, TN (TYS) Des Moines, IA (DSM) - West Palm Beach (PBI) Charlotte, NC (CLT) - St. Thomas, VI (STT) Boston, MA (BOS) - Louisville, KY (SDF) Charlotte, NC (CLT) - San Francisco, CA (SFO) Miami, FL (MIA) - San Jose, CA (SJC) Chicago, IL (CHI) - Knoxville, TN (TYS) Lexington, KY (LEX) - Kansas City, MO (MCI) Nashville, TN (BNA) - Rochester, NY (ROC) West Palm Beach (PBI) - Fayetteville, AR (XNA) Hilo, HI (KOA) - New York, NY (NYC) Post-Merger HHI 3,204 4,454 4,250 4,579 5,211 4,492 3,569 5,343 3,085 3,356 4,511 3,047 3,250 4,599 2,910 2,533 4,494 2,798 3,258 3,448 3,131 5,356 6,164 4,688 5,385 3,257 3,339 4,947 4,543 5,020 9,177 3,335 6,566 3,313 4,427 3,795 3,840 5,232 2,683 ∆ HHI 633 630 628 628 624 622 620 614 612 609 606 606 605 605 604 602 601 601 599 596 594 591 591 589 587 586 583 583 580 580 579 577 577 577 575 570 567 566 565 Appendix Page 6 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 51 of 57 APPENDIX A -- CITY PAIRS WHERE THE MERGER IS PRESUMPTIVELY ILLEGAL CITY PAIR Nashville, TN (BNA) - Westchester County, NY (HPN) St. Thomas, VI (STT) - Knoxville, TN (TYS) Minneapolis, MN (MSP) - San Juan, PR (SJU) Jacksonville, FL (JAX) - Phoenix, AZ (PHX) Minneapolis, MN (MSP) - Ontario, CA (ONT) Fort Myers, FL (RSW) - San Francisco, CA (SFO) Pittsburgh, PA (PIT) - San Jose, CA (SJC) Columbus, OH (CMH) - Westchester County, NY (HPN) Detroit, MI (DTW) - Reno, NV (RNO) Charleston, SC (CHS) - Key West, FL (EYW) San Antonio, TX (SAT) - Savannah, GA (SAV) Chattanooga, TN (CHA) - Seattle, WA (SEA) Austin, TX (AUS) - Ontario, CA (ONT) Los Angeles, CA (LAX) - Richmond, VA (RIC) Monterey, CA (MRY) - New York, NY (NYC) San Antonio, TX (SAT) - Knoxville, TN (TYS) San Antonio, TX (SAT) - San Jose, CA (SJC) Des Moines, IA (DSM) - Knoxville, TN (TYS) Westchester County, NY (HPN) - Los Angeles, CA (LAX) Charlotte, NC (CLT) - Denver, CO (DEN) Phoenix, AZ (PHX) - Syracuse, NY (SYR) Richmond, VA (RIC) - Seattle, WA (SEA) Birmingham, AL (BHM) - San Juan, PR (SJU) New York, NY (NYC) - Kahului, HI (OGG) Norfolk-Virginia Beach, VA (ORF) - Phoenix, AZ (PHX) Chicago, IL (CHI) - San Jose, CA (SJC) Orlando, FL (MCO) - Orange County, CA (SNA) Baton Rouge, LA (BTR) - Lexington, KY (LEX) Dallas, TX (DFW) - Tampa, FL (TPA) Austin, TX (AUS) - Reno, NV (RNO) Santa Barbara, CA (SBA) - Washington, DC (WAS) Gainesville, FL (GNV) - New York, NY (NYC) Charlotte, NC (CLT) - Kansas City, MO (MCI) Charlotte, NC (CLT) - Phoenix, AZ (PHX) Montgomery, AL (MGM) - San Francisco, CA (SFO) Hilo, HI (KOA) - Washington, DC (WAS) San Diego, CA (SAN) - Tampa, FL (TPA) Chicago, IL (CHI) - St. Croix, VI (STX) Charlottesville, VA (CHO) - Little Rock, AR (LIT) Post-Merger HHI 4,351 5,261 3,176 3,050 2,857 2,681 2,903 6,310 3,275 5,545 4,287 5,320 4,018 2,905 5,542 4,405 4,077 4,300 3,258 5,189 3,298 3,084 5,331 2,993 3,132 4,802 2,750 4,938 6,378 4,193 5,304 4,830 5,296 6,243 5,057 4,514 2,600 9,841 5,886 ∆ HHI 565 564 564 564 563 563 560 560 558 557 555 555 552 552 551 551 548 548 548 546 544 544 543 543 541 539 537 535 535 534 533 533 533 530 529 529 528 528 527 CITY PAIR Denver, CO (DEN) - Lexington, KY (LEX) Kapaa, HI (LIH) - Phoenix, AZ (PHX) San Antonio, TX (SAT) - Sacramento, CA (SMF) Phoenix, AZ (PHX) - Tallahassee, FL (TLH) Key West, FL (EYW) - Greensboro, NC (GSO) Chicago, IL (CHI) - Jacksonville, FL (JAX) Pittsburgh, PA (PIT) - San Juan, PR (SJU) Greensboro, NC (GSO) - Fayetteville, AR (XNA) Boston, MA (BOS) - Des Moines, IA (DSM) Columbus, OH (CMH) - Fayetteville, AR (XNA) Charlotte, NC (CLT) - Seattle, WA (SEA) Dallas, TX (DFW) - Los Angeles, CA (LAX) Denver, CO (DEN) - Richmond, VA (RIC) Kapaa, HI (LIH) - New York, NY (NYC) Phoenix, AZ (PHX) - Fort Walton Beach, FL (VPS) Omaha, NE (OMA) - San Juan, PR (SJU) Los Angeles, CA (LAX) - Tallahassee, FL (TLH) Kansas City, MO (MCI) - Syracuse, NY (SYR) Miami, FL (MIA) - Sacramento, CA (SMF) Cincinnati, OH (CIN) - San Juan, PR (SJU) Greenville, SC (GSP) - Fayetteville, AR (XNA) Nashville, TN (BNA) - Washington, DC (WAS) Dallas, TX (DFW) - Salt Lake City, UT (SLC) Boston, MA (BOS) - Hilo, HI (KOA) Dallas, TX (DFW) - Las Vegas, NV (LAS) Des Moines, IA (DSM) - Raleigh-Durham, NC (RDU) Dallas, TX (DFW) - Fort Walton Beach, FL (VPS) Charlottesville, VA (CHO) - Las Vegas, NV (LAS) Des Moines, IA (DSM) - Jacksonville, FL (JAX) Ontario, CA (ONT) - St. Louis, MO (STL) Omaha, NE (OMA) - Syracuse, NY (SYR) San Jose, CA (SJC) - Tampa, FL (TPA) Orlando, FL (MCO) - Reno, NV (RNO) Charleston, SC (CHS) - St. Croix, VI (STX) Raleigh-Durham, NC (RDU) - Seattle, WA (SEA) Greensboro, NC (GSO) - Los Angeles, CA (LAX) Los Angeles, CA (LAX) - Raleigh-Durham, NC (RDU) Denver, CO (DEN) - Montgomery, AL (MGM) Nashville, TN (BNA) - Charlottesville, VA (CHO) Post-Merger HHI 3,415 4,543 3,274 5,470 5,612 2,959 4,171 4,916 2,605 4,343 4,926 5,187 2,855 2,752 3,529 3,521 5,315 3,349 2,774 3,442 5,272 4,076 4,506 4,509 6,373 3,832 9,022 5,346 4,522 3,842 3,346 3,037 3,072 9,341 2,590 3,342 2,869 5,661 6,270 ∆ HHI 526 526 524 523 523 520 520 519 518 517 517 516 516 514 512 508 504 504 503 502 501 499 499 498 498 498 496 495 495 493 491 490 488 488 487 484 481 476 476 Appendix Page 7 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 52 of 57 APPENDIX A -- CITY PAIRS WHERE THE MERGER IS PRESUMPTIVELY ILLEGAL CITY PAIR Columbus, OH (CMH) - Reno, NV (RNO) Kahului, HI (OGG) - Phoenix, AZ (PHX) El Paso, TX (ELP) - Milwaukee, WI (MKE) Kansas City, MO (MCI) - Philadelphia, PA (PHL) Harrisburg, PA (MDT) - Phoenix, AZ (PHX) Cincinnati, OH (CIN) - Rochester, NY (ROC) Kansas City, MO (MCI) - Orange County, CA (SNA) Boston, MA (BOS) - Honolulu, HI (HNL) Little Rock, AR (LIT) - Richmond, VA (RIC) Chicago, IL (CHI) - Kahului, HI (OGG) Richmond, VA (RIC) - San Diego, CA (SAN) Durango, CO (DRO) - Philadelphia, PA (PHL) Detroit, MI (DTW) - Gulfport, MS (GPT) Cincinnati, OH (CIN) - Little Rock, AR (LIT) Key West, FL (EYW) - St. Louis, MO (STL) Atlanta, GA (ATL) - San Jose, CA (SJC) Des Moines, IA (DSM) - Montgomery, AL (MGM) Los Angeles, CA (LAX) - Montgomery, AL (MGM) San Francisco, CA (SFO) - Tallahassee, FL (TLH) Detroit, MI (DTW) - San Jose, CA (SJC) Hartford, CT (BDL) - Los Angeles, CA (LAX) Little Rock, AR (LIT) - Fort Myers, FL (RSW) El Paso, TX (ELP) - New York, NY (NYC) Chattanooga, TN (CHA) - Syracuse, NY (SYR) Columbus, OH (CMH) - Los Angeles, CA (LAX) Raleigh-Durham, NC (RDU) - San Francisco, CA (SFO) Charlotte, NC (CLT) - St. Louis, MO (STL) Denver, CO (DEN) - Fort Walton Beach, FL (VPS) Los Angeles, CA (LAX) - West Palm Beach (PBI) Miami, FL (MIA) - Orange County, CA (SNA) Rochester, NY (ROC) - Louisville, KY (SDF) Nashville, TN (BNA) - Syracuse, NY (SYR) Houston, TX (HOU) - Lexington, KY (LEX) Westchester County, NY (HPN) - Kansas City, MO (MCI) New York, NY (NYC) - Raleigh-Durham, NC (RDU) Indianapolis, IN (IND) - San Jose, CA (SJC) Omaha, NE (OMA) - West Palm Beach (PBI) Anchorage, AK (ANC) - Columbus, OH (CMH) Key West, FL (EYW) - New York, NY (NYC) Post-Merger HHI 4,533 4,623 3,620 4,543 3,941 3,105 2,507 4,142 4,152 4,738 3,411 5,257 4,883 4,541 4,897 3,691 5,393 5,000 5,781 2,931 2,629 4,582 4,710 5,225 2,829 2,659 6,103 3,761 3,421 3,141 3,431 4,010 3,989 3,029 2,628 3,193 4,576 3,993 3,735 ∆ HHI 476 475 474 474 474 473 472 472 471 467 466 466 465 461 460 458 456 456 455 454 451 451 450 450 450 447 447 446 445 442 441 440 440 439 439 437 436 435 434 CITY PAIR Post-Merger HHI Pittsburgh, PA (PIT) - San Diego, CA (SAN) 2,625 El Paso, TX (ELP) - Portland, OR (PDX) 4,077 Chicago, IL (CHI) - Mobile, AL (MOB) 4,718 Los Angeles, CA (LAX) - Lexington, KY (LEX) 3,480 Chattanooga, TN (CHA) - Las Vegas, NV (LAS) 5,739 Chicago, IL (CHI) - Reno, NV (RNO) 4,145 New York, NY (NYC) - St. Thomas, VI (STT) 4,727 Des Moines, IA (DSM) - Syracuse, NY (SYR) 3,540 Raleigh-Durham, NC (RDU) - San Antonio, TX (SAT) 2,819 Gainesville, FL (GNV) - Philadelphia, PA (PHL) 5,296 Norfolk-Virginia Beach, VA (ORF) - San Francisco, CA (SFO 2,619 San Francisco, CA (SFO) - Tampa, FL (TPA) 2,503 Raleigh-Durham, NC (RDU) - San Diego, CA (SAN) 2,545 Indianapolis, IN (IND) - Miami, FL (MIA) 3,367 Las Vegas, NV (LAS) - Miami, FL (MIA) 3,416 Pittsburgh, PA (PIT) - Reno, NV (RNO) 3,770 Indianapolis, IN (IND) - Ontario, CA (ONT) 4,118 Dallas, TX (DFW) - Orlando, FL (MCO) 6,437 Las Vegas, NV (LAS) - Richmond, VA (RIC) 2,632 Mobile, AL (MOB) - Phoenix, AZ (PHX) 3,393 Tallahassee, FL (TLH) - Fayetteville, AR (XNA) 5,582 Key West, FL (EYW) - Las Vegas, NV (LAS) 5,533 Mobile, AL (MOB) - St. Louis, MO (STL) 4,683 Ontario, CA (ONT) - Pittsburgh, PA (PIT) 3,463 Chattanooga, TN (CHA) - San Diego, CA (SAN) 5,736 Des Moines, IA (DSM) - San Diego, CA (SAN) 2,991 Montgomery, AL (MGM) - Seattle, WA (SEA) 5,549 Houston, TX (HOU) - Hilo, HI (KOA) 5,437 Nashville, TN (BNA) - Key West, FL (EYW) 4,663 Jacksonville, FL (JAX) - St. Thomas, VI (STT) 3,969 Charlotte, NC (CLT) - Omaha, NE (OMA) 4,495 Richmond, VA (RIC) - San Antonio, TX (SAT) 3,512 West Palm Beach (PBI) - St. Louis, MO (STL) 3,500 Boston, MA (BOS) - Huntsville, AL (HSV) 3,855 Philadelphia, PA (PHL) - San Juan, PR (SJU) 8,844 Columbus, OH (CMH) - Miami, FL (MIA) 3,540 Hartford, CT (BDL) - Baton Rouge, LA (BTR) 5,950 San Jose, CA (SJC) - Washington, DC (WAS) 2,594 Jackson, MS (JAN) - Phoenix, AZ (PHX) 2,850 ∆ HHI 431 431 431 431 431 430 430 430 429 428 427 427 426 426 424 423 421 419 418 415 415 415 415 414 413 413 412 411 404 404 404 403 403 402 400 399 398 397 397 Appendix Page 8 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 53 of 57 APPENDIX A -- CITY PAIRS WHERE THE MERGER IS PRESUMPTIVELY ILLEGAL CITY PAIR Las Vegas, NV (LAS) - Harrisburg, PA (MDT) Austin, TX (AUS) - San Juan, PR (SJU) Reno, NV (RNO) - Washington, DC (WAS) Austin, TX (AUS) - Harrisburg, PA (MDT) Monterey, CA (MRY) - Phoenix, AZ (PHX) Boston, MA (BOS) - San Antonio, TX (SAT) Phoenix, AZ (PHX) - Pensacola, FL (PNS) Columbus, OH (CMH) - Ontario, CA (ONT) Denver, CO (DEN) - West Palm Beach (PBI) Baton Rouge, LA (BTR) - San Juan, PR (SJU) Austin, TX (AUS) - Durango, CO (DRO) Miami, FL (MIA) - Pittsburgh, PA (PIT) Austin, TX (AUS) - Charlottesville, VA (CHO) Baton Rouge, LA (BTR) - Columbus, OH (CMH) Phoenix, AZ (PHX) - Tampa, FL (TPA) Cleveland, OH (CLE) - Fayetteville, AR (XNA) Chattanooga, TN (CHA) - Houston, TX (HOU) Charlotte, NC (CLT) - Portland, OR (PDX) Chicago, IL (CHI) - Fort Walton Beach, FL (VPS) Atlanta, GA (ATL) - Reno, NV (RNO) Austin, TX (AUS) - Raleigh-Durham, NC (RDU) Miami, FL (MIA) - Richmond, VA (RIC) Charlotte, NC (CLT) - Las Vegas, NV (LAS) El Paso, TX (ELP) - Los Angeles, CA (LAX) Lexington, KY (LEX) - Syracuse, NY (SYR) Miami, FL (MIA) - Salt Lake City, UT (SLC) Memphis, TN (MEM) - San Juan, PR (SJU) New York, NY (NYC) - Washington, DC (WAS) Minneapolis, MN (MSP) - Tucson, AZ (TUS) Detroit, MI (DTW) - Fayetteville, AR (XNA) Baton Rouge, LA (BTR) - Richmond, VA (RIC) Des Moines, IA (DSM) - Orange County, CA (SNA) Dallas, TX (DFW) - Louisville, KY (SDF) Kahului, HI (OGG) - Salt Lake City, UT (SLC) Boston, MA (BOS) - Phoenix, AZ (PHX) Fort Myers, FL (RSW) - San Juan, PR (SJU) Columbus, OH (CMH) - San Diego, CA (SAN) Anchorage, AK (ANC) - Tampa, FL (TPA) Buffalo, NY (BUF) - Little Rock, AR (LIT) Post-Merger HHI 3,460 2,692 2,700 3,369 9,083 3,126 3,086 3,863 3,280 5,023 3,946 4,372 4,508 4,922 4,075 3,346 5,565 3,828 5,381 3,073 2,774 3,155 5,711 5,469 4,516 3,320 4,175 3,200 4,208 5,675 5,129 3,145 6,997 3,497 3,563 4,369 2,702 3,503 2,779 ∆ HHI 396 396 395 394 393 393 392 390 390 390 389 389 386 386 385 385 384 381 381 380 379 378 377 377 377 375 372 372 372 371 371 371 370 370 369 368 366 365 365 CITY PAIR Post-Merger HHI Reno, NV (RNO) - San Antonio, TX (SAT) 4,524 Chattanooga, TN (CHA) - Fayetteville, AR (XNA) 6,035 Chicago, IL (CHI) - Tallahassee, FL (TLH) 5,407 Austin, TX (AUS) - Los Angeles, CA (LAX) 3,130 Austin, TX (AUS) - Sacramento, CA (SMF) 3,323 Chattanooga, TN (CHA) - Kansas City, MO (MCI) 5,869 Gulfport, MS (GPT) - Minneapolis, MN (MSP) 5,688 Houston, TX (HOU) - Kapaa, HI (LIH) 5,668 Boston, MA (BOS) - El Paso, TX (ELP) 5,456 Atlanta, GA (ATL) - Ontario, CA (ONT) 3,281 Columbus, OH (CMH) - Syracuse, NY (SYR) 3,973 Kansas City, MO (MCI) - Raleigh-Durham, NC (RDU) 3,046 Little Rock, AR (LIT) - West Palm Beach (PBI) 5,040 Des Moines, IA (DSM) - Sacramento, CA (SMF) 2,629 Seattle, WA (SEA) - Fort Walton Beach, FL (VPS) 3,723 Austin, TX (AUS) - Huntsville, AL (HSV) 3,718 Des Moines, IA (DSM) - Greenville, SC (GSP) 4,251 New York, NY (NYC) - Norfolk-Virginia Beach, VA (ORF) 3,091 Gainesville, FL (GNV) - Louisville, KY (SDF) 5,418 Chicago, IL (CHI) - Raleigh-Durham, NC (RDU) 3,326 Denver, CO (DEN) - Kapaa, HI (LIH) 5,728 St. Louis, MO (STL) - Knoxville, TN (TYS) 5,379 Rochester, NY (ROC) - St. Louis, MO (STL) 3,063 Harrisburg, PA (MDT) - Seattle, WA (SEA) 3,640 Charlotte, NC (CLT) - Des Moines, IA (DSM) 4,500 Fort Myers, FL (RSW) - San Diego, CA (SAN) 2,930 Jacksonville, FL (JAX) - San Francisco, CA (SFO) 2,638 Orange County, CA (SNA) - Washington, DC (WAS) 2,798 Reno, NV (RNO) - St. Louis, MO (STL) 3,938 West Palm Beach (PBI) - Seattle, WA (SEA) 3,470 Los Angeles, CA (LAX) - Fort Myers, FL (RSW) 2,683 Charlotte, NC (CLT) - Salt Lake City, UT (SLC) 5,011 Lexington, KY (LEX) - San Francisco, CA (SFO) 3,416 Austin, TX (AUS) - Lexington, KY (LEX) 4,331 Des Moines, IA (DSM) - Mobile, AL (MOB) 4,564 El Paso, TX (ELP) - Salt Lake City, UT (SLC) 4,641 Austin, TX (AUS) - Savannah, GA (SAV) 4,641 Houston, TX (HOU) - Norfolk-Virginia Beach, VA (ORF) 2,739 Baton Rouge, LA (BTR) - Cincinnati, OH (CIN) 4,797 ∆ HHI 361 360 358 357 357 356 353 353 352 352 352 351 350 350 349 349 348 346 346 346 345 345 343 342 342 342 342 341 340 339 339 338 338 337 336 336 334 334 333 Appendix Page 9 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 54 of 57 APPENDIX A -- CITY PAIRS WHERE THE MERGER IS PRESUMPTIVELY ILLEGAL CITY PAIR Post-Merger HHI Key West, FL (EYW) - Richmond, VA (RIC) 5,833 San Jose, CA (SJC) - Tucson, AZ (TUS) 5,027 Dallas, TX (DFW) - Detroit, MI (DTW) 4,001 Little Rock, AR (LIT) - Washington, DC (WAS) 3,013 Kansas City, MO (MCI) - Ontario, CA (ONT) 3,922 Huntsville, AL (HSV) - Kansas City, MO (MCI) 5,947 Boston, MA (BOS) - Grand Junction, CO (GJT) 5,419 Omaha, NE (OMA) - Orange County, CA (SNA) 2,541 Pensacola, FL (PNS) - San Juan, PR (SJU) 4,740 El Paso, TX (ELP) - San Jose, CA (SJC) 5,326 Durango, CO (DRO) - Pittsburgh, PA (PIT) 6,192 Chicago, IL (CHI) - Rochester, NY (ROC) 5,020 Memphis, TN (MEM) - Miami, FL (MIA) 4,462 Des Moines, IA (DSM) - Miami, FL (MIA) 3,715 Kansas City, MO (MCI) - Mobile, AL (MOB) 3,917 Des Moines, IA (DSM) - Gulfport, MS (GPT) 4,617 Cleveland, OH (CLE) - Miami, FL (MIA) 3,748 Dallas, TX (DFW) - Miami, FL (MIA) 6,662 Kansas City, MO (MCI) - Fort Walton Beach, FL (VP 4,599 Anchorage, AK (ANC) - Charlotte, NC (CLT) 4,572 Pittsburgh, PA (PIT) - San Antonio, TX (SAT) 2,599 Los Angeles, CA (LAX) - Knoxville, TN (TYS) 3,201 Des Moines, IA (DSM) - Washington, DC (WAS) 3,420 Kansas City, MO (MCI) - Harrisburg, PA (MDT) 3,532 Baton Rouge, LA (BTR) - Raleigh-Durham, NC (RDU) 4,815 Columbus, OH (CMH) - San Francisco, CA (SFO) 2,615 Grand Junction, CO (GJT) - Tampa, FL (TPA) 5,003 Jacksonville, FL (JAX) - Omaha, NE (OMA) 5,067 St. Louis, MO (STL) - Tallahassee, FL (TLH) 5,690 Indianapolis, IN (IND) - Los Angeles, CA (LAX) 2,535 Greenville, SC (GSP) - Los Angeles, CA (LAX) 3,094 Greensboro, NC (GSO) - Phoenix, AZ (PHX) 4,397 Hartford, CT (BDL) - New Orleans, LA (MSY) 2,920 Los Angeles, CA (LAX) - Norfolk-Virginia Beach, VA (ORF 2,594 Chattanooga, TN (CHA) - San Antonio, TX (SAT) 5,910 Jacksonville, FL (JAX) - Seattle, WA (SEA) 2,844 Hartford, CT (BDL) - San Diego, CA (SAN) 2,509 San Antonio, TX (SAT) - San Juan, PR (SJU) 2,667 Baton Rouge, LA (BTR) - Washington, DC (WAS) 3,742 ∆ HHI 332 331 330 329 328 328 328 327 327 327 326 326 325 324 323 323 321 321 321 321 321 320 320 319 318 317 317 317 316 316 316 315 315 314 313 313 312 311 311 CITY PAIR Harrisburg, PA (MDT) - San Antonio, TX (SAT) Nashville, TN (BNA) - Harrisburg, PA (MDT) Cleveland, OH (CLE) - Westchester County, NY (HPN) Harrisburg, PA (MDT) - Miami, FL (MIA) Boston, MA (BOS) - Fort Walton Beach, FL (VPS) San Juan, PR (SJU) - Salt Lake City, UT (SLC) Austin, TX (AUS) - Hartford, CT (BDL) Des Moines, IA (DSM) - Pittsburgh, PA (PIT) Des Moines, IA (DSM) - Los Angeles, CA (LAX) Chattanooga, TN (CHA) - Minneapolis, MN (MSP) Des Moines, IA (DSM) - Richmond, VA (RIC) Milwaukee, WI (MKE) - San Jose, CA (SJC) Omaha, NE (OMA) - Tallahassee, FL (TLH) Columbia, SC (CAE) - Kansas City, MO (MCI) San Diego, CA (SAN) - Syracuse, NY (SYR) Los Angeles, CA (LAX) - Pittsburgh, PA (PIT) Westchester County, NY (HPN) - San Francisco, CA (SFO) Boston, MA (BOS) - Tallahassee, FL (TLH) Dallas, TX (DFW) - St. Croix, VI (STX) Little Rock, AR (LIT) - Orlando, FL (MCO) Seattle, WA (SEA) - Syracuse, NY (SYR) Chicago, IL (CHI) - Key West, FL (EYW) Sacramento, CA (SMF) - St. Louis, MO (STL) Cincinnati, OH (CIN) - Miami, FL (MIA) Austin, TX (AUS) - Norfolk-Virginia Beach, VA (ORF) Seattle, WA (SEA) - Tallahassee, FL (TLH) Gainesville, FL (GNV) - New Orleans, LA (MSY) Phoenix, AZ (PHX) - Savannah, GA (SAV) Huntsville, AL (HSV) - Las Vegas, NV (LAS) Omaha, NE (OMA) - Raleigh-Durham, NC (RDU) Miami, FL (MIA) - St. Louis, MO (STL) Huntsville, AL (HSV) - Seattle, WA (SEA) Westchester County, NY (HPN) - Memphis, TN (MEM) Hilo, HI (KOA) - Phoenix, AZ (PHX) Monterey, CA (MRY) - Washington, DC (WAS) Austin, TX (AUS) - Pittsburgh, PA (PIT) Gulfport, MS (GPT) - New York, NY (NYC) Boston, MA (BOS) - Baton Rouge, LA (BTR) El Paso, TX (ELP) - Pittsburgh, PA (PIT) Post-Merger HHI 3,358 3,909 4,704 5,288 4,955 4,901 2,809 3,185 2,525 6,035 3,387 3,322 6,189 4,527 2,797 2,933 4,195 5,024 10,000 4,050 2,852 3,494 2,582 4,935 2,846 6,209 6,300 4,230 3,885 2,818 3,803 3,345 4,067 4,454 5,619 2,609 4,484 4,280 3,986 ∆ HHI 311 310 310 310 309 309 309 308 308 307 307 307 307 306 306 306 305 304 303 303 301 300 299 299 299 298 298 297 297 297 297 296 295 295 295 295 295 293 293 Appendix Page 10 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 55 of 57 APPENDIX A -- CITY PAIRS WHERE THE MERGER IS PRESUMPTIVELY ILLEGAL CITY PAIR Little Rock, AR (LIT) - Tampa, FL (TPA) Key West, FL (EYW) - Louisville, KY (SDF) Greensboro, NC (GSO) - San Diego, CA (SAN) San Francisco, CA (SFO) - St. Louis, MO (STL) San Francisco, CA (SFO) - Fort Walton Beach, FL ( Hartford, CT (BDL) - San Juan, PR (SJU) Fort Myers, FL (RSW) - San Antonio, TX (SAT) Fresno, CA (FAT) - Phoenix, AZ (PHX) Philadelphia, PA (PHL) - Sacramento, CA (SMF) Chicago, IL (CHI) - Gulfport, MS (GPT) Memphis, TN (MEM) - Phoenix, AZ (PHX) Charleston, SC (CHS) - Los Angeles, CA (LAX) Los Angeles, CA (LAX) - Harrisburg, PA (MDT) Honolulu, HI (HNL) - Orlando, FL (MCO) Denver, CO (DEN) - Greensboro, NC (GSO) St. Louis, MO (STL) - St. Croix, VI (STX) Harrisburg, PA (MDT) - Louisville, KY (SDF) Lexington, KY (LEX) - Fayetteville, AR (XNA) Jackson, MS (JAN) - Minneapolis, MN (MSP) Hartford, CT (BDL) - Fort Walton Beach, FL (VPS) Gulfport, MS (GPT) - Phoenix, AZ (PHX) Montgomery, AL (MGM) - Minneapolis, MN (MSP) Syracuse, NY (SYR) - Knoxville, TN (TYS) West Palm Beach (PBI) - San Diego, CA (SAN) Sacramento, CA (SMF) - Tampa, FL (TPA) Little Rock, AR (LIT) - Norfolk-Virginia Beach, VA (ORF) Omaha, NE (OMA) - Pensacola, FL (PNS) Orlando, FL (MCO) - Phoenix, AZ (PHX) Dallas, TX (DFW) - Gainesville, FL (GNV) Indianapolis, IN (IND) - Syracuse, NY (SYR) New York, NY (NYC) - Tallahassee, FL (TLH) Jackson, MS (JAN) - New York, NY (NYC) St. Louis, MO (STL) - Washington, DC (WAS) Westchester County, NY (HPN) - Lexington, KY (LEX) Denver, CO (DEN) - Mobile, AL (MOB) Philadelphia, PA (PHL) - Seattle, WA (SEA) San Antonio, TX (SAT) - San Francisco, CA (SFO) Jacksonville, FL (JAX) - Little Rock, AR (LIT) Des Moines, IA (DSM) - Huntsville, AL (HSV) Post-Merger HHI 3,930 6,170 4,099 2,810 3,454 5,673 2,676 9,574 2,877 4,618 4,808 3,071 3,884 2,888 3,382 9,073 3,581 4,320 4,719 5,478 4,028 6,343 4,611 3,433 2,501 3,660 4,733 4,009 6,248 3,346 4,681 3,886 3,562 4,864 3,366 4,261 3,404 5,509 5,237 ∆ HHI 293 293 293 293 293 292 291 290 290 289 289 289 288 288 287 287 287 287 287 287 286 286 286 286 285 285 285 283 283 283 282 282 281 280 280 280 279 278 278 CITY PAIR Key West, FL (EYW) - Pittsburgh, PA (PIT) Houston, TX (HOU) - San Juan, PR (SJU) Columbus, OH (CMH) - El Paso, TX (ELP) Louisville, KY (SDF) - Syracuse, NY (SYR) Greenville, SC (GSP) - Phoenix, AZ (PHX) Harrisburg, PA (MDT) - San Diego, CA (SAN) Phoenix, AZ (PHX) - Rochester, NY (ROC) Kansas City, MO (MCI) - Rochester, NY (ROC) Baton Rouge, LA (BTR) - Philadelphia, PA (PHL) El Paso, TX (ELP) - Indianapolis, IN (IND) Columbus, OH (CMH) - Little Rock, AR (LIT) Hartford, CT (BDL) - San Francisco, CA (SFO) St. Thomas, VI (STT) - Tampa, FL (TPA) Kansas City, MO (MCI) - West Palm Beach (PBI) Huntsville, AL (HSV) - Minneapolis, MN (MSP) El Paso, TX (ELP) - Palm Springs, CA (PSP) Columbus, OH (CMH) - Seattle, WA (SEA) Lexington, KY (LEX) - New York, NY (NYC) Houston, TX (HOU) - Tucson, AZ (TUS) Charlottesville, VA (CHO) - Indianapolis, IN (IND Nashville, TN (BNA) - Miami, FL (MIA) Anchorage, AK (ANC) - Indianapolis, IN (IND) Milwaukee, WI (MKE) - Knoxville, TN (TYS) Minneapolis, MN (MSP) - West Palm Beach (PBI) Philadelphia, PA (PHL) - St. Louis, MO (STL) Gainesville, FL (GNV) - Washington, DC (WAS) Gulfport, MS (GPT) - Los Angeles, CA (LAX) Fort Myers, FL (RSW) - Seattle, WA (SEA) Charlottesville, VA (CHO) - Louisville, KY (SDF) Cincinnati, OH (CIN) - Phoenix, AZ (PHX) Dallas, TX (DFW) - San Francisco, CA (SFO) Austin, TX (AUS) - Fort Myers, FL (RSW) Phoenix, AZ (PHX) - Pittsburgh, PA (PIT) Richmond, VA (RIC) - San Juan, PR (SJU) Mobile, AL (MOB) - San Francisco, CA (SFO) New Orleans, LA (MSY) - Philadelphia, PA (PHL) Salt Lake City, UT (SLC) - Tampa, FL (TPA) Omaha, NE (OMA) - San Diego, CA (SAN) Columbia, SC (CAE) - Seattle, WA (SEA) Post-Merger HHI 3,483 4,844 4,590 3,612 2,929 4,131 2,756 2,970 3,775 4,014 3,273 2,657 4,436 3,537 5,458 6,530 2,515 4,373 4,456 4,591 4,483 5,094 4,213 4,823 4,659 4,883 3,661 2,839 7,869 4,029 4,011 2,913 4,126 2,720 3,410 4,232 2,876 2,766 3,457 ∆ HHI 277 277 276 275 274 272 272 271 271 270 270 269 269 269 268 268 267 267 267 266 266 266 265 264 264 263 262 262 261 261 261 261 261 261 261 260 260 260 259 Appendix Page 11 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 56 of 57 APPENDIX A -- CITY PAIRS WHERE THE MERGER IS PRESUMPTIVELY ILLEGAL CITY PAIR Austin, TX (AUS) - Chattanooga, TN (CHA) Kansas City, MO (MCI) - Fort Myers, FL (RSW) Harrisburg, PA (MDT) - Omaha, NE (OMA) Fort Walton Beach, FL (VPS) - Fayetteville, AR (X Boston, MA (BOS) - Pensacola, FL (PNS) Minneapolis, MN (MSP) - Fort Walton Beach, FL (VP Omaha, NE (OMA) - Richmond, VA (RIC) El Paso, TX (ELP) - Tampa, FL (TPA) Des Moines, IA (DSM) - Rochester, NY (ROC) Philadelphia, PA (PHL) - Tallahassee, FL (TLH) Austin, TX (AUS) - Cincinnati, OH (CIN) Omaha, NE (OMA) - Savannah, GA (SAV) Cleveland, OH (CLE) - Little Rock, AR (LIT) Greensboro, NC (GSO) - Omaha, NE (OMA) Huntsville, AL (HSV) - Indianapolis, IN (IND) Des Moines, IA (DSM) - El Paso, TX (ELP) Raleigh-Durham, NC (RDU) - Tallahassee, FL (TLH) Boston, MA (BOS) - Mobile, AL (MOB) Grand Junction, CO (GJT) - Miami, FL (MIA) Austin, TX (AUS) - Knoxville, TN (TYS) Gainesville, FL (GNV) - Indianapolis, IN (IND) El Paso, TX (ELP) - San Francisco, CA (SFO) Jacksonville, FL (JAX) - Los Angeles, CA (LAX) Greensboro, NC (GSO) - Houston, TX (HOU) Miami, FL (MIA) - New Orleans, LA (MSY) Birmingham, AL (BHM) - Key West, FL (EYW) Hartford, CT (BDL) - Jackson, MS (JAN) Detroit, MI (DTW) - Jackson, MS (JAN) Philadelphia, PA (PHL) - Phoenix, AZ (PHX) Indianapolis, IN (IND) - Reno, NV (RNO) Charleston, SC (CHS) - Fayetteville, AR (XNA) Columbia, SC (CAE) - San Francisco, CA (SFO) Nashville, TN (BNA) - Boston, MA (BOS) Los Angeles, CA (LAX) - Tampa, FL (TPA) St. Louis, MO (STL) - Fort Walton Beach, FL (VPS) El Paso, TX (ELP) - Orlando, FL (MCO) Atlanta, GA (ATL) - El Paso, TX (ELP) Minneapolis, MN (MSP) - Knoxville, TN (TYS) Las Vegas, NV (LAS) - Lexington, KY (LEX) Post-Merger HHI 5,587 2,777 3,604 4,338 3,307 6,289 3,508 3,311 3,396 5,014 3,879 5,733 2,934 3,827 5,972 5,590 5,133 4,940 5,388 4,141 5,173 5,400 2,916 4,051 4,060 4,205 3,698 4,440 5,660 3,892 5,979 3,428 3,105 3,488 5,733 3,146 4,450 4,920 3,493 ∆ HHI 258 258 257 257 257 256 256 255 255 255 254 254 254 253 252 252 249 249 249 249 248 248 248 248 247 247 247 247 247 246 246 245 245 245 245 244 244 243 243 CITY PAIR Boston, MA (BOS) - Jackson, MS (JAN) Houston, TX (HOU) - Knoxville, TN (TYS) Milwaukee, WI (MKE) - Reno, NV (RNO) Gulfport, MS (GPT) - Kansas City, MO (MCI) Huntsville, AL (HSV) - New York, NY (NYC) San Francisco, CA (SFO) - Knoxville, TN (TYS) Miami, FL (MIA) - Omaha, NE (OMA) Lexington, KY (LEX) - Rochester, NY (ROC) Montgomery, AL (MGM) - San Diego, CA (SAN) Huntsville, AL (HSV) - San Francisco, CA (SFO) Savannah, GA (SAV) - San Francisco, CA (SFO) Los Angeles, CA (LAX) - Philadelphia, PA (PHL) Gainesville, FL (GNV) - Raleigh-Durham, NC (RDU) Detroit, MI (DTW) - Honolulu, HI (HNL) Dallas, TX (DFW) - Seattle, WA (SEA) Boston, MA (BOS) - Miami, FL (MIA) Milwaukee, WI (MKE) - Ontario, CA (ONT) Huntsville, AL (HSV) - Los Angeles, CA (LAX) Minneapolis, MN (MSP) - Syracuse, NY (SYR) Phoenix, AZ (PHX) - San Antonio, TX (SAT) Chicago, IL (CHI) - Montgomery, AL (MGM) Birmingham, AL (BHM) - Des Moines, IA (DSM) Hartford, CT (BDL) - San Antonio, TX (SAT) Cincinnati, OH (CIN) - Fayetteville, AR (XNA) Baton Rouge, LA (BTR) - Greensboro, NC (GSO) Los Angeles, CA (LAX) - Savannah, GA (SAV) Pensacola, FL (PNS) - San Diego, CA (SAN) Hartford, CT (BDL) - Seattle, WA (SEA) Pensacola, FL (PNS) - San Francisco, CA (SFO) Austin, TX (AUS) - Grand Junction, CO (GJT) Hartford, CT (BDL) - Pensacola, FL (PNS) Omaha, NE (OMA) - Fort Myers, FL (RSW) Indianapolis, IN (IND) - Knoxville, TN (TYS) Baton Rouge, LA (BTR) - Pittsburgh, PA (PIT) Minneapolis, MN (MSP) - Palm Springs, CA (PSP) Los Angeles, CA (LAX) - Miami, FL (MIA) Greenville, SC (GSP) - Little Rock, AR (LIT) Grand Junction, CO (GJT) - Orlando, FL (MCO) Key West, FL (EYW) - Los Angeles, CA (LAX) Post-Merger HHI 3,999 4,051 3,832 3,887 4,033 3,400 2,831 4,466 5,257 3,449 3,791 4,082 5,092 4,822 4,298 3,909 4,742 3,441 4,097 4,728 6,507 4,292 2,916 5,927 5,054 4,517 3,713 2,772 2,909 4,674 4,929 3,008 3,945 4,397 3,824 3,410 4,770 4,457 6,973 ∆ HHI 243 243 243 242 242 242 240 240 239 239 239 239 239 238 237 237 237 237 236 236 236 235 235 235 234 234 234 233 233 233 233 233 232 232 231 231 231 231 230 Appendix Page 12 Case 1:13-cv-01236-CKK Document 73 Filed 09/05/13 Page 57 of 57 APPENDIX A -- CITY PAIRS WHERE THE MERGER IS PRESUMPTIVELY ILLEGAL CITY PAIR Post-Merger HHI Charlottesville, VA (CHO) - San Antonio, TX (SAT) 4,463 Jacksonville, FL (JAX) - Kansas City, MO (MCI) 3,399 Key West, FL (EYW) - Norfolk-Virginia Beach, VA (ORF) 5,747 Dallas, TX (DFW) - Durango, CO (DRO) 4,052 Key West, FL (EYW) - Minneapolis, MN (MSP) 6,277 Miami, FL (MIA) - Knoxville, TN (TYS) 3,304 Indianapolis, IN (IND) - Philadelphia, PA (PHL) 6,700 St. Croix, VI (STX) - Washington, DC (WAS) 8,150 Des Moines, IA (DSM) - Tallahassee, FL (TLH) 6,416 Boston, MA (BOS) - Knoxville, TN (TYS) 5,003 Los Angeles, CA (LAX) - Syracuse, NY (SYR) 2,935 Columbia, SC (CAE) - San Diego, CA (SAN) 4,515 Baton Rouge, LA (BTR) - Norfolk-Virginia Beach, VA (ORF 5,156 Memphis, TN (MEM) - Syracuse, NY (SYR) 4,421 Austin, TX (AUS) - Phoenix, AZ (PHX) 4,891 Indianapolis, IN (IND) - Rochester, NY (ROC) 3,666 Charleston, SC (CHS) - Seattle, WA (SEA) 3,380 San Diego, CA (SAN) - Knoxville, TN (TYS) 3,233 Seattle, WA (SEA) - Knoxville, TN (TYS) 3,046 Sacramento, CA (SMF) - Washington, DC (WAS) 2,898 Denver, CO (DEN) - Tallahassee, FL (TLH) 5,975 Los Angeles, CA (LAX) - Fort Walton Beach, FL (VP 3,815 Denver, CO (DEN) - Westchester County, NY (HPN) 3,819 Phoenix, AZ (PHX) - Raleigh-Durham, NC (RDU) 3,573 Hartford, CT (BDL) - Lexington, KY (LEX) 4,745 Atlanta, GA (ATL) - Tucson, AZ (TUS) 4,916 Monterey, CA (MRY) - Salt Lake City, UT (SLC) 6,650 Little Rock, AR (LIT) - San Juan, PR (SJU) 6,569 San Diego, CA (SAN) - Tallahassee, FL (TLH) 6,434 Key West, FL (EYW) - Memphis, TN (MEM) 6,557 Des Moines, IA (DSM) - Westchester County, NY (HPN) 3,464 Baton Rouge, LA (BTR) - Phoenix, AZ (PHX) 4,389 Baton Rouge, LA (BTR) - New York, NY (NYC) 3,718 Jackson, MS (JAN) - Miami, FL (MIA) 4,304 Mobile, AL (MOB) - New York, NY (NYC) 4,452 Albuquerque, NM (ABQ) - Tampa, FL (TPA) 3,054 Boston, MA (BOS) - Gulfport, MS (GPT) 5,213 Houston, TX (HOU) - Reno, NV (RNO) 3,525 Norfolk-Virginia Beach, VA (ORF) - Seattle, WA (SEA) 3,247 ∆ HHI 230 230 230 230 229 229 229 229 229 228 227 227 226 226 226 226 226 226 225 225 225 223 223 223 222 222 221 220 219 219 219 219 218 218 218 218 218 217 217 CITY PAIR Post-Merger HHI Mobile, AL (MOB) - Minneapolis, MN (MSP) 5,888 Denver, CO (DEN) - Norfolk-Virginia Beach, VA (ORF) 2,598 Kansas City, MO (MCI) - Tallahassee, FL (TLH) 6,205 Des Moines, IA (DSM) - Harrisburg, PA (MDT) 3,556 Columbia, SC (CAE) - Houston, TX (HOU) 3,634 Gulfport, MS (GPT) - Washington, DC (WAS) 4,647 San Francisco, CA (SFO) - Syracuse, NY (SYR) 3,547 Jackson, MS (JAN) - Milwaukee, WI (MKE) 5,568 New York, NY (NYC) - San Jose, CA (SJC) 3,002 Omaha, NE (OMA) - Knoxville, TN (TYS) 3,596 Baton Rouge, LA (BTR) - Indianapolis, IN (IND) 4,240 Charleston, WV (CRW) - Dallas, TX (DFW) 4,244 Des Moines, IA (DSM) - Fort Myers, FL (RSW) 3,859 Houston, TX (HOU) - Santa Barbara, CA (SBA) 6,373 Pittsburgh, PA (PIT) - St. Louis, MO (STL) 3,179 Westchester County, NY (HPN) - Milwaukee, WI (MKE) 3,142 Pensacola, FL (PNS) - St. Thomas, VI (STT) 5,346 Harrisburg, PA (MDT) - Minneapolis, MN (MSP) 3,659 Pittsburgh, PA (PIT) - Seattle, WA (SEA) 2,610 Austin, TX (AUS) - Greenville, SC (GSP) 2,984 Albuquerque, NM (ABQ) - Boston, MA (BOS) 3,294 Las Vegas, NV (LAS) - Syracuse, NY (SYR) 2,755 Houston, TX (HOU) - Monterey, CA (MRY) 6,287 Jackson, MS (JAN) - San Juan, PR (SJU) 6,244 Chattanooga, TN (CHA) - New York, NY (NYC) 5,046 Miami, FL (MIA) - Pensacola, FL (PNS) 5,066 Indianapolis, IN (IND) - Harrisburg, PA (MDT) 3,462 Gulfport, MS (GPT) - Greenville, SC (GSP) 4,923 Norfolk-Virginia Beach, VA (ORF) - Tallahassee, FL (TLH) 5,030 Phoenix, AZ (PHX) - Washington, DC (WAS) 3,416 Chicago, IL (CHI) - Orange County, CA (SNA) 3,726 Austin, TX (AUS) - Charleston, SC (CHS) 3,275 Baton Rouge, LA (BTR) - Detroit, MI (DTW) 5,080 ∆ HHI 217 215 215 215 214 214 214 213 213 213 212 212 211 211 211 210 210 208 207 207 207 207 206 205 205 204 203 203 203 202 201 201 201 Appendix Page 13 Case 1:13-cv-01236-CKK Document 74 Filed 09/05/13 Page 1 of 1 AO 458 (Rev. 06/09) Appearance of Counsel UNITED STATES DISTRICT COURT for the District of Columbia ) ) ) ) ) United States of America, et al. Plaintiff v. US Airways Group, Inc., et al. Defendant Case No. 1:13-CV-01236-CKK APPEARANCE OF COUNSEL To: The clerk of court and all parties of record I am admitted or otherwise authorized to practice in this court, and I appear in this case as counsel for: US Airways Group, Inc. Date: 09/05/2013 (admitted Pro Hac Vice) /s/ Kenneth R. O'Rourke Attorney’s signature Kenneth R. O'Rourke; 120144 (CA) Printed name and bar number O'Melveny & Myers LLP 400 S. Hope Street 18th Floor Los Angeles, CA 90071-2899 Address korourke@omm.com E-mail address (213) 430-6000 Telephone number (213) 430-6407 FAX number . Case 1:13-cv-01236-CKK Document 75 Filed 09/06/13 Page 1 of 1 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. ) ______________________________________ ) Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly NOTICE OF PRO HAC VICE COUNSEL'S CERTIFICATION OF FAMILIARITY WITH THE LOCAL RULES OF THIS COURT Pursuant to the Court's September 4, 2013 Minute Order, I hereby submit the Declarations of Pro Hac Vice Co-Counsel for the Official Committee of Unsecured Creditors of AMR Corporation, John Wm. Butler, Jr., James A. Keyte, Albert L. Hogan, III, Jay M. Goffman and Kenneth B. Schwartz, in which they certify that they are familiar with the Local Rules of this Court. Dated: September 6, 2013 Respectfully submitted, /s/ Gregory B. Craig Gregory B. Craig (D.C. Bar No. 164640) SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 1440 New York Avenue, N.W. Washington, DC 20005-2111 (202) 371-7000 Gregory.Craig@skadden.com Counsel for Official Committee of Unsecured Creditors Case Document 75-1 Filed 09/06/13 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et. al., Plainti?fs, v. Civil Action No. 1:13-cv-01236 (CKK) US AIRWAYS GROUP, INC. Judge Colleen Kollar?Kotelly and AMR CORPORATION, Defendants. DECLARATION OF JOHN Wm. BUTLER, JR. I, John Wm. Butler, Jr., hereby declare: 1. My full name is John William Butler, Jr. 2. I am a partner with the law ?rm of Skadden, Arps, Slate, Meagher Flom LLP, 155 North Wacker Drive, Chicago, IL 60606-1720. 3. I certify that I am familiar with the Local Rules of this Court. I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. EXECUTED this 6?h day of September 2013. ?ohn Wm. Butler, Jr. Case Document 75-2 Filed 09/06/13 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et. al., Plainti?ir, v. Civil Action No. l:l3-cv-01236 (CKK) US AIRWAYS GROUP, INC. Judge Colleen Kollar-Kotelly and AMR CORPORATION, Defendants. ARAT 1" ES YTE 1, James A. Keyte, hereby declare: 1. My full name is James Allen Keyte. 2. I am a partner with the law ?rm of Skadden, Arps, Slate, Meagher Flom LLP, 4 Times Square, New York, New York 10036-6522. 3. I certify that I am familiar with the Local Rules of this Court. I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. EXECUTED this day of September 2013. James Areyte Case Document 75-3 Filed 09/06/13 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA Defendants. UNITED STATES OF AMERICA, et. al., Plainti?fs, v. Civil Action No. 1:13-cv-01236 (CKK) US AIRWAYS GROUP, INC. Judge Colleen Kollar-Kotelly and AMR CORPORATION, DECLARATION OF ALBERT L. HOGAN I, Albert L. Hogan, hereby declare: 1. My full name is Albert Lee Hogan, 2. I am a partner with the law ?rm of Skadden, Arps, Slate, Meagher Flom LLP, 155 North Wacker Drive, Chicago, IL 60606-1720. 3. I certify that I am familiar with the Local Rules of this Court. I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. EXECUTED this day of September 2013. Albert L. Ho'?mml Case Document 75-4 Filed 09/06/13 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et. al., Plainti?fs, v. Civil Action No. 1:13-cv-01236 (CKK) US AIRWAYS GROUP, INC. Judge Colleen Kollar-Kotelly and AMR CORPORATION, Defendants. DECLARATION OF JAY M. GOFFMAN 1, Jay M. Goffman, hereby declare: 1. My full name is Jay Michael Goffman. 2. I am a partner with the law ?rm of Skadden, Arps, Slate, Meagher Flom LLP, 4 Times Square, New York, New York 10036-6522. 3. I certify that I am familiar with the Local Rules of this Court. I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. EXECUTED this 6th day of September 2013. Case Document 75-5 Filed 09/06/13 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et. al., Plainti?fs, v. Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants. DECLARATION OF KENNETH B. SCHWARTZ 1, Kenneth B. Schwartz, hereby declare: 1. My full name is Kenneth Bryan Schwartz. 2. I am a counsel with the law firm of Skadden, Arps, Slate, Meagher Flom LLP, 4 Times Square, New York, New York 10036-6522. 3. I certify that I am familiar with the Local Rules of this Court. I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. EXECUTED this day of September 2013. Kei?eth B. Schyuf Case 1:13-cv-01236-CKK Document 76 Filed 09/09/13 Page 1 of 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, v. US AIRWAYS GROUP, INC. and AMR CORPORATION, ) ) ) ) ) ) ) ) ) ) ) Case No. 1:13-cv-01236 (CKK) Defendants. NOTICE OF APPEARANCE Please take notice that Katrina M. Robson enters her appearance as co-counsel in the above-captioned case on behalf of defendant US Airways Group, Inc. She is admitted to and authorized to practice in this court. Dated: September 9, 2013 Respectfully submitted, /s/ Katrina M. Robson Katrina M. Robson (D.C. Bar No. 989341) O’Melveny & Myers LLP 1625 Eye Street, NW Washington, DC 20006 (202) 383-5300 (phone) (202) 383-5314 (facsimile) krobson@omm.com Counsel for Defendant US Airways Group, Inc. Case 1:13-cv-01236-CKK Document 77 Filed 09/09/13 Page 1 of 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiff, Case No. 1:13-cv-01236 v. US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants. NOTICE OF APPEARANCE Please take notice that Paul H. Friedman enters his appearance as co-counsel in the above-captioned case on behalf of Defendant, US AIRWAYS GROUP, INC. He is admitted to and authorized to practice in this Court. Dated: September 9, 2013 Respectfully submitted, By: /s/ Paul H. Friedman (DC Bar No. 290635) DECHERT LLP 1900 K Street NW, Suite 1200 Washington, DC 20006 Telephone: +1 202 261 3398 Facsimile: +1 202 261 3098 paul.friedman@dechert.com Counsel for Defendant, US AIRWAYS GROUP, INC. Case 1:13-cv-01236-CKK Document 78 Filed 09/10/13 Page 1 of 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, v. Civil Action No. 1:13-cv-01236-CKK US AIRWAYS GROUP, INC. 111 W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION 4333 Amon Carter Boulevard Forth Worth, TX 76155 Defendants. NOTICE OF APPEARANCE BY CHRISTOPHER N. THATCH PLEASE TAKE NOTICE that Christopher N. Thatch of Jones Day hereby enters his appearance as counsel on behalf of Defendant AMR Corporation in the above-captioned case. Respectfully submitted, this the 10th day of September, 2013. /s/ Christopher N. Thatch Christopher N. Thatch (D.C. Bar # 980277) Email: cthatch@jonesday.com JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 Tel. (202) 879-3939 Fax (202) 626-1700 Attorney for Defendant AMR Corporation Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 1 of 50 IN THE 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-01236-CKK ) ) ) ) ) ) ) ) DEFENDANT US AIRWAYS GROUP, INC.’S ANSWER TO AMENDED COMPLAINT Defendant US Airways Group, Inc. (“US Airways”) responds to the allegations in the Amended Complaint as set forth below. Any allegation not expressly and explicitly admitted is denied. GENERAL RESPONSE TO PLAINTIFFS’ ALLEGATIONS This merger will greatly enhance competition and provide immense benefits to the traveling public. Combined, US Airways and American Airlines will offer more and better travel options for passengers through an improved domestic and international network, something that neither carrier could provide on its own. Millions more passengers each year will fly on this new network than would fly on US Airways and American, should they be forced to remain separate. Conservative estimates place the net benefits to consumers at more than $500 million annually. Simply put, from the perspective of consumers, the new American will be Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 2 of 50 much greater than the sum of its parts. This merger will be procompetitive and lawful. Plaintiffs’ request for this Court to enjoin the merger should be summarily denied. It is ironic that plaintiffs fixate on maintaining the number of “legacy” carriers—those airlines that, prior to 1978, endured the well-documented failure of federal regulation of routes and fares—because those carriers are by most relevant measures the least financially successful companies in the industry. The oversight of the federal government left legacy carriers saddled with route and cost structures ill-suited to meeting the evolving consumer demand of the day, much less the radically different consumer demand of the 21st century economy. The 35 years since deregulation have painted a vivid picture, completely absent from the Complaint, of the excruciatingly painful process of reshaping these airlines to better respond to consumer demand. The post-deregulation history of legacy carriers is one of staggering financial loss, dozens of bankruptcies, hundreds of thousands of lost jobs, dramatic reductions in employee pay and benefits, and painful restructuring. The Complaint’s focus on legacy airlines causes it to ignore the most meaningful competitive development in the airline industry since deregulation: the emergence of low cost carriers. Southwest, which in 1978 was an oddity limited to intrastate flying in Texas, is now the country’s largest domestic airline, carrying more passengers last year than any legacy carrier and more than US Airways and American combined. Other low cost carriers, including JetBlue, Spirit Airlines, Virgin America, Sun Country, and Allegiant, are expanding at dramatic rates. These carriers, together with Southwest and regional competitors Alaska Airlines and Hawaiian Airlines, now transport over 40% of all domestic passengers, and that share continues to grow. The demonstrable success of low cost carriers is a market driven response to consumer demand, 2 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 3 of 50 but the Complaint inexplicably ignores their profound and permanent effect on industry competition. The other potent market response to consumer demand ignored by the Complaint is the evolution of the industry through mergers. Since 1978, there have been over a dozen mergers involving legacy carriers as the fares paid by passengers fell substantially in real terms. Most recently Delta merged with Northwest (2008) and United with Continental (2010) as those firms—each of which had been reorganized in bankruptcy during the last decade—combined complementary assets to create networks better able to respond to consumer demand. The government approval of these two mergers created airlines with much larger and more comprehensive networks than either American or US Airways, leaving both American and US Airways at a competitive disadvantage which cannot be overcome on a standalone basis. It is in this vigorously competitive world that US Airways and American Airlines seek to merge so that they can provide similar benefits to customers and have the chance to compete with the new Delta and new United. Taken separately, each of US Airways and American is incomplete. American has a weaker presence for traffic moving up and down the East Coast, US Airways is weaker in the Midwest, and both are relatively weaker on the West Coast. Without geographically strategic hubs and efficient and convenient connections from those hubs, American and US Airways cannot effectively appeal to travelers going to or from, or traveling within, these critical regions, and they necessarily lose business to the more complete networks that Delta and United offer. Together, US Airways and American will create an effective third competitor for that business and, in doing so, increase competition. It is the Complaint—by interposing the heavy hand of federal and state regulation—which will lessen competition by precluding the market from creating new and competitive flight options for passengers. 3 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 4 of 50 Plaintiffs argue that the merger is not necessary because “American is fully capable of emerging from bankruptcy proceedings on its own” and “US Airways today is competing vigorously.” That view, of course, is not relevant to the antitrust analysis before the Court. Moreover, the statistics provided in the Complaint focus on only very recent industry performance, during one of the few brief periods when the airlines turned a profit, and ignore the competitive landscape and extreme volatility of the airline business. The harsh reality is that over the last twelve years American lost $10.3 billion and US Airways lost $3.4 billion. US Airways filed for bankruptcy twice during that period and without the merger with America West Airlines would have liquidated. American filed for bankruptcy in November 2011, lost $1.9 billion in 2012, and remains in bankruptcy today. Blocking the merger will not sharpen competition—it will prolong this cycle of crisis to the detriment of passengers, the employees of American and US Airways, and the communities the airlines serve. The merger with US Airways is the foundation of American’s reorganization plan for growth and expansion, and is its only extant plan to emerge from bankruptcy. Thousands of new routes will be created simply by combining the two airlines. These new routes will offer travelers the convenience of more flight options to fit their schedule; offer flights with fewer connections to both domestic and global destinations; and offer passengers in smaller communities better access to the rest of the country and world. In addition to these benefits, the new American will grow its capacity and output, purchasing new aircraft and improving its airport services. In short, the combined network will offer passengers more opportunities to fly where they want to go, when they want to go, and how they want to go. This growth will spur competition. The combined network can go head-to-head with United and Delta while competing vigorously against the rest of the industry, both domestically 4 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 5 of 50 and abroad. The potential harms are minimal; American and US Airways directly compete on only 17 of the nearly 900 nonstop city pairs that the carriers now serve, and on almost all of these routes face nonstop competition from other carriers. Indeed, across the industry, the low cost carriers offer strong competitive choices built on diverse business models, and play the role of industry “maverick” in a way that no legacy airline ever has or could. In every relevant aspect, this merger is more procompetitive than those previously approved by the government. The Court’s review of the plaintiffs’ challenge to this merger should not be an evaluation of the few aspects of the intensely competitive airline industry plaintiffs do not like, or a comparison to some hypothetical state of the airline industry that plaintiffs would prefer. It must be a determination of whether this airline merger would result in a “substantial lessening of competition” relative to what would happen absent the merger. But rather than considering how this merger will create robust competition in the future, or how blocking the merger will impede competitive forces, plaintiffs rely on rhetoric and innuendo. The Complaint makes broad, unsupported claims about past industry coordination and cobbles together out-of-context statements in an effort to suggest by anecdote what the plaintiffs cannot support with analysis. This skewed and incomplete focus ignores the current realities of the airline industry. Detailed evidence will show that this merger is about growth and improved competition—a bigger network, new flight options, more jobs, and millions of additional customers each year who will choose the more competitive new American RESPONSE TO SPECIFIC ALLEGATIONS I. INTRODUCTION 1. Millions of passengers depend on the airline industry to travel quickly, efficiently, and safely between various cities in the United States and throughout the world. Since 1978, the nation has relied on competition among airlines to promote affordability, innovation, and service and 5 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 6 of 50 quality improvements. In recent years, however, the major airlines have, in tandem, raised fares, imposed new and higher fees, and reduced service. Competition has diminished and consumers have paid a heavy price. This merger—by creating the world’s largest airline—would, in the words of US Airways’ management, “finish[ ] industry evolution.” It would reduce the number of major domestic airlines from five to four, and the number of “legacy” airlines—today, Delta, United, American, and US Airways—from four to three. In so doing, it threatens substantial harm to consumers. Because of the size of the airline industry, if this merger were approved, even a small increase in the price of airline tickets, checked bags, or flight change fees would cause hundreds of millions of dollars of harm to American consumers annually. Response: US Airways admits that millions of passengers travel by air every year, that competition in the airline industry is robust, and that the merger would create a new network to compete more effectively with United and Delta globally while also competing vigorously against the rest of the industry. US Airways further admits that it is described as a “legacy” airline. US Airways respectfully refers the Court to the quoted document for a complete and accurate description of its contents. US Airways denies the remaining allegations in this paragraph. 2. American and US Airways compete directly on thousands of heavily traveled nonstop and connecting routes. Millions of passengers benefit each year from head-to-head competition that this merger would eliminate. With less competition, airlines can cut service and raise prices with less fear of competitive responses from rivals. Response: US Airways admits that it and American overlap on a limited number of routes, almost all of which involve connecting rather than nonstop service. US Airways denies the remaining allegations in this paragraph. 3. This merger will leave three very similar legacy airlines—Delta, United, and the new American—that past experience shows increasingly prefer tacit coordination over full throated competition. By further reducing the number of legacy airlines and aligning the economic incentives of those that remain, the merger of US Airways and American would make it easier 6 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 7 of 50 for the remaining airlines to cooperate, rather than compete, on price and service. That enhanced cooperation is unlikely to be significantly disrupted by Southwest and JetBlue, which, while offering important competition on the routes they fly, have less extensive domestic and international route networks than the legacy airlines. Response: US Airways admits that it is described as a “legacy” airline. US Airways further admits that Southwest and JetBlue offer important competition on domestic and international routes. US Airways denies the remaining allegations in this paragraph. 4. US Airways’ own executives—who would run the new American—have long been “proponents of consolidation.” US Airways believes that the industry—before 2005—had “too many” competitors, causing an “irrational business model.” Since 2005, there has been a wave of consolidation in the industry. US Airways has cheered these successive mergers, with its CEO stating in 2011 that “fewer airlines” is a “good thing.” US Airways’ President explained this thinking that same year: “Three successful fare increases – [we are] able to pass along to customers because of consolidation.” (emphasis added). Similarly, he boasted at a 2012 industry conference: “Consolidation has also . . . allowed the industry to do things like ancillary revenues [e.g., checked bag and ticket change fees] . . . . That is a structural permanent change to the industry and one that’s impossible to overstate the benefit from it.” In essence, industry consolidation has left fewer, more-similar airlines, making it easier for the remaining airlines to raise prices, impose new or higher baggage and other ancillary fees, and reduce capacity and service. This merger positions US Airways’ management to continue the trend—at the expense of consumers. Response: US Airways admits that there have been several mergers in the United States air travel industry in recent years. US Airways further admits that the management team for the combined airline would include US Airways executives. US Airways respectfully refers the Court to the quoted documents for a complete and accurate description of their contents. US Airways denies the remaining allegations in this paragraph. 5. US Airways intends to do just that. If this merger were approved, US Airways would no longer need to offer low-fare options for certain travelers. For example, US Airways employs “Advantage Fares,” an 7 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 8 of 50 aggressive discounting strategy aimed at undercutting the other legacy airlines’ nonstop fares with cheaper connecting service. US Airways’ hubs are in cities that generate less lucrative nonstop traffic than the other legacy airlines’ hubs. To compensate, US Airways uses its Advantage Fares to attract additional passengers on flights connecting through its hubs. Response: US Airways admits that it employs “Advantage Fares.” US Airways denies the remaining allegations in this paragraph. 6. The other legacy airlines take a different approach. If, for example, United offers nonstop service on a route, and Delta and American offer connecting service on that same route, Delta and American typically charge the same price for their connecting service as United charges for its nonstop service. As American executives observed, the legacy airlines “generally respect the pricing of the non-stop carrier [on a given route],” even though it means offering connecting service at the same price as nonstop service. But American, Delta, and United frequently do charge lower prices for their connecting service on routes where US Airways offers nonstop service. They do so to respond to US Airways’ use of Advantage Fares on other routes. Response: US Airways lacks the information and knowledge to respond to allegations concerning the pricing strategies and motivations of any of its competitors, including other legacy airlines. US Airways respectfully refers the Court to the quoted document for a complete and accurate description of its contents. US Airways denies the remaining allegations in this paragraph. 7. If the merger were approved, US Airways’ economic rationale for offering Advantage Fares would likely go away. The merged airline’s cost of sticking with US Airways’ one-stop, low-price strategy would increase. Delta and United would likely undercut the merged firm on a larger number of nonstop routes. At the same time, the revenues generated from Advantage Fares would shrink as American’s current nonstop routes would cease to be targets for Advantage Fares. The bottom line is that the merged airline would likely abandon Advantage Fares, eliminating significant competition and causing consumers to pay hundreds of millions of dollars more. Response: US Airways denies the allegations in this paragraph. 8 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 9 of 50 8. Consumers will likely also be harmed by the planned merger because American had a standalone plan to emerge from bankruptcy poised to grow. American planned to expand domestically and internationally, adding service on nearly 115 new routes. To support its plan, American recently made the largest aircraft order in industry history. Response: US Airways admits that American’s management at one time was considering a preliminary plan. US Airways further admits that American ordered additional aircraft. US Airways lacks information and knowledge to respond to competitor strategies and motivations, and, on that basis, denies those allegations in this paragraph. US Airways denies the remaining allegations in this paragraph. 9. American’s standalone plan would have bucked current industry trends toward capacity reductions and less competition. US Airways called American’s growth plan “industry destabilizing” and worried that American’s plan would cause other carriers to react “with their own enhanced growth plans . . . .” The result would be to increase competitive pressures throughout the industry. After the merger, US Airways’ current executives—who would manage the merged firm—would be able to abandon American’s efforts to expand and instead continue the industry’s march toward higher prices and less service. As its CEO candidly stated earlier this year, US Airways views this merger as “the last major piece needed to fully rationalize the industry.” Response: US Airways admits that the management team for the combined airline would include US Airways executives. US Airways respectfully refers the Court to the quoted documents for a complete and accurate description of their contents. US Airways denies the remaining allegations in this paragraph. 10. Passengers to and from the Washington, D.C. area are likely to be particularly hurt. To serve Ronald Reagan Washington National Airport (“Reagan National”), a carrier must have “slots,” which are governmentissued rights to take off and land. US Airways currently holds 55% of the slots at Reagan National and the merger would increase the percentage of slots held by the combined firm to 69%. The combined airline would have a monopoly on 63% of the nonstop routes served out of the airport. Competition at Reagan National cannot flourish where one airline 9 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 10 of 50 increasingly controls an essential ingredient to competition. Without slots, other airlines cannot enter or expand the number of flights that they offer on other routes. As a result, Washington, D.C. area passengers would likely see higher prices and fewer choices if the merger were approved. Response: US Airways admits that slots are government-issued rights to take off and land. US Airways further admits that a carrier must have slots to take off and land at Reagan National Airport. US Airways further admits that it has approximately 55 percent of the slots at DCA and that the merged firm would have approximately 69 percent of the Reagan National slots. US Airways denies the remaining allegations in this paragraph. 11. Notwithstanding their prior unequivocal statements about the effects of consolidation, the defendants will likely claim that the elimination of American as a standalone competitor will benefit consumers. They will argue that Advantage Fares will continue, existing capacity levels and growth plans will be maintained, and unspecified or unverified “synergies” will materialize, creating the possibility of lower fares. The American public has seen this before. Commenting on a commitment to maintain service levels made by two other airlines seeking approval for a merger in 2010, the CEO of US Airways said: “I’m hopeful they’re just saying what they need... to get this [transaction] approved.” By making claims about benefits that are at odds with their prior statements on the likely effects of this merger, that is precisely what the merging parties’ executives are doing here—saying what they believe needs to be said to pass antitrust scrutiny. Response: US Airways admits that it will claim that the merger will benefit consumers and that the Advantage Fares program may continue after the merger is completed. US Airways respectfully refers the Court to the quoted document for a complete and accurate description of its contents. US Airways denies the remaining allegations in this paragraph. 12. There is no reason to accept the likely anticompetitive consequences of this merger. Both airlines are confident they can and will compete effectively as standalone companies. A revitalized American is fully capable of emerging from bankruptcy proceedings on its own with a competitive cost structure, profitable existing business, and plans for 10 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 11 of 50 growth. US Airways today is competing vigorously and earning record profits. Executives of both airlines have repeatedly stated that they do not need this merger to succeed. Response: US Airways admits that it has, at all times, competed vigorously and that its earnings in the latest fiscal quarter were strong. Since the turn of the century, however, US Airways has lost an enormous amount of money, suffered through two bankruptcies and, at subsequent times, struggled for its very survival. US Airways lacks the knowledge and information sufficient to admit or deny paraphrasing of unspecified statements by unidentified individuals, and, on that basis, denies the allegations in this paragraph. US Airways denies the remaining allegations in this paragraph. 13. The merger between US Airways and American would likely substantially lessen competition, and tend to create a monopoly, in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. Therefore, this merger should be permanently enjoined. Response: US Airways denies the allegations in this paragraph. II. JURISDICTION, INTERSTATE COMMERCE, AND VENUE 14. The United States brings this action, and this Court has subject-matter jurisdiction over this action, under Section 15 of the Clayton Act, as amended, 15 U.S.C. § 25, to prevent and restrain US Airways and American Airlines from violating Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18. Response: US Airways admits that the United States purports to bring this action pursuant to Section 15 of the Clayton Act, and that the United States purports to seek to prevent and restrain Defendants from violating Section 7 of the Clayton Act. US Airways denies that the merger violates the Clayton Act in any way and further denies the remaining allegations in this paragraph. 11 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 12 of 50 15. The Plaintiff States bring this action under Section 16 of the Clayton Act, 15 U.S.C. § 26, to prevent and restrain US Airways and American Airlines from violating Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18. The Plaintiff States, by and through their respective Attorneys General, bring this action as parens patriae on behalf of the citizens, general welfare, and economy of each of their states. Response: US Airways admits that the Plaintiff States purport to bring the action as parens patriae pursuant to Section 15 of the Clayton Act and that the Plaintiff States purport to seek to prevent and restrain Defendants from violating Section 7 of the Clayton Act. US Airways denies that the merger violates the Clayton Act in any way and further denies the remaining allegations in this paragraph. 16. The defendants are engaged in, and their activities substantially affect, interstate commerce, and commerce in each of the Plaintiff States. US Airways and American Airlines each annually transport millions of passengers across state lines throughout this country, generating billions of dollars in revenue while doing so. Response: 17. Admitted. Venue is proper under Section 12 of the Clayton Act, 15 U.S.C. § 22. This Court also has personal jurisdiction over each defendant. Both defendants are found and transact business in this judicial district. Response: Admitted. III. THE DEFENDANTS AND THE TRANSACTION 18. Defendant US Airways Group, Inc., is a Delaware corporation headquartered in Tempe, Arizona. Last year, it flew over fifty million passengers to approximately 200 locations worldwide, taking in more than $13 billion in revenue. US Airways operates hubs in Phoenix, Charlotte, Philadelphia, and Washington, D.C. Response: 19. Admitted. US Airways is performing exceptionally well. In 2012, it enjoyed record profits. It is operating at high load factors—the percentage of seats sold 12 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 13 of 50 on its flights—and has a national and international route network, alliances with international airlines, a strong brand name, modern equipment, and a competitive cost structure. In mid-2012, US Airways’ CEO, touting the airline’s “record second quarter results,” told Dow Jones that the company “has a great business model that works and we certainly don’t need to merge with another airline.” Response: US Airways admits that it earned a profit in 2012, has a national and international route network, is a member of an alliance network that includes international airlines, has a strong brand name and modern equipment, and competes on cost. Since the turn of the century, however, US Airways has lost an enormous amount of money, suffered through two bankruptcies and, at subsequent times, struggled for its very survival. US Airways denies the remaining allegations in this paragraph, and respectfully refers the Court to the quoted document for a complete and accurate description of its contents. 20. Defendant AMR Corporation is a Delaware corporation headquartered in Fort Worth, Texas. AMR Corporation is the parent company of American Airlines. Last year, American flew over eighty million passengers to approximately 250 locations worldwide, taking in more than $24 billion in revenue. American operates hubs in New York, Los Angeles, Chicago, Dallas, and Miami. The American Airlines brand is “one of the most recognized . . . in the world.” Response: 21. Admitted. In November 2011, American filed for bankruptcy reorganization and is currently under the supervision of the Bankruptcy Court for the Southern District of New York. American adopted and implemented a standalone business plan designed “to restore American to industry leadership, profitability and growth.” While in bankruptcy, American management “pursued and successfully implemented” key provisions of this plan, including revenue and network enhancements, as well as “restructuring efforts [that] have encompassed labor cost savings, managerial efficiencies, fleet reconfiguration, and other economies . . . .” That work has paid off. American reported that its revenue growth has “outpaced” the industry since entering bankruptcy and in its most recent quarterly results reported a company record-high $5.6 billion in revenues, with $357 million in profits. Under experienced and sophisticated senior 13 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 14 of 50 management, American’s restructuring process has positioned it to produce “industry leading profitability.” As recently as January 8, 2013, American’s management presented plans to emerge from bankruptcy that would increase the destinations American serves in the United States and the frequency of its flights, and position American to compete independently as a profitable airline with aggressive plans for growth. Response: US Airways admits that American filed for bankruptcy reorganization in November 2011, and is currently under the supervision of the Bankruptcy Court for the Southern District of New York. US Airways respectfully refers the Court to the quoted document for a complete and accurate description of its contents. US Airways lacks the knowledge to admit or deny the remaining allegations in this paragraph, and, on that basis, denies them. 22. US Airways sees American the same way. Its CEO observed in December 2011 that “A[merican] is not going away, they will be stronger postbankruptcy because they will have less debt and reduced labor costs.” A US Airways’ executive vice president similarly wrote in July 2012 that “[t]here is NO question about AMR’s ability to survive on a standalone basis.” Response: US Airways admits that these quotes were selected from e-mails involving US Airways’ employees, and respectfully refers the Court to the quoted documents for a complete and accurate description of their contents. US Airways denies the remaining allegations in this paragraph. 23. US Airways and American agreed to merge on February 13, 2013. US Airways shareholders would own 28 percent of the combined airline, while American shareholders, creditors, labor unions, and employees would own 72 percent. The merged airline would operate under the American brand name, but the new American would be run by US Airways management. Response: US Airways admits that it and American agreed to merge on February 13, 2013. US Airways further admits that US Airways shareholders would own approximately 28 percent of the combined airline, while American shareholders, creditors, labor unions, and 14 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 15 of 50 employees would own approximately 72 percent. US Airways admits that the new airline would operate under the American brand name, and that its management would include US Airways executives. US Airways denies the remaining allegations in this paragraph. IV. THE RELEVANT MARKETS A. 24. Scheduled Air Passenger Service Between Cities Domestic scheduled air passenger service enables consumers to travel quickly and efficiently between various cities in the United States. Air travel offers passengers significant time savings and convenience over other forms of travel. For example, a flight from Washington, D.C. to Detroit takes just over an hour of flight time. Driving between the two cities takes at least eight hours. A train between the two cities takes more than fifteen hours. Response: US Airways admits that domestic scheduled air-passenger service often enables consumers to travel quickly and efficiently between various cities in the United States. US Airways further admits that travel time from Washington, D.C. to Detroit by plane, automobile, or train varies. US Airways denies the remaining allegations in this paragraph. 25. Due to time savings and convenience afforded by scheduled air passenger service, few passengers would substitute other modes of transportation (car, bus, or train) for scheduled air passenger service in response to a small but significant industry-wide fare increase. Another way to say this, as described in the Fed. Trade Comm’n & U.S. Dep’t of Justice Horizontal Merger Guidelines (2010), and endorsed by courts in this Circuit, is that a hypothetical monopolist of all domestic scheduled air passenger service likely would increase its prices by at least a small but significant and non-transitory amount. Scheduled air passenger service, therefore, constitutes a line of commerce and a relevant product market within the meaning of Section 7 of the Clayton Act. Response: This paragraph contains numerous legal conclusions and other non-factual statements to which no response is required. To the extent a response is required, US Airways denies the allegations in this paragraph. 15 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 16 of 50 26. A “city pair” is comprised of a flight’s departure and arrival cities. For example, a flight departing from Washington and arriving in Chicago makes up the Washington-Chicago city pair. Passengers seek to depart from airports close to where they live and work, and arrive at airports close to their intended destinations. Most airline travel is related to business, family events, and vacations. Thus, most passengers book flights with their origins and destinations predetermined. Few passengers who wish to fly from one city to another would likely switch to flights between other cities in response to a small but significant and non-transitory fare increase. Response: US Airways admits that a “city pair,” as that term is generally used in the airline industry, is comprised of a flight’s departure and arrival cities. US Airways lacks the knowledge or information sufficient to form a belief as to the allegations concerning the preferences of passengers because those preferences can differ widely among a diverse set of passengers in different areas and near different airports, and, on that basis, denies these allegations. US Airways denies the remaining allegations in this paragraph. 27. Airlines customarily set fares on a city pair basis. For each city pair, the degree and nature of the competition from other airlines generally plays a large role in an airline’s pricing decision. Response: US Airways admits that competition among airlines is robust and plays a significant role in airline pricing decisions and that airlines will set fares on a city-pair basis. US Airways denies the remaining allegations in this paragraph. 28. Therefore, a hypothetical monopolist of scheduled air passenger service between specific cities likely would increase its prices by at least a small but significant and non-transitory amount. Accordingly, each city pair is a relevant geographic market and section of the country under Section 7 of the Clayton Act. Response: This paragraph contains numerous legal conclusions and other non-factual statements to which no response is required. To the extent a response is required, US Airways denies the allegations in this paragraph. 16 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 17 of 50 29. Consumer preferences also play a role in airline pricing and are relevant for the purpose of analyzing the likely effects of the proposed merger. Some passengers prefer nonstop service because it saves travel time; some passengers prefer buying tickets at the last minute; others prefer service at a particular airport within a metropolitan area. For example, most business customers traveling to and from downtown Washington prefer service at Reagan National over other airports in the Washington, D.C. metropolitan area. Through a variety of fare restrictions and rules, airlines can profitably raise prices for some of these passengers without raising prices for others. Thus, the competitive effects of the proposed merger may vary among passengers depending on their preferences for particular types of service or particular airports. Response: US Airways admits that air travel preferences vary among consumers. US Airways admits that some consumers have preferences for nonstop service or a particular airport, and some consumers have last-minute travel needs. US Airways further admits that demand plays a role in airline pricing and that the number of consumers who prefer a particular type of service or airport affects demand. US Airways further admits that, depending on schedules, destinations, pricing, and other factors, at least some business customers traveling to or from downtown Washington choose to travel through Reagan National Airport. US Airways further admits that this merger will provide tremendous net benefits for customers and that some consumers may benefit more than others, depending on where they are flying from and to, among other things. US Airways denies the remaining allegations in this paragraph. B. 30. Takeoff and Landing Slots at Reagan National Airport Reagan National is one of only four airports in the country requiring slots for takeoffs and landings. Slots are expensive (often valued at over $2 million per slot), difficult to obtain, and only rarely change hands between airlines. There are no alternatives to slots for airlines seeking to enter or expand their service at Reagan National. Response: US Airways admits that Reagan National and the three New York City area airports require slots for takeoffs and landings. US Airways lacks the knowledge or 17 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 18 of 50 information sufficient to form a belief as to the truth of the allegations concerning the price of slots, difficulty of obtaining slots, and frequency at which slots change hands between airlines, and, on that basis, denies the allegations in this paragraph. US Airways denies the remaining allegations in this paragraph. 31. Reagan National is across the Potomac River from Washington, D.C., and, due to its proximity to the city and direct service via the Metro, airlines actively seek to serve passengers flying into and out of Reagan National. Airlines do not view service at other airports as adequate substitutes for service offered at Reagan National for certain passengers, and thus they are unlikely to switch away from buying or leasing slots at Reagan National in response to a small but significant increase in the price of slots. Airlines pay significant sums for slots at Reagan National, despite having the option of serving passengers through the region’s other airports. A hypothetical monopolist of slots at Reagan National likely would increase its prices by at least a small but significant and nontransitory amount. Thus, slots at Reagan National Airport constitute a line of commerce, section of the country, and relevant market within the meaning of Section 7 of the Clayton Act. Response: US Airways admits that Reagan National is across the Potomac River from Washington, D.C., that there is a Metro stop at Reagan National, that airlines pay for slots at Reagan National, and have options of serving passengers through the region’s other airports, and that passengers have options of flying to and from the region’s other airports. This paragraph contains numerous legal conclusions and other non-factual statements to which no response is required. To the extent that a response is required, US Airways denies such statements. US Airways denies the remaining allegations in this paragraph. V. THE MERGER IS LIKELY TO RESULT IN ANTICOMPETITIVE EFFECTS A. 32. Industry Background Today, four network or “legacy” airlines remain in the United States: American, US Airways, United, and Delta. These four have extensive national and international networks, connections to hundreds of destinations, established brand names, and strong frequent flyer reward 18 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 19 of 50 programs. In addition, there are non-network airlines, including Southwest Airlines and a handful of smaller firms, which typically do not offer “hub-and-spoke” service. Response: US Airways admits that it is often described as a “legacy” airline. US Airways admits that two other legacy airlines, United and Delta, have extensive national and international networks, connections to hundreds of destinations, established brand names, and strong frequent-flyer reward programs. US Airways admits that Southwest Airlines is the largest of all domestic airlines. US Airways admits that some non-legacy airlines do not offer hub and spoke service. US Airways denies the remaining allegations in this paragraph. 33. Airlines compete in many ways. One is the price of a ticket. Airlines also compete based on: nonstop versus connecting flights; number of destinations served; convenient flight schedules; passenger comfort and seating policies; choices for classes of service; carry-on baggage policies; the degree of personal service at ticket counters and boarding areas; onboard meal and drink service; in-flight entertainment; and the quality and generosity of frequent flyer programs. Response: US Airways admits that airlines vigorously compete on these and many other bases. 34. Since 2005, the U.S. airline industry has undergone significant consolidation. The consolidation “wave” started with the 2005 merger between US Airways and America West, creating today’s US Airways. In 2008, Delta and Northwest Airlines merged; in 2010, United and Continental merged; and in 2011, Southwest Airlines and AirTran merged. The chart below, in which one of US Airways’ executive vice presidents referred to industry consolidation as the “New Holy Grail,” demonstrates that since 2005 the number of major airlines has dropped from nine to five. 19 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 20 of 50 Response: US Airways admits that―with the approval of the Department of Justice―US Airways and America West merged in 2005, Delta and Northwest Airlines merged in 2008, United and Continental merged in 2010, and Southwest Airlines and AirTran merged in 2011. US Airways respectfully refers the Court to the excerpted document for a complete and accurate description of its contents. US Airways denies the remaining allegations in this paragraph. 35. Increasing consolidation among large airlines has hurt passengers. The major airlines have copied each other in raising fares, imposing new fees on travelers, reducing or eliminating service on a number of city pairs, and downgrading amenities. An August 2012 presentation from US Airways observes that consolidation has resulted in “Fewer and Larger Competitors.” The structural change to “fewer and larger competitors” has allowed “[t]he industry” to “reap the benefits.” Those benefits to the industry are touted by US Airways in the same presentation as including “capacity reductions” and new “ancillary revenues” like bag fees. Response: US Airways respectfully refers the Court to the quoted document for a complete and accurate description of its contents. US Airways denies the remaining allegations in this paragraph. 20 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 21 of 50 B. 36. Many Relevant Markets Are Highly Concentrated and the Planned Merger Would Significantly Increase that Concentration In 2005, there were nine major airlines. If this merger were approved, there would be only four. The three remaining legacy airlines and Southwest would account for over 80% of the domestic scheduled passenger service market, with the new American becoming the biggest airline in the world. Response: US Airways admits that, if the merger were consummated, there would be three comparably sized legacy carriers in the United States and that, by some measures, the new American would be the largest, but Southwest, a non-legacy carrier, would remain the largest domestic carrier. US Airways denies the remaining allegations in this paragraph. 37. Market concentration is one useful indicator of the level of competitive vigor in a market, and the likely competitive effects of a merger. The more concentrated a market, and the more a transaction would increase concentration in a market, the more likely it is that a transaction would result in a meaningful reduction in competition. Concentration in relevant markets is typically measured by the Herfindahl-Hirschman Index (“HHI”). Markets in which the HHI exceeds 2,500 points are considered highly concentrated. Post-merger increases in HHI of more than 200 points are considered to be significant increases in concentration. Response: US Airways admits that the Herfindahl-Hirschman Index (“HHI”) is used by Plaintiffs as a measure of market concentration. US Airways admits that the Horizontal Merger Guidelines issued by the Antitrust Division of the United States Department of Justice and the Federal Trade Commission on August 19, 2010, reference the HHI, but otherwise states that the Horizontal Merger Guidelines, which the Department of Justice itself refers to as only an outline of enforcement policy, speak for themselves. US Airways denies the remaining allegations in this paragraph. 38. In more than 1,000 of the city pair markets in which American and US Airways currently compete head-to-head, the post-merger HHI would exceed 2,500 points and the merger would increase the HHI by more than 200 points. For example, on the Charlotte-Dallas city pair, the post21 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 22 of 50 merger HHI will increase by 4,653 to 9,324 (out of 10,000). In these markets, US Airways and American annually serve more than 14 million passengers and collect more than $6 billion in fares. The substantial increases in concentration in these highly concentrated markets demonstrate that in these relevant markets, the merger is presumed, as a matter of law, to be anticompetitive. The relevant markets described in this paragraph are listed in Appendix A. Response: US Airways hereby incorporates its response to paragraph 37 as if fully set forth herein. US Airways admits that there is a limited number of city pairs that are served by both US Airways and American. The allegation that the city pairs in Appendix A are relevant markets and the allegations about concentrations and legal presumptions are conclusory and are legal conclusions to which no response is required. To the extent a response is required, US Airways denies the allegation. US Airways denies the remaining allegations in this paragraph. 39. Other city pairs across the country would likely be affected by the loss of competition stemming from this planned merger. In some of these markets, US Airways and American compete head-to-head, often offering consumers discounted fares. If approved, this merger will likely end much of that discounting, significantly harming consumers in the process. Moreover, the loss of competition in these markets would increase the likelihood that the remaining airlines can coordinate to raise price, reduce output, and diminish the quality of their services. In these relevant markets, the merger is likely also to substantially lessen competition. Response: 40. US Airways denies the allegations in this paragraph. In the market for slots at Reagan National, the merger would result in a highly concentrated market, with a post-merger HHI of 4,959. The merger would also significantly increase concentration by 1,493 points. As a result, the merger should be presumed, as a matter of law, to be anticompetitive. Response: US Airways hereby incorporates its response to paragraph 37 as if fully set forth herein. The allegation that slots at Reagan National are a relevant market is a legal conclusion to which no response is required. To the extent a response is required, US Airways denies the allegation. US Airways denies the remaining allegations in this paragraph. 22 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 23 of 50 C. 41. The structure of the airline industry is already conducive to coordinated behavior: Few large players dominate the industry; each transaction is small; and most pricing is readily transparent. Response: 42. This Merger Would Increase the Likelihood of Coordinated Behavior Among the Remaining Network Airlines Causing Higher Fares, Higher Fees, and More Limited Service US Airways denies the allegations in this paragraph. For example, the legacy airlines closely watch the pricing moves of their competitors. When one airline “leads” a price increase, other airlines frequently respond by following with price increases of their own. The initiating carrier will lead the price increase and then see if the other carriers will match the increase. If they do not, the initiating carrier will generally withdraw the increase shortly thereafter. Response: US Airways admits that, as in any competitive industry, the perceived pricing of competitors is one of the factors that an airline may take into account in setting its prices. US Airways denies the remaining allegations in this paragraph. 43. The legacy airlines also use what they call “cross-market initiatives,” or “CMIs,” to deter aggressive discounting and prevent fare wars. A CMI occurs where two or more airlines compete against each other on multiple routes. If an airline offers discounted fares in one market, an affected competitor often responds with discounts in another market—a CMI— where the discounting airline prefers a higher fare. CMIs often cause an airline to withdraw fare discounts. For example, in the fall of 2009, US Airways lowered fares and relaxed restrictions on flights out of Detroit (a Delta stronghold) to Philadelphia. Delta responded by offering lower fares and relaxed restrictions from Boston to Washington (a US Airways stronghold). US Airways’ team lead for pricing observed Delta’s move and concluded “[w]e have more to lose in BOSWAS . . . I think we need to bail on the [Detroit-Philadelphia] changes.” Response: US Airways admits that airlines vigorously compete against each other in many ways, including the use of discounts in order to attract more passengers, and that one type of discount is sometimes referred to as a cross-market initiative. US Airways denies the 23 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 24 of 50 remaining allegations in this paragraph, and respectfully refers the Court to the quoted document for a full and accurate description of its contents. 44. There is also past express coordinated behavior in the industry. For example, all airlines have complete, accurate, and real-time access to every detail of every airline’s published fare structure on every route through the airline-owned Airline Tariff Publishing Company (“ATPCO”). US Airways’ management has called ATPCO “a dedicated price-telegraph network for the industry.” The airlines use ATPCO to monitor and analyze each other’s fares and fare changes and implement strategies designed to coordinate pricing. Airlines have previously used ATPCO to engage in coordinated behavior. In 1992, the United States filed a lawsuit to stop several airlines, including both defendants, from using their ATPCO filings as a signaling device to facilitate agreements on fares. That lawsuit resulted in a consent decree, now expired. Response: US Airways admits that ATPCO publishes some airline fares. US Airways further admits that the United States filed a Complaint in 1992 against a number of airlines which eventually resulted in a consent decree, which has since expired. US Airways denies the remaining allegations in this paragraph. 45. US Airways also has communicated directly with a competitor when it was upset by that competitor’s efforts to compete more aggressively. In 2010, one of US Airways’ larger rivals extended a “triple miles” promotion that set off a market share battle among legacy carriers. The rival airline was also expanding into new markets and was rumored to be returning planes to its fleet that had been mothballed during the recession. US Airways’ CEO complained about these aggressive maneuvers, stating to his senior executives that such actions were “hurting [the rival airline’s] profitability − and unfortunately everyone else’s.” US Airways’ senior management debated over email about how best to get the rival airline’s attention and bring it back in line with the rest of the industry. In that email thread, US Airways’ CEO urged the other executives to “portray[] these guys as idiots to Wall Street and anyone else who’ll listen.” Ultimately, to make sure the message was received, US Airways’ CEO forwarded the email chain—and its candid discussion about how aggressive competition would be bad for the industry—directly to the CEO of the rival airline. (The rival’s CEO immediately responded that it was an inappropriate communication that he was referring to his general counsel.) 24 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 25 of 50 Response: US Airways denies that it intended to complain to a rival airline about its competitive behavior. US Airways respectfully refers the Court to the quoted documents for a complete and accurate description of their contents. US Airways denies the remaining allegations in this paragraph. 46. Coordination becomes easier as the number of major airlines dwindles and their business models converge. If not stopped, the merger would likely substantially enhance the ability of the industry to coordinate on fares, ancillary fees, and service reductions by creating, in the words of US Airways executives, a “Level Big 3”of network carriers, each with similar sizes, costs, and structures. Response: US Airways respectfully refers the Court to the quoted document for a complete and accurate description of its contents. US Airways denies the remaining allegations in this paragraph. 47. Southwest, the only major, non-network airline, and other smaller carriers have networks and business models that differ significantly from the legacy airlines. Traditionally, Southwest and other smaller carriers have been less likely to participate in coordinated pricing or service reductions. For example, Southwest does not charge customers for a first checked bag or ticket change fees. Yet that has not deterred the legacy carriers from continuing, and even increasing, those fees. In November 2011, a senior US Airways executive explained to her boss the reason: “Our employees know full well that the real competition for us is [American], [Delta], and [United]. Yes we compete with Southwest and JetBlue, but the product is different and the customer base is also different.” Response: US Airways admits that Southwest is the largest domestic airline and that each airline has a different business model. US Airways further admits that each airline has many different policies regarding checked-bag fees, ticket-change fees, and other passenger charges. US Airways respectfully refers the Court to the quoted document for a complete and accurate description of its contents. US Airways denies the remaining allegations in this paragraph. 25 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 26 of 50 1. 48. The Merger Would Likely Result in the Elimination of US Airways’ Advantage Fares On routes where one legacy airline offers nonstop service, the other legacies “generally respect the pricing of the non-stop carrier,” as American has put it. Thus, if American offers nonstop service from Washington to Dallas at $800 round-trip, United and Delta will, “[d]espite having a service disadvantage,” price their connecting fares at the level of American’s nonstop fares. The legacy carriers do this because if one airline, say Delta, were to undercut fares in markets where American offers nonstop service, American would likely do the same in Delta’s nonstop markets. To Delta, the cost of being undercut in its nonstop markets exceeds the benefit it would receive from winning additional passengers in American nonstop markets. Response: US Airways lacks knowledge and information on the motivations that drive other airlines’ pricing decisions, and, on that basis, denies the allegations in this paragraph. 49. US Airways, alone among the legacy carriers, has a different costbenefit analysis for pricing connecting routes. Although it too is a national network carrier, US Airways has hubs in cities that generate less revenue from passengers flying nonstop than the other legacy airlines’ hubs. Because US Airways’ hubs generate less revenue from passengers flying nonstop, US Airways must gain more revenue from connecting passengers. It gets that revenue by offering connecting service that is up to 40% cheaper than other airlines’ nonstop service. US Airways calls this program “Advantage Fares.” Response: US Airways admits that one of its many competitive practices is a program known as “Advantage Fares.” US Airways admits that the Advantage Fares program is used on routes where US Airways offers connecting service and a competitor offers nonstop service. US Airways denies the remaining allegations in this paragraph. 50. Millions of consumers have benefitted. Advantage Fares offer consumers, especially those who purchase tickets at the last minute, meaningfully lower fares. The screenshot below from ITA Software, Airfare Matrix (“ITA”), taken on August 12, 2013, for travel departing on August 13 and 26 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 27 of 50 returning August 14 from Miami to Cincinnati, shows the benefits of US Airways’ Advantage Fare program to passengers.1 American is the only airline on this route to offer nonstop service, charging $740. Delta and United do not meaningfully compete. Both charge more for their connecting service than American charges for nonstop service. Thus, on this particular route, a passenger who chose Delta or United would pay more for an inferior product. In contrast, US Airways’ fares today are significantly lower than American’s fares, and offer consumers a real choice. Those consumers who are more price conscious receive the benefit of a substantially lower-fare option. In this case, a customer who purchased a US Airways one-stop ticket would save $269 compared to American’s nonstop service. Response: US Airways admits that one of its many competitive practices is a program known as “Advantage Fares.” US Airways cannot verify the ITA screenshot purportedly taken on August 12, 2013. US Airways denies the remaining allegations in this paragraph. 51. 1 The benefits from Advantage Fares extend to hundreds of other routes, including those where more than one carrier offers nonstop service. The screenshot below from ITA, taken on August 12, 2013, for travel departing on August 13 and returning August 14 from New York to Houston, demonstrates just how dramatic the savings can be: “Multiple Airlines” refers to an itinerary where a passenger uses different airlines for their departing and returning flights. 27 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 28 of 50 US Airways’ connecting fare is $870 cheaper than the other legacy carriers’ nonstop flights, and beats JetBlue and AirTran’s fares by more than $300. Although Southwest does not participate in the standard online travel sites, a cross-check against the Southwest website demonstrates that US Airways also beats Southwest’s $887 nonstop fare by more than $300. Response: US Airways admits that one of its many competitive practices is a program known as “Advantage Fares.” US Airways cannot verify the ITA screenshot purportedly taken on August 12, 2013. US Airways denies the remaining allegations in this paragraph. 52. Other airlines have chosen to respond to Advantage Fares with their own low connecting fares in markets where US Airways has nonstop service. That is, the other legacy airlines undercut US Airways’ nonstop fares the same way that US Airways undercuts their nonstop fares. The screenshot below from ITA, taken on August 12, 2013, for travel on August 13 and returning August 14 from Charlotte to Syracuse, shows how the other legacy carriers respond to Advantage Fares to the benefit of consumers: Here, US Airways is the only airline to offer nonstop service, charging $685. Delta and United undercut that price by charging $375 and $395, 28 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 29 of 50 respectively, for connecting service. Once again, consumers benefit by having the option of far less expensive connecting service. A customer who buys a Delta one-stop flight saves $310 over US Airways’ nonstop service. Response: US Airways cannot verify the ITA screenshot purportedly taken on August 12, 2013. US Airways lacks knowledge and information on the motivations that drive other airlines’ pricing decisions, and, on that basis, denies the allegations in this paragraph. 53. There are over 100 routes where other carriers offer nonstop service on which US Airways does not offer Advantage Fares. Consumers in these markets are not given the option of a low-cost connecting alternative and are forced to pay significantly more for service. For example, US Airways does not currently offer Advantage Fares on flights from Cincinnati to Pittsburgh. Without the option of a low connecting fare, consumers see significantly higher prices, as illustrated by a screenshot from ITA, taken on August 12, 2013, for travel on August 13 and returning August 14: Response: US Airways admits that there are routes on which the Advantage Fares program is not offered. US Airways cannot verify the ITA screenshot purportedly taken on August 12, 2013. US Airways lacks knowledge and information on the motivations that drive other airlines’ pricing decisions, and, on that basis, denies the remaining allegations in this paragraph. 54. Advantage Fares have proven highly disruptive to the industry’s overall coordinated pricing dynamic. An American executive expressed her 29 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 30 of 50 frustration in September 2011 with US Airways’ Advantage Fares, noting that US Airways was “still way undercutting us [on flights from Boston and New York to Dallas] and getting significant share.” One response American considered was to lower its fares on the same route. Another option was “to take up this battle w/them again,” in an attempt to force US Airways to limit or abandon its strategy. Response: US Airways lacks knowledge or information sufficient to form a belief as to the truth of the allegations in this paragraph, and on that basis denies them. 55. US Airways’ President acknowledged in September 2010 that its Advantage Fare strategy “would be different if we had a different route network . . . .” Currently, US Airways’ network structure precludes Delta and United from preventing US Airways’ aggressive “one-stop pricing.” Because US Airways’ hubs have relatively less nonstop traffic, the other legacy airlines cannot respond sufficiently to make Advantage Fares unprofitable. But by increasing the size and scope of US Airways’ network, the merger makes it likely that US Airways will have to discontinue its Advantage Fares. Response: US Airways admits that the merger would increase the size and scope of the merged airline’s network and enable the merged carrier to compete vigorously and effectively with its larger rivals. US Airways respectfully refers the Court to the quoted document for a complete and accurate description of its contents. US Airways lacks knowledge or information sufficient to form a belief as to the truth of the allegations concerning Delta’s and United’s current internal strategic decisions regarding pricing or how, if it all, those two larger airlines would change their respective pricing decisions post-merger, and, on that basis, denies the remaining allegations in this paragraph. 56. American’s executives agree. American believes that Advantage Fares will be eliminated because of the merger. Internal analysis at American in October 2012 concluded that “[t]he [Advantage Fares] program would have to be eliminated in a merger with American, as American’s large non-stop markets would now be susceptible to reactionary pricing from Delta and United.” Another American executive observed that same month: “The industry will force alignment to a single approach—one that 30 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 31 of 50 aligns with the large legacy carriers as it is revenue maximizing.” Response: US Airways lacks knowledge or information sufficient to form a belief as to the truth of the allegations concerning the beliefs of certain, unspecified American executives, and, on that basis, denies the allegations in this paragraph. 57. US Airways believes that it currently gains “most of its advantage fare value from AA,” meaning that Advantage Fares provide a substantial value for US Airways on routes where American is the legacy airline offering nonstop service. Post-merger, continuing Advantage Fares would mean that US Airways was taking that value away from itself by undercutting its own nonstop prices. Plainly, this would make no sense. Thus, for US Airways post-merger, the benefits of Advantage Fares would go down, and its costs would go up. Response: US Airways admits that it uses the Advantage Fares program as well as many other competitive practices to compete with other airlines. US Airways respectfully refers the Court to the quoted document for a complete and accurate description of its contents. US Airways otherwise denies the allegations in this paragraph. 58. By ending Advantage Fares, the merger would eliminate lower fares for millions of consumers. Last year, more than 2.5 million round-trip passengers—including more than 250,000 passengers from the greater Washington, D.C. area; another 250,000 passengers in the Dallas-Fort Worth area; half a million passengers in the greater New York City area; and 175,000 passengers from Detroit—bought an Advantage Fare ticket. Hundreds of thousands of other passengers flying nonstop on US Airways, particularly from their hubs in Phoenix, Charlotte, and Philadelphia, benefited from responsive fares offered by the legacy airlines. Response: US Airways admits that a number of passengers have purchased Advantage Fare tickets. US Airways denies the remaining allegations in this paragraph. 31 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 32 of 50 2. 59. The Merger Would Likely Lead to Increased IndustryWide “Capacity Discipline,” Resulting in Higher Fares and Less Service Legacy airlines have taken advantage of increasing consolidation to exercise “capacity discipline.” “Capacity discipline” has meant restraining growth or reducing established service. The planned merger would be a further step in that industry-wide effort. In theory, reducing unused capacity can be an efficient decision that allows a firm to reduce its costs, ultimately leading to lower consumer prices. In the airline industry, however, recent experience has shown that capacity discipline has resulted in fewer flights and higher fares. Response: US Airways admits that reducing unused capacity can be an efficient decision that allows airlines to reduce costs and to lower consumer prices. US Airways denies the remaining allegations in this paragraph. 60. Each significant legacy airline merger in recent years has been followed by substantial reductions in service and capacity. These capacity reductions have not consisted simply of cancellation of empty planes or empty seats; rather, when airlines have cut capacity after a merger, the number of passengers they carry on the affected routes has also decreased. Response: US Airways lacks knowledge or information sufficient to form a belief as to the truth of the allegations concerning other airlines’ decisions to cut capacity, and, on that basis, denies the allegations in this paragraph. 61. US Airways has recognized that it benefitted from this industry consolidation and the resulting capacity discipline. US Airways has long taken the position that the capacity cuts achieved through capacity discipline “enable” fare increases and that “pricing power” results from “reduced industry capacity.” US Airways’ CEO explained to investors in 2006 that there is an “inextricable link” between removing seats and raising fares. Response: US Airways responds that Plaintiffs’ selective quotation of unidentified written material or communications, offered without context, is misleading as framed, and refers 32 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 33 of 50 the Court to the quoted documents, once identified, for a complete and accurate description of their contents. US Airways otherwise denies the allegations in this paragraph. 62. In 2005, America West—managed then by many of the same executives who currently manage US Airways—merged with US Airways. American West had hubs in Phoenix and Las Vegas while the former US Airways had hubs in Pittsburgh, Charlotte, and Philadelphia. Following the merger, the combined firm reduced capacity, including significant cuts in Pittsburgh and Las Vegas. In 2010, the Chief Financial Officer for US Airways explained: We believe in the hub system. I just think there’s too many hubs. If you look across the country, you can probably pick a few that are smaller hubs and maybe duplicative to other hubs that airlines have that they could probably get out of. In our example, we merged with US Airways [and] . . . what we have done over time, which is unfortunate for the cities, but we couldn’t hold a hub in Pittsburgh and we couldn’t hold a hub in Las Vegas. So over time we have consolidated and condensed our operation back, which is really important, condensed it back to our major hubs. A post-merger US Airways analysis confirmed that it succeeded in obtaining a “3% to 4% capacity reduction.” Response: US Airways admits that it merged with America West in 2005. US Airways further admits that American West had hubs or large operations in Phoenix and Las Vegas and that US Airways had hubs in Pittsburgh, Charlotte, and Philadelphia. US Airways respectfully refers the Court to the quoted documents for a complete and accurate description of their contents. US Airways denies the remaining allegations in this paragraph. 63. In 2006, on the heels of the America West/US Airways merger, the combined firm submitted an ultimately unsuccessful hostile bid for Delta Air Lines. US Airways’ management had concluded that a merged US Airways/Delta could reduce the combined carrier’s capacity by 10 percent, which would lead to higher revenues for the combined firm and for the industry. In 2007, following the rejection of the hostile bid, US Airways’ CEO explained to investors how the deal would have increased industry profits: 33 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 34 of 50 It’s part of what we tried to impress upon people as we were going through our run at Delta, was that . . . it was good for US Airways [and] good for the entire industry. We’re going to take out 4% of the industry capacity as we did that. Everyone’s 2008 numbers would look a (expletive) of a lot better had that transaction happened . . . Response: US Airways admits that it made an unsuccessful bid to acquire Delta in 2006. US Airways respectfully refers the Court to the entire conference call transcript from which Plaintiffs have selected only excerpts for a complete and accurate description of its contents. US Airways denies the remaining allegations in this paragraph. 64. In 2008, Delta merged with Northwest Airlines. Despite promises to the contrary, the combined airline reduced capacity, including significant cuts at its former hubs in Cincinnati and Memphis. US Airways’ CEO was “quite happy” to see the merger and advocated for further consolidation. He explained that an industry structure of “five different hub and spoke airlines with who knows how many hubs across the United States . . . results in all of us fighting for the same connecting passengers over numerous hubs.” Left unsaid was that fewer airlines meant less competition and higher fares. Response: US Airways admits that Delta and Northwest Airlines merged in 2008, but lacks knowledge or information sufficient to form a belief as to the truth of the allegations concerning Delta’s intentions with respect to its 2008 merger or its capacity reductions. US Airways respectfully refers the Court to the entire conference call transcript from which Plaintiffs have selected only excerpts for a complete and accurate description of its contents. US Airways denies the remaining allegations in this paragraph. 65. In May 2010, United Airlines and Continental Airlines announced their planned merger. The announcement caused speculation about the future of each airline’s hubs, including Continental’s Cleveland hub. In Congressional testimony, an industry analyst stated that he did not believe the merger would cause reductions in Cleveland. On June 18, 2010, upon seeing the testimony, US Airways’ CEO wrote an email to other US Airways executives stating, “[s]urely these guys [United/Continental] 34 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 35 of 50 aren’t really planning to keep Cleveland open. I’m hopeful they’re just saying what they need to (including to [the analyst]] to get this approved.” United and Continental closed their deal on October 1, 2010. The combined firm has reduced capacity at nearly all of its major hubs (including Cleveland) and at many other airports where the two airlines previously competed. Similarly, Southwest/AirTran has reduced service in a number of its focus cities and on many of AirTran’s former routes following its 2011 merger. Response: US Airways admits that United Airlines merged with Continental Airlines in 2010, and that Southwest merged with AirTran in 2011, with Department of Justice approval. US Airways lacks knowledge or information sufficient to form a belief as to the truth of the allegations concerning unspecified “speculation,” the beliefs of an industry analyst, or the reasons that the combined United/ Continental or Southwest/Air Tran reduced capacity or service at certain of its hubs if such reductions occurred, and, on that basis, denies the allegations. US Airways respectfully refers the Court to the entire e-mail from which Plaintiffs have selected only excerpts for a complete and accurate description of its contents. US Airways denies the remaining allegations in this paragraph. 66. The defendants are fully aware of these earlier mergers’ effects. A 2012 American Airlines analysis concluded that “following a merger, carriers tend to remove capacity or grow more slowly than the rest of the industry.” US Airways’ management concluded that although industry consolidation has been a success, as its CEO stated publicly in 2010, the industry had yet to hit its “sweet spot,” and additional consolidation was needed because the industry remained “overly fragmented.” Response: US Airways denies knowledge or information sufficient to form a belief as to the truth of the allegations concerning American Airlines’ analyses of earlier mergers and, on that basis, denies them. US Airways denies the remaining allegations in this paragraph. 67. A merger with American would allow US Airways to hit the “sweet spot.” For consumers, however, it would be anything but sweet. US Airways believes that merging with American “finishes industry evolution” by 35 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 36 of 50 accomplishing US Airways’ goal of “reduc[ing] capacity more efficiently.” When first considering a combination with American, US Airways projected that the merged firm could reduce capacity by as much as 10 percent. Similarly, American expects that the merger will lead to capacity reductions that would negatively impact “communities,” “people,” “customers,” and “suppliers.” Higher fares would be right around the corner. Response: US Airways responds that Plaintiffs’ selective quotation of unidentified written material or communications, offered without context, is misleading as framed, and respectfully refers the Court to the quoted documents, once identified, for a complete and accurate description of their contents. US Airways denies the remaining allegations in this paragraph. 3. 68. The Planned Merger Would Likely Block American’s Standalone Expansion Plans, Thwarting Likely Capacity Increases American does not need this merger to thrive, let alone survive. Before the announcement of this merger, a key component of American’s standalone plan for exiting bankruptcy revolved around substantial expansion, including increases in both domestic and international flights. Thus, in 2011, American placed the largest order for new aircraft in the industry’s history. Response: US Airways admits that American’s management at one time was considering a preliminary plan. US Airways admits that American made an aircraft order, but denies knowledge or information sufficient to form a belief as to the truth of the allegations concerning the reasons for the aircraft purchase. US Airways denies the remaining allegations in this paragraph. 69. US Airways executives feared that American’s standalone growth plan would disrupt the industry’s capacity discipline “momentum." In a 2012 internal presentation, US Airways executives recognized that while “[i]ndustry mergers and capacity discipline expand margins,” American’s standalone “growth plan has potential to disrupt the new dynamic” and would “Reverse Industry Capacity Trends.” Moreover, US Airways 36 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 37 of 50 believed that if American implemented its growth plans, other airlines would “react to AMRs plans with their own enhanced growth plans destabilizing industry.” US Airways believed that American’s standalone capacity growth would “negatively impact” industry revenues and threaten industry pricing. Response: US Airways responds that Plaintiffs’ selective quotation of unidentified written material or communications, offered without context, is misleading as framed, and respectfully refers the Court to the quoted documents, once identified, for a complete and accurate description of their contents. US Airways otherwise denies the allegations in this paragraph. 70. US Airways thought that a merger with American was a “lower risk alternative” than letting American’s standalone plan come to fruition because US Airways management could maintain capacity discipline. American’s executives have observed that “the combined network would likely need to be rationalized,” especially given the merged carrier’s numerous hubs, and that it is “unlikely that [a combined US Airways/American] would pursue growth . . . .” Response: US Airways responds that Plaintiffs’ selective quotation of unidentified written material or communications, offered without context, is misleading as framed, and respectfully refers the Court to the quoted documents, once identified, for a complete and accurate description of their contents. US Airways otherwise denies the allegations in this paragraph. 4. 71. The Merger Would Likely Result in Higher Fees Since 2008, the airline industry has increasingly charged consumers fees for services that were previously included in the price of a ticket. These so-called ancillary fees, including those for checked bags and flight changes, have become very profitable. In 2012 alone, airlines generated over $6 billion in fees for checked bags and flight changes. Even a small increase in these fees would cost consumers millions. Response: US Airways admits that some airlines charge certain fees to defray the 37 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 38 of 50 costs associated with some of the ancillary services provided to those passengers who actually use these services instead of incorporating the cost of these services into the general-fare prices. US Airways lacks the knowledge and information sufficient to form a belief as to the truth of the other allegations as related to the industry as a whole, and, on that basis, denies the remaining allegations in this paragraph. 72. Increased consolidation has likely aided the implementation of these fees. The levels of the ancillary fees charged by the legacy carriers have been largely set in lockstep. One airline acts as the “price leader,” with others following soon after. Using this process, as a US Airways strategic plan observed, the airlines can raise their fees without suffering “market share impacts.” For example, American announced that it would charge for a first checked bag on May 21, 2008. On June 12, 2008, both United and US Airways followed American’s lead. Similarly, over a period of just two weeks this spring, all four legacy airlines increased their ticket change fee for domestic travel from $150 to $200. Response: US Airways admits that checked bags is a service for which some airlines charge ancillary fees. US Airways denies knowledge or information sufficient to form a belief as to the truth of the allegations concerning the motivations that drive other airlines’ pricing decisions. US Airways responds that Plaintiffs’ selective quotation of unidentified written material or communications, offered without context, is misleading as framed, and respectfully refers the Court to the quoted document, once identified, for a complete and accurate description of its contents. US Airways otherwise denies the allegations in this paragraph. 73. The legacy airlines recognize that the success of any individual attempt to impose a new fee or fee increase depends on whether the other legacies follow suit. When, in July 2009, American matched the other legacy carriers by raising its checked bag fee to $20, but did not join the others in offering a $5 web discount, US Airways was faced with the decision of whether to “match” American by either eliminating its own web discount, or raising its price to $25, with a $5 discount. US Airways’ CEO gave his view: 38 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 39 of 50 I can’t believe I’m saying this, but I think we should stand still on this for now. I recognize that increases the chances of everyone standing still . . . the [dollars] aren’t compelling enough for us to stick our necks out first. I do think D[elta] or U[nited] won’t let them have an advantage, so it’ll get matched - I’m just not sure we should go first. If a couple weeks go by and no one’s moved, we can always jump in. Response: US Airways denies knowledge or information sufficient to form a belief as to the truth of the allegations concerning how other airlines determine how or when to impose or increase their fees. US Airways denies the remaining allegations in this paragraph, and respectfully refers the Court to the quoted document for a full and accurate description of its contents. 74. Similarly, when US Airways was considering whether to raise its second checked bag fee to $100 to match Delta’s fee, a US Airways executive observed: “Wow - $100 is a lot for a second bag. I would think there’s big passenger gag reflex associated with that, but if we can get it, we should charge it. Do you think we should wait for [United] or [American] to move first, though?” Response: US Airways responds that Plaintiffs’ selective quotation of unidentified written material or communications, offered without context, is misleading as framed, and respectfully refers the Court to the quoted document, once identified, for a complete and accurate description of its contents. US Airways otherwise denies the allegations in this paragraph. 75. Conversely, in 2008, when US Airways began charging passengers for soft drinks, the other legacy airlines did not follow its lead, and US Airways backed off. US Airways’ CEO explained: “With US Airways being the only network carrier to charge for drinks, we are at a disadvantage.” Had US Airways not rescinded this fee, it would have lost passengers to the other legacy airlines. Response: US Airways admits that it briefly had a policy of charging passengers for soft drinks. US Airways respectfully refers the Court to the quoted document, once identified, 39 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 40 of 50 for a complete and accurate description of its contents. US Airways otherwise denies the allegations in this paragraph. 76. At times, the airlines consider new fees or fee increases, but hold off on implementing them while they wait to see if other airlines will move first. For example, on April 18, United announced that it was increasing its ticket change fee from $150 to $200. American decided that “waiting for [Delta] and then moving to match if [Delta] comes along” would be its best strategy. Over the next two weeks, US Airways, Delta, and American each fell in line, leading a US Airways executive to observe on May 1: “A[merican] increased their change fees this morning. The network carriers now have the same $200 domestic . . . change fees.” Response: US Airways admits that checked bags is a service for which some airlines charge fees. US Airways lacks sufficient information to admit or deny whether the allegations concerning American’s purported decision and the actions of other airlines are accurate, and, on that basis, denies them. US Airways further responds that Plaintiffs’ selective quotation of unidentified written material or communications, offered without context, is misleading as framed, and respectfully refers the Court to the quoted documents, once identified, for a complete and accurate description of their contents. US Airways otherwise denies the allegations in this paragraph. 77. Post-merger, the new American would likely lead new fee increases. A December 2012 discussion between US Airways executives included the observation that after the merger, “even as the world’s largest airline we’d want to consider raising some of the baggage fees a few dollars in some of the leisure markets.” Response: US Airways responds that Plaintiffs’ selective quotation of an unidentified “discussion,” offered without context, is misleading as framed, and respectfully refers the Court to the quoted document, once identified, for a complete and accurate description of its contents. US Airways otherwise denies the allegations in this paragraph. 40 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 41 of 50 78. New checked bag fees on flights from the United States to Europe are a likely target. Both US Airways and American have considered imposing a first checked bag fee on flights to Europe but have refrained from doing so. US Airways seriously considered leading such a price move but was concerned that other airlines would not match: “We would hope that [other airlines] would follow us right away . . . but there is no guarantee . . . .” Ultimately, US Airways concluded it was “too small” to lead additional checked bag fees for flights to Europe. Post-merger, that would no longer be true. The merged firm would be the world’s largest airline, giving it sufficient size to lead industry fee and price increases across the board. Response: US Airways admits that it does, at times, change its pricing and/or fee structure to compete more efficiently and effectively and that it has, at times, considered certain international bag fees and other charges for ancillary services. US Airways lacks knowledge or information sufficient to form a belief as to the truth of allegations concerning American’s internal deliberations regarding fees, and, on that basis, denies the allegations. US Airways further responds that Plaintiffs’ selective quotation of unidentified written material or communications, offered without context, is misleading as framed, and respectfully refers the Court to the quoted documents, once identified, for a complete and accurate description of their contents. US Airways otherwise denies the allegations in this paragraph. 79. Some fee increases are likely to result from US Airways raising American’s existing fees. Today, “US Airways generally charges higher bag fees than AA” for travel from the United States to international destinations. Post-merger, US Airways would likely raise American’s ancillary fees to US Airways’ higher fee levels as part of a “fee harmonization” process. US Airways’ own documents estimate that “fee harmonization” would generate an additional $280 million in revenue annually—directly harming consumers by the same amount. A US Airways presentation from earlier this year analyzing the merger identified American’s lower bag fees as a “value lever” that US Airways “will likely manage differently with tangible financial upside.” The analysis concludes that “[i]ncreasing AA baggage fees to match US creates significant revenue impact.” US Airways also plans to institute its fees ($40 on average) for the redemption of frequent flyer tickets on American’s existing frequent fliers, who currently are not charged for 41 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 42 of 50 mileage redemption. Response: US Airways responds that Plaintiffs’ selective quotation of unidentified written material or communications, offered without context, is misleading as framed, and respectfully refers the Court to the quoted documents, once identified, for a complete and accurate description of their contents. US Airways otherwise denies the allegations in this paragraph. 80. The merger would also likely reduce the quality and variety of ancillary services offered by the legacy airlines—a side effect of consolidation anticipated and embraced by US Airways’ CEO. In a 2011 email exchange lamenting the need for US Airways to deploy wireless internet on all of its airplanes, a senior US Airways executive groused: [N]ext it will be more legroom. Then industry standard labor contracts. Then better wines. Then the ability to book on Facebook. Penultimately, television commercials. Then, finally, we will pay the NYSE an exorbitant fee to change our ticket symbol [from LCC]. US Airways’ CEO responded: “Easy now. Consolidation will help stop much of the stupid stuff but inflight internet is not one of them.” Response: US Airways responds that Plaintiffs’ selective quotation of unidentified written material, offered without context, is misleading as framed, and respectfully refers to the Court to the quoted documents, once identified, for a complete and accurate description of their contents. US Airways otherwise denies the allegations in this paragraph. 81. If the planned merger is enjoined, both American and US Airways will have to compete against two larger legacy rivals, and against each other. The four legacy airlines will not look exactly the same. As the smallest of the legacy airlines, American and US Airways will have greater incentives to grow and compete aggressively through lower ancillary fees, new services, and lower fares. Response: US Airways admits that it and American currently compete and will 42 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 43 of 50 continue to compete post-merger against the two larger legacy airlines, Delta and United, as well as Southwest, the largest domestic carrier, and the other fast-growing low cost carriers, including Virgin America, JetBlue, Spirit, and Allegiant. US Airways admits that it and American will not compete against each other after they are merged into a single company, but responds that the merged company would be a more robust and effective competitor to other airlines, including United, Delta, Southwest, and JetBlue. US Airways denies the remaining allegations in this paragraph. D. 82. The Merger Would Eliminate Head-to-Head Competition in Hundreds of Relevant Markets and Entrench US Airways’ Dominance at Reagan National Airport American and US Airways engage in head-to-head competition with nonstop service on 17 domestic routes representing about $2 billion in annual industry-wide revenues. American and US Airways also compete directly on more than a thousand routes where one or both offer connecting service, representing billions of dollars in annual revenues. The merger’s elimination of this head-to-head competition would create strong incentives for the merged airline to reduce capacity and raise fares where they previously competed. Response: US Airways admits that it and American overlap on a limited number of routes, nearly all connecting. US Airways denies the remaining allegations in this paragraph, including but not limited to the allegation that the merger would lead to reduced capacity or higher fares on overlap routes. 83. The combined firm would control 69% of the slots at Reagan National Airport, almost six times more than its closest competitor. This would eliminate head-to-head competition at the airport between American and US Airways. It would also effectively foreclose entry or expansion by other airlines that might increase competition at Reagan National. Response: US Airways admits that the merged firm would have approximately 69 percent of the Reagan National slots. US Airways admits that it and American will not compete 43 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 44 of 50 against each other after they are combined into a single company, and responds that the merged company would be a more robust and effective competitor to other airlines, including United, Delta, Southwest, and JetBlue. US Airways denies the remaining allegations in this paragraph. 84. The need for slots is a substantial barrier to entry at Reagan National. The FAA has occasionally provided a limited number of slots for new service. In almost all cases, however, a carrier wishing to begin or expand service at Reagan National must buy or lease slots from an airline that already owns them. Response: US Airways admits that slots are required to take off and land at Reagan National, and that airlines may acquire slots either through transactions with existing slot holders or by being assigned slots by the Federal Aviation Administration. US Airways denies the remaining allegations in this paragraph. 85. This merger would thwart any prospect for future entry or expansion at Reagan National. US Airways, which already has 55% of the airport’s slots, does not sell or lease them because any slot that goes to another airline will almost certainly be used to compete with US Airways. The merger would only increase US Airways’ incentives to hoard its slots. Today, US Airways provides nonstop service to 71 airports from Reagan National, and it faces no nonstop competitors on 55 of those routes. After this merger, the number of US Airways routes with no nonstop competition would increase to 59, leaving, at best, only 21 routes at the entire airport with more than one nonstop competitor. Unsurprisingly, Reagan National is US Airways’ second most-profitable airport. Response: US Airways admits that it holds a number of slots at Reagan National and that it provides nonstop service out of Reagan National to a number of cities. US Airways denies the remaining allegations in this paragraph. 86. Potential entrants would likely not be able to turn to other airlines to obtain slots. When allocating their slots, airlines prioritize their most profitable routes, typically those where they have a frequent, significant pattern of service. If a carrier has a small portfolio of slots, it is likely to allocate almost all of its slots to its most profitable routes. If it has 44 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 45 of 50 additional slots beyond what is needed to serve those routes, a carrier will then work its way down to other routes or sell or lease those slots to other airlines. Over the last several years, US Airways has purchased nearly all of the slots that might otherwise be available to interested buyers. Thus, before this planned merger, American was the only airline at Reagan National with the practical ability to sell or lease additional slots. Response: US Airways lacks knowledge or information sufficient to form a belief as to the truth of the allegations concerning other airlines’ strategies and motivations, and, on that basis, denies them. US Airways denies the remaining allegations in this paragraph. 87. In March 2010, American and JetBlue entered into an arrangement in which JetBlue traded slots at New York’s JFK International Airport to American in exchange for American trading slots at Reagan National to JetBlue. And until American reached agreement with US Airways to merge, it had been negotiating to sell those slots and ten other Reagan National slots to JetBlue. Response: US Airways admits that American and JetBlue exchanged a limited number of slots in 2010. US Airways further admits that it is aware that American and JetBlue discussed a possible transaction involving slots at Reagan National airport. US Airways denies the remaining allegations in this paragraph. 88. JetBlue’s entry on four routes, particularly Reagan National to Boston, has generated stiff price competition. Fares on the route have dropped dramatically. US Airways estimated that after JetBlue’s entry, the lastminute fare for travel between Reagan National and Boston dropped by over $700. The combined firm will have the right to terminate the JetBlue leases and thereby eliminate, or at least diminish, JetBlue as a competitor on some or all of these routes. Response: US Airways admits that JetBlue, like other airlines, provides robust price competition. US Airways further responds that Plaintiffs’ reference to an unspecified estimate by US Airways, offered without context, is misleading as framed, and respectfully refers the Court to the quoted documents, once identified, for a complete and accurate description of their 45 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 46 of 50 contents. US Airways denies the remaining allegations in this paragraph. 89. The merger would also eliminate the potential for future head-to-head competition between US Airways and American on flights at Reagan National. In 2011, US Airways planned to start service from Reagan National to Miami and St. Louis, which would directly compete with American’s existing service. US Airways argued to the Department of Transportation that this new competition would “substantial[ly] benefit[]” consumers, and so asked DOT to approve the purchase of slots from Delta that would make the service possible. DOT ultimately approved that purchase. When it developed its plan to merge with American, however, US Airways abandoned its plans to enter those markets and deprived consumers of the “substantial benefits” it had promised. Response: US Airways admits that American offers service to Miami and St. Louis out of Reagan National. US Airways further admits that the quoted statement was made on behalf of US Airways in comments to the Federal Aviation Administration, and respectfully refers the Court to the quoted document for a complete and accurate description of its contents. US Airways admits that the Department of Transportation allowed US Airways and Delta to exchange certain slots in 2011. US Airways denies the remaining allegations in this paragraph. 90. By acquiring American’s slot portfolio, US Airways would eliminate existing and future head-to-head competition, and effectively block other airlines’ competitive entry or expansion. Response: US Airways denies the allegations in this paragraph. VI. ABSENCE OF COUNTERVAILING FACTORS 91. New entry, or expansion by existing competitors, is unlikely to prevent or remedy the merger’s likely anticompetitive effects. New entrants into a particular market face significant barriers to success, including difficulty in obtaining access to slots and gate facilities; the effects of corporate discount programs offered by dominant incumbents; loyalty to existing frequent flyer programs; an unknown brand; and the risk of aggressive responses to new entry by the dominant incumbent carrier. In addition, entry is highly unlikely on routes where the origin or destination airport is 46 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 47 of 50 another airline’s hub, because the new entrant would face substantial challenges attracting sufficient local passengers to support service. Response: 92. United and Delta are unlikely to expand in the event of anticompetitive price increases or capacity reductions by the merged airline. Indeed, those carriers are likely to benefit from and participate in such conduct by coordinating with the merged firm. Response: 93. US Airways denies the allegations in this paragraph. US Airways denies the allegations in this paragraph. The remaining airlines in the United States, including Southwest and JetBlue, have networks and business models that are significantly different from the legacy airlines. In particular, most do not have huband-spoke networks. In many relevant markets, these airlines do not offer any service at all, and in other markets, many passengers view them as a less preferred alternative to the legacy carriers. Therefore, competition from Southwest, JetBlue, or other airlines would not be sufficient to prevent the anticompetitive consequences of the merger. Response: US Airways admits that each different airline uses a different business model. US Airways denies the remaining allegations in this paragraph. 94. There are not sufficient acquisition-specific and cognizable efficiencies that would be passed through to U.S. consumers to rebut the presumption that competition and consumers would likely be harmed by this merger. Response: US Airways denies the allegations in this paragraph. VII. VIOLATION ALLEGED 95. The effect of the proposed merger, if approved, likely will be to lessen competition substantially, or tend to create a monopoly, in interstate trade and commerce in the relevant markets, in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. Response: 96. US Airways denies the allegations in this paragraph. Unless enjoined, the proposed merger likely would have the following effects in the relevant markets, among others: 47 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 48 of 50 (a) actual and potential competition between US Airways and American Airlines would be eliminated; (b) competition in general among network airlines would be lessened substantially; (c) ticket prices and ancillary fees would be higher than they otherwise would; (d) industry capacity would be lower than it otherwise would; (e) service would be lessened; and (f) the availability of slots at Reagan National would be significantly impaired. Response: US Airways admits that it and American would no longer compete against each other post-merger. US Airways denies the remaining allegations in this paragraph. VIII. REQUEST FOR RELIEF 97. Plaintiffs request: (a) that US Airways’ proposed merger with American Airlines be adjudged to violate Section 7 of the Clayton Act, 15 U.S.C. § 18; (b) that Defendants be permanently enjoined from and restrained from carrying out the planned merger of US Airways and American or any other transaction that would combine the two companies; (c) that Plaintiffs be awarded their costs of this action, including attorneys’ fees to Plaintiff States; and (d) that Plaintiffs be awarded such other relief as the Court may deem just and proper. Response: US Airways denies that Plaintiffs are entitled to any of the relief requested, and requests that US Airways be awarded the costs incurred in defending this action, and any and all other relief as the Court may deem just and proper. 48 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 49 of 50 DEFENDANTS’ AFFIRMATIVE DEFENSES Defendants assert the following defenses, without assuming the burden of proof on such defenses that would otherwise rest with Plaintiffs: 1. The Amended Complaint fails to state a claim on which relief can be granted. 2. Granting the relief sought is contrary to the public interest. 3. The combination of the Defendants’ complementary networks will bring new routes online, increase number and convenience of flights on existing routes, grow capacity, and benefit consumers. These consumer benefits, as well as the cost synergies and other efficiencies that will result from the merger, greatly outweigh any and all proffered anticompetitive effects. 4. US Airways reserves the right to assert any other defenses as they become known to US Airways. 49 Case 1:13-cv-01236-CKK Document 79 Filed 09/10/13 Page 50 of 50 Dated: September 10, 2013 O’MELVENY & MYERS LLP By: /s/ Richard Parker Richard G. Parker (DC Bar #327544) rparker@omm.com 1625 Eye Street, N.W. Washington, D.C. 20006-4001 Telephone: (202) 383-5300 Facsimile: (202) 383-5414 Kenneth R. O’Rourke (Admitted pro hac vice) O’MELVENY & MYERS LLP 400 South Hope Street Los Angeles, CA 90071 Telephone: (213) 430-6000 Facsimile: (213) 430-6407 korourke@omm.com Paul T. Denis (DC Bar #437040) Steven G. Bradbury (DC Bar #416430) DECHERT LLP 1900 K Street, N.W. Washington, DC 20006 Telephone: (202) 261-3300 Facsimile: (202) 261-3333 paul.denis@dechert.com steven.bradbury@dechert.com Charles F. Rule (DC Bar #370818) CADWALADER, WICKERSHAM & TAFT LLP 700 Sixth Street, N.W. Washington, DC 20001 Telephone: (202) 862-2200 Facsimile: (202) 862-2400 rick.rule@cwt.com Attorneys for Defendant US AIRWAYS GROUP, INC. 50 Case 1:13-cv-01236-CKK Document 80 Filed 09/10/13 Page 1 of 15 THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, Civil Action No.1:13-cv-01236-CKK v. US AIRWAYS GROUP, INC. and AMR CORPORATION Defendants DEFENDANT AMR CORPORATION’S ANSWER [AND AFFIRMATIVE DEFENSES] TO PLAINTIFFS’ AMENDED COMPLAINT NOW COMES defendant AMR Corporation (“American”), by its undersigned counsel, and in answer to Plaintiffs’ Amended Complaint (“Complaint”), states as follows: The proposed merger of American and US Airways will increase competition in every meaningful respect. Plaintiffs’ complaint tries to explain why this is not correct, but can only do so by ignoring the realities of the airline industry in the 21st Century. This transaction, viewed through the lens of the actual US airline industry today, rather than some idealized vision of the past, does not violate the antitrust laws. The airline industry has come a long way since deregulation some 35 years ago. Not surprisingly, it has gone through a variety of shocks and cycles, some external (like 9/11 or fuel price increases) and some the result of the new competitive environment created by deregulation (like the dramatic entry and growth of low cost carriers (“LCCs”) and serial bankruptcies). Plaintiffs seem to be nostalgic for certain elements of this history that seem to provide consumer benefits, while ignoring or downplaying other elements that do not fit their preferred narrative. The relevance of that history to the issue before this Court, however, is largely to explain how we got where we are today — an intensely competitive industry with two leading network carriers, a multitude of vigorous and dynamic LCCs, and US Airways and American, seeking to position themselves to be more effective long-term competitors in that environment. This transaction would create a third comprehensive, global network carrier (the “New American”), fully capable of competing with the two that exist today (Delta and United, themselves created by mergers permitted by Plaintiffs). New American would be a long-term viable airline more capable of sustaining the economic shocks that have so characterized the Case 1:13-cv-01236-CKK Document 80 Filed 09/10/13 Page 2 of 15 airline industry, resulting in one or more bankruptcies for literally all of its major legacy participants. New American would generate enormous direct consumer benefit, most significantly by creating a unified network affording a vastly expanded array of flight options for travelers — taking more passengers where they want to go when they want to go there. Models routinely used by the airlines in their businesses demonstrate that these positive network effects would attract millions of additional passengers to the merged airline. Methods used by the United States Department of Justice (“DOJ”) conservatively demonstrate that the value of these consumer benefits would exceed $500,000,000 every year, net of any fare effects. The merger would also produce synergies resulting in $150,000,000 annually in reduced costs, net of improved pay and benefits and welcome job stability for many thousands of airline employees who have been among the victims of this industry’s tumultuous past. These very large consumer benefits are not speculative. Indeed, the DOJ itself has repeatedly recognized them while approving recent industry mergers based on the same analytical approach. For instance, the DOJ hailed the consumer benefits created by the merger of Delta and Northwest as a result of “combining under single ownership the complementary aspects of the airlines’ networks.” And while the Complaint now relies largely on mechanical recitations of “Herfindahl-Hirschman Index” numbers for individual city-pairs, it ignores that other recent airline mergers resulted in comparable HHI values and were nonetheless approved and lauded by the DOJ because across the entire network the net benefits stemming from the transactions were overwhelmingly positive. The DOJ’s approach in evaluating those earlier mergers – unlike in this transaction – was fully consistent with its own Merger Guidelines, which recognize that market shares and HHI numbers are merely starting points for analysis, not the decisive results portrayed in this Complaint. These benefits are particularly important because US Airways has undergone two bankruptcies in recent years, and American has undergone one, from which it has not yet emerged. Together, the two airlines lost almost $14 billion in the last twelve years, and the uncertainty and shocks that have prevailed in today’s airline industry, make the need for their combination all the more important to consumers. This transaction will produce a stronger, more effective competitor more able to offer consumers the network and services they want. The Complaint presents no coherent rationale supporting its challenge to the merger. Rather, it cobbles together a collection of ad hoc contentions based on anecdotes involving small numbers of passengers and historical e-mails and other documents irrelevant to this transaction, while ignoring the central facts and economic realities of today’s airline industry. For instance, the Complaint focuses heavily on the existence of “more than 1,000” overlapping routes between the two airlines with high HHI numbers. But the number of nonstop and connecting overlaps in this merger is comparable to those transactions that the DOJ only recently agreed would increase competition. Of the 623 domestic nonstop routes currently flown by American and US Airways, the two airlines directly compete on only 17, and DOJ’s list includes only 14. Moreover, most of those overlaps are also served nonstop by other airlines, including Southwest and the LCCs, such as Spirit, and JetBlue, all very vigorous and active with their individual business approaches, but in the logic of this Complaint virtually irrelevant. The remaining routes in DOJ’s list are 994 one-stop connecting overlaps, a fraction of the more than 13,000 that American and US Airways serve. And the merger would have very little effect on 2 Case 1:13-cv-01236-CKK Document 80 Filed 09/10/13 Page 3 of 15 the bulk of even that minority of routes. Illustrating how little high HHIs reveal about the competitiveness of a market, most of these one-stop routes will remain very competitive after the merger: • AA’s and US’s small shares. On almost half of the routes, either AA or US flies less than 10% of the passengers on the route. • Postmerger competition. Almost 90% of the passengers on these routes will continue to be served by at least 3 airlines after the merger. • LCC competition. About 85% of passengers on these routes will continue to be served by one of the LCCs. Since LCCs fly 40% of domestic airline passengers in the US, the notion that LCC competition and potential entry are not the dominant competitive fact in the industry is out of touch with market realities. • No barriers. Virtually none of the routes have any barriers to new entry. As this incomplete summary shows, the narrative weight this Complaint places on these “overlapping routes” is competitively misleading, and in fact illustrates the fragility of the Complaint’s allegations generally. Doing competitive effects analysis by simply counting competitors might have been accepted practice four decades ago, but seems quaint at best today. It is inconsistent with the state of the law and with the DOJ’s own Horizontal Merger Guidelines. The airline industry is intensely competitive today and would remain so after this transaction. Air travelers today receive more service to more places at lower prices (properly adjusted for inflation and other relevant factors) than ever before. The Complaint ignores this reality, and instead concocts an imaginary narrative where airlines tacitly collude and where prices are higher than in the past, but the real facts are just the opposite. This transaction would create a more effective competitor to both the existing comprehensive network carriers and the LCCs and would promise consumers more competitive and more effective air travel options in the future. In its proper historical context, the proposed transaction is the next logical step in a series of transactions that, taken as a whole, would not only create a more competitive industry but one that can be more effective in serving passengers than ever before. With this transaction, more airline passengers will get better service to more places at competitive prices. That is the definition of a procompetitive transaction. American denies, generally and specifically, any and all allegations in the Complaint not specifically admitted in the numbered paragraphs below, which correspond to the paragraphs in the Complaint. American does not respond to the headings of the various sections of the Complaint. American further states that generally it lacks knowledge or information sufficient to form a belief about the truth or falsity of allegations that relate to the actions, statements, or intent of US Airways or third parties, and therefore denies them. American reserves the right to amend this answer. 3 Case 1:13-cv-01236-CKK Document 80 Filed 09/10/13 Page 4 of 15 I. INTRODUCTION 1. American admits the allegations of the first two sentences of this paragraph. Since deregulation in 1978, the airline industry has been, and remains, highly competitive. American denies that the proposed merger threatens harm to consumers. To the contrary, it would increase competition by combining American’s and US Airways’ complementary networks and creating a competitor better able to withstand the inevitable economic shocks to the industry than either company standing alone. Following the proposed merger, the largest U.S. domestic airlines would be Southwest, American, United, and Delta. American denies the contention in the sixth sentence that the number of so-called “legacy” airlines following the merger would be three, because other airlines (including Hawaiian and Alaska Airlines) have also been considered “legacy” airlines, but in any event that category is irrelevant in assessing airline competition today. American denies the remaining allegations in this paragraph. 2. American admits that American and US Airways compete on 17 nonstop city-pair routes (12 airport-pairs) and thousands of connecting routes (along with a large number of other airlines), and admits that some of those routes are heavily traveled. American denies that this merger would eliminate substantial competition. American denies the remaining allegations in this paragraph. 3. American denies the allegations of this paragraph. 4. American admits that there have been several airline mergers since 2005, none of which were challenged by DOJ. American denies that the proposed merger would lead to anticompetitive fare or fee increases or capacity or service reductions. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in this paragraph, which relate to purported statements by US Airways, and therefore denies them. 5. American admits that at some times in the booking cycle, US Airways sometimes offers for sale connecting service on some routes that is priced lower than other airlines’ nonstop service. American admits that US offers Advantage Fares. American denies the remaining allegations in this paragraph. 6. American admits that at some times in the booking cycle, US Airways sometimes offers for sale on some routes airlines offer for sale some seats for connecting service at prices comparable to those being offered by other airlines for nonstop service. The effective pricing for airline seats is also affected by other factors such as off-tariff discounting and yield management. American admits that, shortly before departure on some routes, American, Delta, and United sometimes offer connecting service at a price lower than US Airways offers nonstop service. American admits the allegations in the fourth sentence of this paragraph. American denies the remaining allegations in this paragraph. 7. American denies the allegations in this paragraph. 8. American admits that, shortly after filing for bankruptcy, it developed a business plan to be used as the basis of a chapter 11 plan to emerge from bankruptcy independent of a merger, but that plan was not supported by creditors nor presented to the Bankruptcy Court. The business 4 Case 1:13-cv-01236-CKK Document 80 Filed 09/10/13 Page 5 of 15 plan contemplated that American would increase capacity but in a manner that tracked industrywide increases in demand. American admits the allegations in the second sentence of this paragraph. American denies the remaining allegations in this paragraph. 9. American admits that this proposed independent plan included American capacity increases but denies that this “would have bucked industry trends.” American denies there is an industrywide trend towards capacity reductions and less competition. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in this paragraph, which relate to purported statements by US Airways, and therefore denies them. 10. American admits the allegations of the second, third, and sixth sentences of this paragraph. American admits that, assuming no schedule changes, postmerger New American would be the sole carrier on 63% of nonstop routes from Reagan National. American denies the remaining allegations in this paragraph. 11. American admits that the merger will benefit consumers. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in the fourth and fifth sentences this paragraph, which relate to purported statements by US, and therefore denies them. American denies the remaining allegations in this paragraph. 12. American denies the merger will be anticompetitive. American admits that it would be able to compete as an independent company, although not as effectively as it would with the procompetitive benefits brought by the merger. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in this paragraph, which relate to purported statements by US and unspecified American executives, and therefore denies them. 13. II. American denies the allegations in this paragraph. JURISDICTION, INTERSTATE COMMERCE, AND VENUE 14. The allegations of this paragraph that this Court has subject matter jurisdiction under 15 U.S.C. § 25, and that the United States claims violations of 15 U.S.C. § 18, are legal conclusions not subject to admission or denial. American denies that the merger would violate any provision of law. 15. The allegations of this paragraph that the plaintiff States assert subject matter jurisdiction under 15 U.S.C. § 26, and that the plaintiff States claim violations of 15 U.S.C. § 18, are legal conclusions not subject to admission or denial. American denies that the merger would violate any provision of law. 16. American admits the allegations in this paragraph. 17. The allegations of this paragraph that venue is proper under 15 U.S.C. § 22, and that the Court has personal jurisdiction over American, are legal conclusions not subject to admission or denial. American admits it is found and transacts business in this judicial district. 5 Case 1:13-cv-01236-CKK Document 80 Filed 09/10/13 Page 6 of 15 III. 18. THE DEFENDANTS AND THE TRANSACTION American admits the allegations in this paragraph. 19. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the allegations in this paragraph and therefore denies them. 20. American admits the allegations in this paragraph. 21. American admits that, shortly after filing for bankruptcy, it developed a business plan to be used as the basis of a chapter 11 plan to emerge from bankruptcy independent of a merger, which contemplated growth and improved profitability, but that plan was not supported by creditors nor presented to the Bankruptcy Court. American admits that, after filing for bankruptcy, it adopted and has followed steps approved by the bankruptcy court, incompletely described in the quoted language in the third sentence of this paragraph. American admits that it reported that its revenue growth outpaced industry growth by one measure in parts of 2012, but states that its revenues have underperformed industry growth in 2013. American denies the remaining allegations in this paragraph. 22. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the allegations in this paragraph, which relate to purported statements by US Airways, and therefore denies them. 23. American admits the allegations in the first two sentences of this paragraph. American admits that the merged airline would operate under the American name, but states that its management would include persons from both US Airways management and American management. IV. THE RELEVANT MARKETS A. 24. Scheduled Air Passenger Service Between Cities American admits the allegations in this paragraph. 25. The allegations of this paragraph are too generalized to be true or meaningful. For instance, (a) for travel between some nearby city pairs, travel by car, bus, or train is a reasonable substitute and should be included in the relevant market; and (b) for some cities, air service to or from a nearby city is a reasonable substitute for service to or from those cities. American therefore denies the allegations in this paragraph. 26. American admits the allegation in the first sentence of this paragraph. The remaining allegations of this paragraph are too generalized to be true or meaningful. For example, with respect to some city pairs, air service to and from other nearby cities is a reasonable substitute. American therefore denies those remaining allegations. 27. American admits the allegations in this paragraph. 6 Case 1:13-cv-01236-CKK Document 80 Filed 09/10/13 Page 7 of 15 28. The allegations of this paragraph are too generalized to be true or meaningful. For example, (a) for travel between some nearby city pairs, travel by car, bus, or train is a reasonable substitute and should be included in the relevant market; and (b) for some city pairs, air service to and from another nearby city is a reasonable substitute. American therefore denies the allegations in this paragraph. 29. American admits the allegations in the first sentence of this paragraph. American admits that the factors identified in the second sentence of this paragraph are relevant to some passengers, but denies that these are the only factors relevant to passengers’ purchase decisions. American admits that, all else equal, some business customers traveling from downtown Washington prefer Reagan National. American admits that the proposed merger will affect passengers differently, and that fare rules make distinctions among the various services provided to passengers. American denies that individual passenger preference or fare rules define a separate relevant market. American denies the remaining allegations in this paragraph. B. Takeoff and Landing Slots at Reagan National Airport 30. American admits the allegations in the first sentence of this paragraph. American states that slots are more frequently leased than purchased, and otherwise denies the vague and subjective characterizations of the second sentence of this paragraph. American admits that, to provide service at Reagan National, an airline must have slots at Reagan National, and otherwise denies the remaining allegations in this paragraph. 31. American admits that Reagan National is across the Potomac River from Washington, D.C., that people can travel to it by subway, that some airlines are willing to, and do, pay for slots at Reagan National, and that, all else equal, some passengers prefer Reagan National to other D.C.-area airports. American denies that individual passenger preference defines a separate relevant market. American denies the remaining allegations in this paragraph. V. THE MERGER IS LIKELY TO RESULT IN ANTICOMPETITIVE EFFECTS A. Industry Background 32. American admits the allegations of the second sentence of this paragraph. American denies that there are only four airlines that have been characterized as “legacy” airlines. American admits that there are other airlines besides the four listed – such as Southwest Airlines, Jet Blue Airways, Alaska Airlines, WestJet, Spirit Airlines, Frontier Airlines, Hawaiian Airlines, Allegiant Air, and others – and that some do not offer hub-and-spoke service. American denies the remaining allegations in this paragraph. 33. American admits the allegations of this paragraph, except that airlines compete in ways other than those listed in this paragraph. 34. American admits that the four DOJ-approved mergers took place in the years indicated. American denies the allegations of the first sentence of this paragraph insofar as it uses vague and subjective characterizations of the industry. American denies the remaining allegations in this paragraph. 7 Case 1:13-cv-01236-CKK Document 80 Filed 09/10/13 Page 8 of 15 35. American denies the allegations in the first two sentences of this paragraph. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in this paragraph, which relate to purported statements by US Airways, and therefore denies them. B. Many Relevant Markets Are Highly Concentrated and the Planned Merger Would Significantly Increase that Concentration 36. American admits that, following the merger of American and US Airways, the nine airlines identified in ¶ 34 of the Complaint would have merged to four. American admits that as of today the four airlines listed would serve about 80% of domestic scheduled passenger service and that, by some measures, the new American would be the largest worldwide carrier, but Southwest Airlines would remain the largest domestic carrier. American denies the remaining allegations in this paragraph. 37. American admits that HHI values are “one” factor identified in the DOJ Horizontal Merger Guidelines (2010) as relevant in evaluating mergers, but without additional close and proper analysis, concentration changes cannot accurately predict the likely effects of any transaction. American denies the remaining allegations of this paragraph. 38. American admits that, on the city pairs listed in Appendix A, US Airways and American annually serve more than 14 million passengers and collect more than $6 billion in fares. The Complaint does not provide sufficient information to allow American to make the HHI calculations reported in Appendix A; therefore American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in this paragraph and therefore denies them. American denies that these HHI calculations demonstrate that the merger is anticompetitive or should be presumed anticompetitive. American denies that scheduled air passenger service between all of the identified city pairs is a relevant market, because (a) for travel between some nearby city pairs, travel by car, bus, or train is a reasonable substitute and should be included in the relevant market; and (b) for some cities, air service to or from a nearby city is a reasonable substitute for service to or from those cities. American denies the remaining allegations in this paragraph. 39. American denies the allegations in this paragraph. 40. American admits that, using the data selected by DOJ, the postmerger HHI calculation produces the results alleged in the first two sentences of this paragraph. American denies that these HHI calculations demonstrate that the merger is anticompetitive or should be presumed anticompetitive. American denies the remaining allegations in this paragraph. C. 41. This Merger Would Increase the Likelihood of Coordinated Behavior Among the Remaining Network Airlines Causing Higher Fares, Higher Fees, and More Limited Service American denies the allegations in this paragraph. 42. American admits that, as in most industries, airlines respond to competition by and consider the actions of rivals – especially carriers like Southwest Airlines and JetBlue Airways – 8 Case 1:13-cv-01236-CKK Document 80 Filed 09/10/13 Page 9 of 15 in setting their own fares. When one airline changes prices, other airlines may or may not make a similar change, which of course affects whether the airline making the initial fare change will decide to retain its new fares or restore its original fares. American denies the remaining allegations in this paragraph. 43. American admits that airlines sometimes use cross-market initiatives to compete with competitors’ fares, but denies that CMIs deter aggressive discounting or prevent fare wars. Indeed, CMIs constitute a type of fare war. American denies the allegations of the third and fourth sentences, because CMIs do not occur with respect to the majority of fare reductions. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in this paragraph, which relate to purported actions by other airlines, and therefore denies them. 44. American admits the allegations in the sixth, and seventh sentences of this paragraph. American denies the allegations in the first, second, fourth, and fifth sentences of this paragraph, and notes that there has never been any judicial finding that ATPCO was a signaling device used for anticompetitive behavior. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the allegations in the third sentence of this paragraph, which relate to purported statements by US Airways, and therefore denies them. 45. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the allegations in this paragraph, which relate to purported actions by other airlines, and therefore denies them. 46. American denies the allegations in this paragraph, and asserts this reflects a fundamental misunderstanding of competition in the airline industry. 47. American admits the allegations in the third sentence of this paragraph, except its allegation that this is an “example” of the allegation in the second sentence. American admits that some newer airlines’ business models differ from American’s, just as all carriers have business models that in many respects differ from one another. American denies the remaining allegations in this paragraph, some of which relate to purported statements by US Airways, and asserts that they represent a fundamental lack of understanding of the competitive importance of these airlines. 1. 48. The Merger Would Likely Result in the Elimination of US Airways’ Advantage Fares American denies the allegations in this paragraph. 49. American admits that US Airways is a national network carrier, and that it maintains a program that it calls “Advantage Fares.” American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in this paragraph, which relate to purported analysis and strategy of US Airways, and therefore denies them. 50. American admits that US Airways makes available Advantage Fares for connecting service on some routes, generally for sale close to departure. American has no independent basis 9 Case 1:13-cv-01236-CKK Document 80 Filed 09/10/13 Page 10 of 15 to confirm or deny the accuracy of the screenshot reproduced by Plaintiffs. American denies the remaining allegations in this paragraph. 51. American admits that Advantage Fares have been applied on hundred of routes, including some where more than one carrier offers nonstop service. American has no independent basis to confirm or deny the accuracy of the screenshot reproduced by Plaintiffs. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in the last sentence of this paragraph and therefore denies them. 52. American admits that some airlines offer some seats with fares similar to US Airway’s Advantage Fares on routes where US Airways has nonstop service. American has no independent basis to confirm or deny the accuracy of the screenshot reproduced by Plaintiffs. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in the last sentence of this paragraph and therefore denies them. American denies the remaining allegations in this paragraph. 53. American has no independent basis to confirm or deny the accuracy of the screenshot reproduced by Plaintiffs. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in this paragraph and therefore denies them. 54. American admits the allegations in the third and fourth sentences of this paragraph. American admits that the second through fourth sentences correctly quote and describe the email of an American employee. American denies the remaining allegations of this paragraph. 55. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the allegations in this paragraph, which relate to the operations of other airlines, and therefore denies them. 56. American admits the allegations in the third and fourth sentences of this paragraph. American denies the remaining allegations in this paragraph. 57. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the allegations in this paragraph, which relate to purported statements and strategy of US Airways, and therefore denies them. 58. American denies that the proposed merger would end Advantage Fares. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the allegations in this paragraph and therefore denies them. 2. The Merger Would Likely Lead to Increased Industry-Wide “Capacity Discipline,” Resulting in Higher Fares and Less Service 59. American admits that “reducing unused capacity can be an efficient decision that allows an airline to reduce its costs,” which allows it to lower consumer prices and provide other consumer benefits. American denies that the proposed merger will result in reduced capacity. American denies the remaining allegations in this paragraph. 60. American denies the allegations in this paragraph. 10 Case 1:13-cv-01236-CKK Document 80 Filed 09/10/13 Page 11 of 15 61. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the allegations in this paragraph and therefore denies them. 62. American admits the allegations in the first three sentences of this paragraph. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in this paragraph, which relate to purported statements by US Airways, and therefore denies them. 63. American admits the allegations in the first sentence of this paragraph. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in this paragraph, which relate to purported statements by US Airways, and therefore denies them. 64. American admits the allegations in the first sentence of this paragraph. American admits that, following the Delta/Northwest merger, the combined airline reduced service at Cincinnati and Memphis while increasing service elsewhere. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in this paragraph, which relate to purported statements by US Airways, and therefore denies them. 65. American admits the allegations in the first two sentences. American admits that United and Continental closed their deal on October 1, 2010. American admits that the combined airlines identified in this paragraph reduced service at some cities while increasing service elsewhere. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in this paragraph, which relate to purported statements by US Airways, and therefore denies them. 66. American admits it is aware of publicly-available information on other mergers. American admits the allegations in the second sentence of this paragraph. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in this paragraph and therefore denies them. 67. American denies that it expects the merger to reduce capacity and specifically denies DOJ’s characterization of the American document quoted by DOJ in the fifth sentence of this paragraph. American denies the allegations in the second, fifth, and sixth sentences of this paragraph. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in this paragraph, which relate to purported analysis by US Airways, and therefore denies them. 3. The Planned Merger Would Likely Block American’s Standalone Expansion Plans, Thwarting Likely Capacity Increases 68. American admits that it could compete as an independent company, although it could not compete as effectively as it would with the improvements brought by the merger. American admits that its independent business plan that had been under discussion prior to the merger included American domestic and international capacity increases intended to track expected industrywide increases in demand. American admits the allegations in the last sentence of this paragraph. American denies the remaining allegations in this paragraph. 11 Case 1:13-cv-01236-CKK Document 80 Filed 09/10/13 Page 12 of 15 69. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the allegations in this paragraph and therefore denies them. 70. American admits that the text quoted in the second half of the second sentence is from an American document, but denies DOJ’s suggestion that it opined that the combined airline would not pursue growth. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in the first sentence of this paragraph, which relate to purported analysis by US Airways, and therefore denies them. 4. The Merger Would Likely Result in Higher Fees 71. American admits the allegations in the first three sentences of this paragraph. American admits that increases in fees would bring additional costs to those who pay them. American denies the remaining allegations in this paragraph. 72. American admits that in 2008, American, United and US Airways introduced a firstchecked-bag fee on the dates indicated in the fifth and sixth sentences of this paragraph. American admits the allegation of the seventh sentence of this paragraph. American denies the remaining allegations and opinions in this paragraph. 73. American admits that, as in any competitive industry, the competitive responses of other airlines are factors that can affect implementation of new fees or fee changes. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in this paragraph, which relate to purported statements by US Airways, and therefore denies them. 74. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the allegations in this paragraph, which relate to purported statements by US Airways, and therefore denies them. 75. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the allegations in this paragraph and therefore denies them. 76. American admits that, as is common to any competitive industry, airlines at times delay responding to new fees or fee changes until other airlines have responded. American admits the allegations in the second and third sentences of this paragraph. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in this paragraph, which relate to purported statements by US Airways, and therefore denies them. 77. American denies the allegation of the first sentence of this paragraph. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in this paragraph, which relate to purported statements by US Airways, and therefore denies them. 78. American admits that it has considered but not imposed a checked bag fee on flights to Europe. American admits that, by some measures, the new American would be the largest worldwide carrier, but denies the remaining allegations in the last sentence of this paragraph. American lacks knowledge or information sufficient to form a belief about the truth or falsity of 12 Case 1:13-cv-01236-CKK Document 80 Filed 09/10/13 Page 13 of 15 the remaining allegations in this paragraph, which relate to purported statements by US Airways, and therefore denies them. 79. American admits that the merged airline would harmonize the now-separate fees of American and US Airways, but the ultimate fee structure would depend on market conditions. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in this paragraph, which relate to purported statements by US, and therefore denies them. 80. American denies the allegation in the first sentence of this paragraph. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in this paragraph, which relate to purported statements by US Airways, and therefore denies them. 81. American admits, without this merger, American and US Airways would continue to compete with United and Delta, each other, Southwest, and other airlines. American admits that no airlines look exactly the same. American denies the remaining allegations in this paragraph. D. The Merger Would Eliminate Head-to-Head Competition in Hundreds of Relevant Markets and Entrench US Airways’ Dominance at Reagan National Airport 82. American admits the allegations of the first two sentences of this paragraph, but notes that the vast majority of those “markets” include other competitive alternatives, frequently more than one. American denies the remaining allegations in this paragraph. 83. American admits the allegations of the first two sentences of this paragraph. American denies the remaining allegations in this paragraph. 84. American admits the allegations of the second sentence of this paragraph. American admits that slots are required to take off and land at Reagan National, and that airlines may obtain slots through transactions with existing slot holders or by assignment from the FAA. American denies the remaining allegations in this paragraph. 85. American denies the allegations of the first sentence of this paragraph. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in this paragraph, which relate to purported statements by US Airways, and therefore denies them. 86. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the allegations of the second and fourth sentences of this paragraph. American denies the remaining allegations in this paragraph. 87. American admits the allegations in this paragraph. 88. American admits the allegation in the fourth sentence of this paragraph that the combined firm would have the right to terminate with a 180 days’ notice, but notes that doing so would result in a loss of access by the combined firm to slots at JFK. American lacks knowledge or 13 Case 1:13-cv-01236-CKK Document 80 Filed 09/10/13 Page 14 of 15 information sufficient to form a belief about the truth or falsity of the remaining allegations in this paragraph, which relate to purported statements by US Airways, and therefore denies them. 89. American admits the allegations of the first sentence of this paragraph. American lacks knowledge or information sufficient to form a belief about the truth or falsity of the remaining allegations in this paragraph, which relate to purported statements by US Airways, and therefore denies them. 90. American denies the allegations in this paragraph. VI. ABSENCE OF COUNTERVAILING FACTORS 91. American denies the allegations in this paragraph. 92. American denies the allegations in this paragraph. 93. American admits that some carriers do not serve all markets and that there are customers who prefer certain types of carriers and particular carriers. American denies the remaining allegations in this paragraph. 94. American denies the allegations in this paragraph. VII. VIOLATION ALLEGED 95. American denies the allegations in this paragraph. 96. American denies the allegations in this paragraph. VIII. REQUEST FOR RELIEF 97. American states the Plaintiffs are not entitled to the relief requested. AFFIRMATIVE DEFENSES 1. The Complaint fails to state a claim on which relief can be granted. 2. Granting the relief sought is contrary to the public interest. 3. Combining US Airways’ and American’s flight networks will offer travelers new routes, increase the frequency and convenience of flights, increase capacity, and benefit consumers. These consumer benefits, as well as cost synergies and other efficiencies that will result from the merger, far outweigh any proffered anticompetitive effects. 4. American reserves the right to assert any other defenses as they become known to American. 14 Case 1:13-cv-01236-CKK Document 80 Filed 09/10/13 Page 15 of 15 Dated: September 10, 2013 /s/ John M. Majoras John M. Majoras (DC Bar #474267) Paula W. Render (Pro Hac Vice) Michael S. Fried (DC Bar #458357) Rosanna K. McCalips (DC Bar #482859) JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (Phone) (202) 626-1700 (Facsimile) jmmajoras@jonesday.com prender@jonesday.com msfried@jonesday.com rkmccalips@jonesday.com Mary Jean Moltenbrey (DC Bar #481127) PAUL HASTINGS LLP 875 15th Street, N.W. Washington, DC 20005 (202) 551-1725 (Phone) (202) 551-0225 (Facsimile) mjmoltenbrey@paulhastings.com Attorneys for Defendant AMR Corporation 15 Case 1:13-cv-01236-CKK Document 81 Filed 09/12/13 Page 1 of 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiff, Case No. 1:13-cv-01236 v. US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants. NOTICE OF APPEARANCE Please take notice that Gorav Jindal enters his appearance as co-counsel in the abovecaptioned case on behalf of Defendant, US Airways Group, Inc. He is admitted to and authorized to practice in this Court. Dated: September 9, 2013 Respectfully submitted, By: /s/ Gorav Jindal Gorav Jindal (DC Bar No. 471059) Dechert LLP 1900 K Street NW Washington, DC 20006 Telephone: +1 202 261 3435 Facsimile: +1 202 261 3333 gorav.jindal@dechert.com Counsel for Defendant, US Airways Group, Inc. Case 1:13-cv-01236-CKK Document 82 Filed 09/18/13 Page 1 of 1 IN THE 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-01236 NOTICE OF APPEARANCE Please take notice that Andrew J. Forman enters his appearance as co-counsel in the above-captioned case on behalf of defendant US Airways Group, Inc. He is admitted to and authorized to practice in this court. Dated: September 18, 2013 Respectfully submitted, By:/s/ Andrew J. Forman Andrew J. Forman (D.C. Bar No. 477425) CADWALADER, WICKERSHAM & TAFT LLP 700 6th St. NW Washington, DC 20001 (202) 862-2243 (phone) (202) 862-2400 (facsimile) andrew.forman@cwt.com Counsel for Defendant, US Airways Group, Inc. Case 1:13-cv-01236-CKK Document 83 Filed 09/18/13 Page 1 of 1 IN THE 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-01236 NOTICE OF APPEARANCE Please take notice that Daniel J. Howley enters his appearance as co-counsel in the above-captioned case on behalf of Defendant US Airways Group, Inc. He is admitted to and authorized to practice in this court. Dated: September 18, 2013 Respectfully submitted, By: /s/ Daniel J. Howley Daniel J. Howley (D.C. Bar No. 983664) CADWALADER, WICKERSHAM & TAFT LLP 700 6th St. NW Washington, DC 20001 (202) 862-2326 (phone) (202) 862-2400 (facsimile) daniel.howley@cwt.com Counsel for Defendant, US Airways Group, Inc. Case Document 84-1 Filed 09/20/13 Page 1 of 13 Exhibit 1 Case 1:13-cv-01236-CKK Document 84-1 Filed 09/20/13 Page 2 of 13 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, v. US AIRWAYS GROUP, INC. and AMR CORPORATION, Case No. 1:13-cv-01236-CKK (Before Special Master Levie) Defendants, DEFENDANTS’ MOTION TO COMPEL PRODUCTION OF FACTUAL MATERIALS AND INFORMATION REGARDING DOJ’S APPROVALS OF FOUR PRIOR AIRLINE MERGERS Defendants hereby move for an order compelling Plaintiffs to respond to Requests 15 through 20 of Defendants’ First Request for Production of Documents (“RFP”) (see accompanying Declaration of Steven Bradbury, Ex. A) and Interrogatory 2 of Defendants’ First Set of Interrogatories (see id., Ex. B). These requests seek the factual record on which the Department of Justice (“DOJ”) approved four prior airline mergers under section 7 of the Clayton Act. This motion is supported by the following points and authorities: Preliminary Statement Over the past eight years, DOJ has approved four airline mergers similar to the one at issue here. Each time, DOJ issued press releases explaining that, after careful consideration, it had determined that the merger would enhance competition in the airline industry and benefit the traveling public. (Id., Ex. C.) Those mergers—the 2005 US Airways-America West Airlines merger, the 2008 Delta Air Lines-Northwest Airlines merger, the 2010 United AirlinesContinental Airlines merger, and the 2011 Southwest Airlines-AirTran merger—spurred Case 1:13-cv-01236-CKK Document 84-1 Filed 09/20/13 Page 3 of 13 competition and allowed United and Delta to create broad airline networks with global reach. But in the Amended Complaint, DOJ alleges that those mergers “hurt passengers” and that the American Airlines-US Airways merger would exacerbate the harm caused by the previous mergers. (Am. Compl. ¶ 35; see also ¶¶ 46, 64-67, 71.) Even more remarkable than DOJ’s abrupt and unexplained reversal is the fact that it contends that the dramatic change in its view of consolidation in the airline industry is off-limits in the discovery process here. DOJ seeks to prevent Defendants from learning the facts on which it approved the other four mergers. But DOJ cannot assert that the American-US Airways merger should be blocked because it could cause the same results as the prior mergers, and, at the same time, contend that those mergers have no relevance here. Plaintiffs raised this line of inquiry themselves, and the discovery sought will be used to demonstrate that this merger offers significant procompetitive benefits. Accordingly, Plaintiffs should be compelled to provide the requested discovery. Defendants’ RFPs 15 through 19 seek documents that reflect the facts, factual assumptions, and forecasts on which DOJ based its original conclusions that the service improvements and other consumer benefits expected from the prior mergers would increase competition, notwithstanding any predicted fare effects on overlapping routes. Interrogatory 2 asks for the same factual information directly. Defendants’ RFP 20 seeks the documents that reflect the underlying studies, analyses, and forecasts described in an article published by three senior DOJ economists that “report[ed]” on DOJ’s approval of the Delta-Northwest merger and summarized the government’s method for evaluating the costs and benefits of proposed mergers. (See Ex. D, Heyer, Shapiro, & Wilder, The Year in Review: Economics at the Antitrust Division 2008-2009, § 2.3.) 2 Case 1:13-cv-01236-CKK Document 84-1 Filed 09/20/13 Page 4 of 13 Plaintiffs refused to produce any of the requested documents or information on the ground that the factual record on which DOJ approved the prior airline mergers is not “relevant” to any issue in this case. Plaintiffs also asserted several varieties of privilege, including deliberative process privilege and work-product protection. (See Ex. A at 0023-33; Ex. B at 0043-0044.) The parties met and conferred, to no avail. In an effort to sharpen the issues for resolution by the Special Master, Defendants asked Plaintiffs to itemize the categories of materials at issue, and explain what privilege(s) they claimed as to each category. Plaintiffs refused. These discovery requests do not seek privileged materials. They do not seek the government’s internal deliberations over whether to approve the prior mergers. They do not seek the government’s legal analysis. Instead, the requests simply seek facts. Plaintiffs have these facts in their possession, used these facts to approve prior mergers, and now claim this Court should halt the current merger because it may cause the same results as those prior mergers. Our discovery system is designed to ensure that parties cannot plead facts and then refuse to disclose those facts. The motion to compel should be granted. Argument I. The Requested Information Is Highly Relevant. Defendants are entitled to discover all facts available to Plaintiffs that are potentially relevant to the allegations in the Complaint and all non-privileged documents that may lead to discovery of admissible evidence. See Fed. R. Civ. P. 26(b)(1). The requested materials and information easily meet this standard for at least two reasons. First, the requested discovery will enable Defendants to show that this merger is procompetitive even when evaluated using similar models, forecasts, and analyses as those the government itself relied on when it concluded that earlier mergers did not violate section 7. See 3 Case 1:13-cv-01236-CKK Document 84-1 Filed 09/20/13 Page 5 of 13 United States v. Leggett & Platt, Inc., 542 F.2d 655, 658 (6th Cir. 1976) (“[I]nvestigatory inquiries into other industry acquisitions are relevant, and thereby discoverable unless privileged, to the extent they contain factual materials, such as surveys and economic analyses of the industry, and the government analyses.”). Defendants intend to show at trial that the present merger should be approved because its net effect will be to increase, not decrease, competition. Defendants expect to make this showing in part using models and economic studies very similar to those that DOJ relied on in approving the prior mergers. Using DOJ’s own analysis, the present merger will generate similar and potentially even greater procompetitive effects than DOJ predicted when approving prior mergers under section 7. Second, Plaintiffs have established the relevance of this inquiry by alleging that the prior airline mergers did not produce the benefits DOJ predicted, and attempting to use this fact to attack the current merger. Having approved previous mergers and put their results at issue in this case, DOJ cannot now refuse Defendants the opportunity to understand whether and how the prior mergers’ outcomes were inconsistent with DOJ’s own analyses. In addition, Defendants have submitted a retrospective merger analysis to DOJ, and the allegations in the Complaint suggest that DOJ may cross-examine Defendants’ expert witnesses about these prior mergers. Without the requested factual materials and information, Defendants will be handcuffed in responding to these allegations and in preparing for expert depositions. Put simply, having raised the issue, Plaintiffs must now allow its full consideration. II. The Requested Factual Materials and Information Are Not Shielded from Discovery. Plaintiffs’ privilege assertions should be rejected. Defendants’ discovery requests seek only factual materials and information, and Plaintiffs cannot shield this information from 4 Case 1:13-cv-01236-CKK Document 84-1 Filed 09/20/13 Page 6 of 13 discovery now that they have put at issue DOJ’s prior merger analyses—and in any event, DOJ has waived any basis it might have to claim privilege by its own public statements. A. Deliberative Process Privilege Does Not Apply to the Underlying Facts. The deliberative process privilege “does not authorize an agency to throw a protective blanket over all information” that may have been selected or generated in support of a deliberative decision; thus, “[p]urely factual reports and scientific studies cannot be cloaked in secrecy by [a privilege] designed to protect only those internal working papers in which opinions are expressed and policies formulated and recommended.” Am. Radio Relay League, Inc. v. FCC, 524 F.3d 227, 238 (D.C. Cir. 2008) (quotation marks omitted); see McGrady v. Mabus, 635 F. Supp. 2d 6, 17 (D.D.C. 2009) (“When the information at issue is ‘[f]actual material that does not reveal the deliberative process,’ it is not protected.”) (citations omitted). Unlike the ultimate policy recommendations conveyed to the relevant decisionmaker—which may be protected—the facts, data analyses, economic studies, models, and forecasts that underlie those recommendations fall outside the privilege and must be produced. See, e.g., Public Citizen, Inc. v. OMB, 598 F.3d 865, 874, 876 (D.C. Cir. 2009) (the deliberative process privilege protects only the “give-and-take” of an agency’s consultative process); Vento v. IRS, 714 F. Supp. 2d 137, 154 (D.D.C. 2010) (same). The only relevant exception provides that underlying factual materials are shielded if they are so inextricably intertwined with the deliberative recommendations of the agency that separation is impossible. Plaintiffs have not and cannot meet that exacting standard. See Vento, 714 F. Supp. 2d at 154. To be clear, the mere selection of facts or preparation of factual analyses in support of a recommendation does not immunize those facts and analyses from discovery under the deliberative process privilege; otherwise, “every factual report would be protected as a 5 Case 1:13-cv-01236-CKK Document 84-1 Filed 09/20/13 Page 7 of 13 part of the deliberative process.” Playboy Enters., Inc. v. Dep’t of Justice, 677 F.2d 931, 935 (D.C. Cir. 1982). Indeed, the privilege does not even “shield the reasoning behind a final governmental decision,” such as DOJ’s final decisions to approve the prior mergers. United States v. Motorola, Inc., No. Civ.A.94-2331TFH/JMF, 1999 WL 552558, at *2 (D.D.C. May 27, 1999) (ordering Rule 30(b)(6) deposition of Antitrust Division attorney in litigation relating to section 7 merger decree); see Motorola, at *1 (“When a decision by a government agency affects entire segments of the economy and there is grounds for inquiry into the knowledge that agency had when it made the decision, the case for disclosure is always stronger than the case for secrecy . . . .”); Leggett, 542 F.2d at 659. In any event, even if the requested factual materials and information were somehow covered by the deliberative process privilege, the privilege can be overcome by a sufficient showing of need. See In re Sealed Case, 121 F.3d 729, 737 (D.C. Cir. 1997); cf. Stonehill v. IRS, 558 F.3d 534, 538 (D.C. Cir. 2009) (recognizing that questions of relevance and need in particular cases guide discovery of deliberative materials in litigation). Defendants need this material to defend against this suit that Plaintiffs initiated. Moreover, Defendants will be at a significant disadvantage if Plaintiffs can avoid responding, because there is no other source from which Defendants can obtain the final versions of DOJ-generated consumer-benefit studies, data analyses, and other factual models and forecasts on which DOJ relied in making its final decisions to approve the prior airline mergers, while Plaintiffs have this information and can use the facts to develop their expert testimony and case strategy. B. The Attorney Work-Product Doctrine Does Not Apply. Nor does the work-product doctrine immunize the requested materials from discovery. The work-product doctrine is intended to protect attorneys’ legal strategies, thoughts, and mental 6 Case 1:13-cv-01236-CKK Document 84-1 Filed 09/20/13 Page 8 of 13 impressions developed in anticipation of litigation. Hickman v. Taylor, 329 U.S. 495, 504-08 (1947). It does not protect relevant facts from discovery. See id. at 507 (“Mutual knowledge of all the relevant facts gathered by both parties is essential to proper litigation.”); see also Resolution Trust Corp. v. Dabney, 73 F.3d 262, 266 (10th Cir. 1995) (work-product doctrine does not protect from discovery “facts contained within work-product” documents). While work-product protection may extend to the factual portions of a document that an attorney labored to prepare, it does not provide the same degree of protection for separate documents, not prepared by an attorney, that reflect purely factual information or analysis. See Fed. R. Civ. P. 26(b)(3)(B) (core of this doctrine is the protection of an attorney’s “mental impressions, conclusions, opinions, or legal theories . . . concerning the litigation”).1 Defendants do not seek discovery of DOJ’s assessments of legal positions or other preparations for litigation, but only the final versions of economic models, studies, forecasts, and similar factual analyses. Those factual materials are not placed beyond discovery by the workproduct doctrine. In particular, Plaintiffs cannot withhold the requested documents on the ground that they constitute the opinions of consulting experts prepared at the request of counsel within the meaning of Rule 26(b)(4)(D). Rather, these documents represent the factual record on which a final agency decision was based, and Rule 26 may not be used in subsequent litigation as a device to exclude these relevant factual materials from the universe of discoverable evidence. See Motorola, 1999 WL 552558, at *1-*2 (permitting litigant to take discovery of the reasoning behind a prior enforcement decision of the Antitrust Division). In any event, like the deliberative privilege, the work-product doctrine provides only qualified protection of material within its scope. See United States v. Deloitte LLP, 610 F.3d 1 Furthermore, work-product protection only extends to “documents and tangible things” under Rule 26(b)(3), and Defendants’ Interrogatory 2 seeks factual information, not documents. 7 Case 1:13-cv-01236-CKK Document 84-1 Filed 09/20/13 Page 9 of 13 129, 135 (D.C. Cir. 2010); Fed. R. Civ. P. 26(b)(3)(A)(ii) (permitting discovery of attorney work product based on showing of substantial need in litigation and undue hardship if forced to obtain by other means); see also Fed. R. Civ. P. 26(b)(4)(D)(ii) (permitting discovery of consulting expert opinions upon showing of exceptional circumstances making it impracticable to obtain the relevant facts or opinions by other means). Here again, Defendants have a strong need for the requested factual materials and cannot obtain this relevant evidence from any source other than DOJ records. C. No Other Privilege Claims Are Valid. Plaintiffs recited a litany of other privilege claims (see Ex. A at 0023-0033; Ex. B at 0043-0044), but these assertions also fail. Attorney-client privilege has no relevance here because Defendants’ requests do not seek confidential attorney advice. Coastal States Gas Corp. v. Dep’t of Energy, 617 F.2d 854, 862-63 (D.C. Cir. 1980). Moreover, for federal agencies the attorney-client privilege is simply a component of the deliberative process privilege, discussed above. Plaintiffs also cite a law enforcement investigatory privilege, but that privilege does not shield factual information developed in prior closed investigations when the information is relevant to issues raised in litigation initiated by DOJ and its disclosure will not jeopardize any ongoing law enforcement matter. See In re Sealed Case, 856 F.2d 268, 271-72 (D.C. Cir. 1988); see also In re U.S. Dep’t of Homeland Sec., 459 F.3d 565, 569-70 (5th Cir. 2006). Lastly, Plaintiffs invoke two statutes that provide for confidential treatment of materials secured from private parties through civil investigative demands. See 15 U.S.C. §§ 18a(h), 1313(c). However, section 18a(h) does not prevent disclosure of material “relevant to any . . . judicial action or proceeding,” id. § 18a(h), and Plaintiffs have not established that section 1313(c) applies to any of the internal DOJ-generated factual materials and information sought here. 8 Case 1:13-cv-01236-CKK Document 84-1 Filed 09/20/13 Page 10 of 13 D. Plaintiffs Waived Any Privilege That Might Exist Even if any privilege existed, DOJ would have waived its right to claim privilege by making multiple disclosures inconsistent with the maintenance of confidentiality. DOJ not only issued public closing statements about the prior mergers, but permitted its economists to publish an article describing why DOJ approved those mergers and disclosing the economic analyses and methodology supporting those approvals. DOJ cannot have it both ways, selectively disclosing information about confidential materials and then asserting privilege over those same materials for tactical advantage in litigation. See In re Subpoenas Duces Tecum, 738 F.2d 1367, 1370 (D.C. Cir. 1984). DOJ’s prior disclosures are inconsistent with the maintenance of confidentiality, and thus effect a waiver of any privilege or work-product protection that could apply. Conclusion For the foregoing reasons, Defendants respectfully request an order compelling Plaintiffs to respond to Defendants’ RFPs 15 through 20 and Interrogatory 2. 9 Case 1:13-cv-01236-CKK Document 84-1 Filed 09/20/13 Page 11 of 13 Dated: September 20, 2013 Respectfully submitted, /s/ Richard G. Parker Richard G. Parker (DC Bar #327544) Henry Thumann (DC Bar #474499) Courtney Dyer (DC Bar #490805) O’MELVENY & MYERS LLP 1625 Eye Street, N.W. Washington, D.C. 20006 (202) 383-5300 (Phone) (202) 383-5414 (Facsimile) rparker@omm.com hthumann@omm.com cdyer@omm.com Kenneth R. O’Rourke (Admitted Pro Hac Vice) O’MELVENY & MYERS LLP 400 South Hope Street Los Angeles, CA 90071 (213) 430-6000 (Phone) (213) 430-6407 (Facsimile) korourke@omm.com Paul T. Denis (DC Bar #437040) Steven G. Bradbury (DC Bar #416430) DECHERT LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 (Phone) (202) 261-3333 (Facsimile) paul.denis@dechert.com steven.bradbury@dechert.com Charles F. Rule (DC Bar #370818) CADWALADER, WICKERSHAM & TAFT LLP 700 Sixth Street, N.W. Washington, DC 20001 (202) 862-2200 (Phone) (202) 862-2400 (Facsimile) rick.rule@cwt.com Attorneys for Defendant US Airways Group, Inc. 10 Case 1:13-cv-01236-CKK Document 84-1 Filed 09/20/13 Page 12 of 13 /s/ John M. Majoras John M. Majoras (DC Bar #474267) Paula Render (Pro Hac pending) Michael S. Fried (DC Bar #458357) Rosanna K. McCalips (DC Bar #482859) JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (Phone) (202) 626-1700 (Facsimile) jmmajoras@jonesday.com prender@joensday.com msfried@jonesday.com rkmccalips@jonesday.com Mary Jean Moltenbrey (DC Bar #481127) PAUL HASTINGS LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 (Phone) (202) 551- 0225 (Facsimile) mjmoltenbrey@paulhastings.com Attorneys for Defendant AMR Corporation 11 Case 1:13-cv-01236-CKK Document 84-1 Filed 09/20/13 Page 13 of 13 CERTIFICATE OF SERVICE I certify that I caused a true and correct copy of the attached DEFENDANTS’ MOTION TO COMPEL PRODUCTION OF FACTUAL MATERIALS AND INFORMATION REGARDING DOJ’S APPROVALS OF FOUR PRIOR AIRLINE MERGERS to be served via electronic mail in accordance with the Scheduling and Case Management Order on the following: Ryan Danks, Esq. Kate Mitchell-Tombras, Esq. Patrick Hallagan, Esq. Department of Justice Antitrust Division Transportation, Energy, and Agricultural Section 450 5th Street Northwest, Suite 8000 Washington, DC 20530 ryan.danks@usdoj.gov katharine.mitchell@usdoj.gov f.patrick.hallagan@usdoj.gov Mark Levy, Esq. Assistant Attorney General Office of the Attorney General of TX 300 W. 15th Street, 7th Floor Austin, TX 78701 mark.levy@texasattorneygeneral.gov John M. Majoras, Esq. Rosanna K. McCalips, Esq. JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (Phone) (202) 626-1700 (Facsimile) jmmajoras@jonesday.com rkmccalips@jonesday.com Dated: September 20, 2013 /s/ Robert M. Swerdlow Robert M. Swerdlow Case Document 84-2 Filed 09/20/13 Page 1 of 91 Exhibit 2 Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 2 of 91 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, v. US AIRWAYS GROUP, INC. and AMR CORPORATION, Case No. 1:13-cv-01236-CKK (Before Special Master Levie) Defendants, DECLARATION OF STEVEN G. BRADBURY I, Steven G. Bradbury, being over the age of 18, do hereby declare as follows: 1. I am a partner at Dechert LLP and a counsel of record to Defendant US Airways Group, Inc. in this action. I submit this Declaration in support of Defendants’ Motion to Compel Production of Factual Materials and Information Regarding DOJ’s Approvals of Four Prior Airline Mergers (the “Motion to Compel”). 2. Attached to this Declaration as Exhibit A is a true and correct copy of Plaintiffs’ Objections and Responses to Defendants’ First Set of Requests for Production of Documents, dated September 13, 2013. 3. Attached as Exhibit B is a redacted copy of Plaintiffs’ Objections and Responses to Defendants’ First Set of Interrogatories Directed to All Plaintiffs, dated September 19, 2013. The non-redacted portion of the document contains Plaintiffs’ objections and responses to Plaintiffs’ Interrogatories 1 and 2. The portion of the document that is redacted (addressing Interrogatory no. 3) is not at issue on this motion. Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 3 of 91 4. Attached as Exhibit C are true and correct copies of closing statements publicly released by the United States Department of Justice (“DOJ”) announcing and explaining DOJ’s decisions not to challenge four prior airline mergers under section 7 of the Clayton Act: (a) the April 26, 2011 statement approving the merger of Southwest Airlines and AirTran Airways; (b) the August 27, 2010 statement approving the merger of United Airlines and Continental Airlines, subject to the transfer of certain assets; (c) the October 29, 2008 statement approving the merger of Delta Airlines and Northwest Airlines; and (d) the June 23, 2005 statement approving the merger of US Airways and America West. 5. Review: Attached as Exhibit D is a true and correct copy of an article entitled “The Year in Economics at the Antitrust Division, 2008-2009,” authored by three senior DOJ economists (Ken Heyer, Carl Shapiro, and Jeffrey Wilder) and published by the Review of Industrial Organization on November 12, 2009. 6. Attached as Exhibit E is a true and correct copy of a subpoena to produce documents served by the DOJ on United Airlines, Inc. 7. At issue in Defendants’ Motion to Compel are Plaintiffs’ objections and responses to Defendants’ Requests for Production (“RFP”) 15 through 20, set forth in Exhibit A, and their objections and responses to Interrogatory 2, set forth in Exhibit B. RFPs 15 through 19 seek documents that reflect the facts, factual assumptions, and forecasts on which DOJ based its decisions not to challenge the four prior airline mergers announced in the closing statements set forth in Exhibit C. RFP 20 seeks the documents that reflect the underlying studies, analyses, and forecasts described in section 2.3 of the article attached hereto as Exhibit D (key language highlighted) concerning DOJ’s approval of the merger of Delta Airlines and Northwest Airlines. 2 Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 4 of 91 Interrogatory 2 requests the same factual information encompassed by RFPs 15 through 20, but asks for the information directly in the form of an interrogatory. 8. Plaintiffs have refused to produce any of the documents or information requested in RFPs 15 through 20 and Interrogatory 2 on the ground that the factual record on which DOJ approved the prior airline mergers is not relevant to any issue in this case. Plaintiffs have also asserted that all of the requested documents and information are categorically protected from discovery in this litigation by various privileges and discovery protections, including the deliberative process privilege, work-product protection, and other privileges. (See Exhibit A at 20-30; Exhibit B at 5-6.) 9. As required by Local Civil Rule 7(m), the parties met and conferred on the substance of Plaintiffs’ objections and the subject of this Motion to Compel, but were unable to resolve this discovery dispute. In an effort to sharpen the issues for resolution by the Special Master, Defendants asked Plaintiffs to itemize the categories of materials at issue and to identify what privileges they are claiming as to each category, but Plaintiffs have refused to do so. I declare under penalty of perjury that the foregoing is true and correct. Executed on September 19, 2013, in Washington, D.C. ________________________ Steven G. Bradbury 3 Case Document 84-2 Filed 09/20/13 Page 5 of 91 Exhibit A Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 6 of 91 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, v. Case No. 1:13-cv-01236 (CKK) US AIRWAYS GROUP, INC. and AMR CORPORATION Defendants. PLAINTIFFS’ OBJECTIONS AND RESPONSES TO DEFENDANTS’ FIRST SET OF REQUESTS FOR PRODUCTION OF DOCUMENTS Plaintiff United States of America (“United States”) and the Plaintiff States (collectively, “Plaintiffs”), by their undersigned counsel, and pursuant to the Federal Rules of Civil Procedure, respond to Defendants’ First Set of Requests for Production of Documents (“First Set of Requests”) as follows: GENERAL OBJECTIONS 1. Plaintiffs’ investigation and development of facts and circumstances relating to this action are ongoing. Therefore, Plaintiffs reserve the right to supplement, clarify, revise, or correct any or all of these responses and objections, and to assert additional objections or privileges, in one or more supplemental responses. 2. Plaintiffs object generally that because it contains no time limitation, Defendants’ First Set of Requests is overbroad, unduly burdensome, and seeks documents that are neither relevant 1 Ex. A 0004 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 7 of 91 nor reasonably calculated to lead to the discovery of admissible evidence. Subject to and without waiving the General Objections or the Specific Objections, Plaintiffs respond that they will produce documents through August 13, 2013. 3. Plaintiffs object generally to Defendants’ First Set of Requests to the extent that the “General Instructions” attempt to impose any obligation on Plaintiffs greater than those imposed or authorized by the Federal Rules of Civil Procedure, the Local Civil Rules of the United States District Court for the District of Columbia, or any applicable order of the Court. 4. Plaintiffs object generally to Defendants’ First Set of Requests to the extent that they request premature production of expert materials, or production of expert materials not subject to discovery under Paragraph 10 of the Case-Management Order (“CMO”) or FRCP 26. 5. Plaintiffs object generally to Defendants’ First Set of Requests to the extent that it is vague, ambiguous, overbroad, or incomprehensible. 6. Plaintiffs object generally to Defendants’ First Set of Requests to the extent that it requests documents that are unduly burdensome to produce, irrelevant, or not reasonably calculated to lead to the discovery of admissible evidence. 7. Plaintiffs object generally to Defendants’ First Set of Requests to the extent that it requests production of documents that are protected from disclosure by the attorney-client privilege, deliberative-process privilege, attorney work-product doctrine, the law enforcement investigatory files privilege, common interest privilege, or any other applicable privilege or statute governing confidentiality of information. Should any such disclosure by Plaintiffs occur, it is inadvertent and shall not constitute a waiver of any privilege. 8. Plaintiffs object generally to Defendants’ First Set of Requests to the extent it requests Plaintiffs’ production of documents in Defendants’ possession, custody, or control. 2 Ex. A 0005 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 8 of 91 9. Plaintiffs object generally to Defendants’ First Set of Requests to the extent it seeks production of materials produced by Plaintiffs in compliance with their Initial Disclosure obligations pursuant to Paragraph 5 of the CMO. Plaintiffs will not reproduce documents already being produced in connection with their Initial Disclosures. 10. Plaintiffs object generally to Defendants’ First Set of Requests to the extent it requests production of documents that are subject to the terms of confidentiality or non-disclosure agreements with non-parties or would violate privacy interests of others. Plaintiffs’ production of such documents will be made after non-parties have had an opportunity to designate their documents in a manner consistent with the provisions of the Protective Order governing this case, and subject to that Protective Order. 11. Plaintiffs expressly incorporate their General Objections into each specific response below. A specific response may repeat a General Objection for emphasis or some other reason. The failure to include any General Objection in any specific response does not waive any General Objection applicable to that Request. Moreover, Plaintiffs do not waive their right to amend their responses. SPECIFIC OBJECTIONS TO DEFINITIONS AND INSTRUCTIONS 12. Plaintiff United States objects to Defendants’ Definition 14 to the extent that it includes the Department of Transportation or other agencies of the executive branch of the United States government in its definition of “third parties.” 13. Plaintiff United States objects to Defendants’ Instruction 1 as overbroad and unduly burdensome to the extent it requires production of documents from divisions of the Department of Justice other than the Antitrust Division and therefore not in the Antitrust Division’s possession, custody, or control. Subject to and without waiving the following Specific 3 Ex. A 0006 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 9 of 91 Objections or the General Objections, Plaintiff United States will produce responsive, nonprivileged documents in the possession, custody, or control of the Antitrust Division of the Department of Justice. 14. Plaintiffs Arizona, District of Columbia, Michigan, Pennsylvania, Tennessee, Texas, and Virginia object to Defendants’ Instruction 1 as overbroad and unduly burdensome to the extent it requires production of documents from units, departments, divisions, or sections of the offices of their Attorneys General other than those with antitrust enforcement responsibilities. 15. Plaintiffs object to Defendants’ Instruction 4 to the extent it requires individualized logging in a privilege log of voluminous privileged documents that can be described categorically, such as the Antitrust Division’s internal privileged documents that have not been disclosed to persons outside the Antitrust Division of the Department of Justice. Individual logging of such documents in a privilege log is unduly burdensome and exceeds the obligation imposed by the Federal Rules of Civil Procedure, including Fed. R. Civ. P. 26(b)(5)(ii). SPECIFIC OBJECTIONS AND RESPONSES TO DOCUMENT REQUESTS REQUEST FOR PRODUCTION NO. 1: All documents, communications, data, or other information that have been provided to, made available to, or obtained by the DOJ or any State from third parties pursuant to or in connection with the Merger Review or this litigation. Response to Request No. 1: Subject to and without waiving the following Specific Objections or the General Objections, and consistent with Plaintiff United States’ obligation to provide non-parties an opportunity to designate their documents in accordance with the provisions of the Protective Order governing this case, Plaintiff United States responds that it has produced or will produce all responsive, non-privileged documents related to its investigation of the proposed Transaction (DOJ File No. 4 Ex. A 0007 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 10 of 91 60-481111-0048). Specifically, Plaintiff United States will produce all non-privileged documents, data, oral examination transcripts, depositions, statements, declarations, and affidavits, whether in hard-copy or electronic form, exchanged between Plaintiff United States and a non-party in the course of Plaintiff United States’ investigation of the Transaction. Plaintiff United States will also produce all responsive, non-privileged, relevant documents relating to the following investigations: • (DOJ File No. 60-481111-0045) (“slots babysitting”), • (DOJ File No. 60-481111-0038) (the proposed acquisition of US Airways’ slots by Delta Airlines), • (DOJ File No. 60-481111-0039) (the slots swap between Continental Airlines and AirTran Airways), and • (DOJ File No. 60-481111-0034) (airline baggage fees). Plaintiff United States will also produce a submission made by US Airways’ predecessor, America West Airlines, to the Department of Justice on July 26, 2002 and a submission made by America West Airlines to the U.S. Department of Transportation on May 15, 2012. Further, Plaintiff United States will produce six depositions of American Airlines personnel conducted in 2004. Lastly, Plaintiff United States will produce four boxes of documents submitted by American Airlines to the Department of Justice on or around July 2000 that consist of records of AMR Corp. v. UAL Corp., No. 91-civ-7773 (JSM) (S.D.N.Y.), a case filed by American Airlines against United Airlines and Air Wisconsin. Subject to and without waiving the following Specific Objections and the General Objections, Plaintiff States respond that they have produced all responsive, non-privileged 5 Ex. A 0008 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 11 of 91 documents related to their investigation of the proposed Transaction in their disclosures pursuant to FRCP 26(a)(1)(A)(ii). Specific Objections to Request No. 1: 1. Plaintiff United States objects to this Request as unduly burdensome and overbroad to the extent it seeks documents not in the Antitrust Division’s custody, possession, or control. Plaintiffs Arizona, District of Columbia, Michigan, Pennsylvania, Tennessee, Texas, and Virginia object to this Request as unduly burdensome and overbroad to the extent it seeks documents from units, departments, divisions, or sections of the offices of their Attorneys General other than those with antitrust enforcement responsibilities. 2. Plaintiffs object to the phrase “made available to” as overbroad, vague, and ambiguous. Plaintiffs will limit their response to this Request to documents, communications, data, or other information that was provided to or obtained by the Antitrust Division of the U.S. Department of Justice or the units, departments, divisions, or sections of the offices of the Attorneys General of the Plaintiff States. 3. Plaintiffs object to this Request to the extent that it requires the production of materials that are protected by the attorney work-product doctrine, attorney-client privilege, law enforcement investigatory files privilege, or the deliberative process privilege, in conjunction with the joint prosecution privilege. 6 Ex. A 0009 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 12 of 91 REQUEST FOR PRODUCTION NO. 2: All transcripts of investigatory hearings, depositions, factual witness statements or factual interviews (ex parte or otherwise) of third parties concerning the Merger. Response to Request No. 2: Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff United States responds that it has produced or will produce all responsive, nonprivileged transcripts of investigatory hearings, depositions, declarations, and affidavits. Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff States respond to Request No. 2 as follows: Plaintiff States adopt and specifically incorporate by reference their response to Request No. 1 as their response to Request No. 2. Specific Objections to Request No. 2: 1. Plaintiffs object to the phrase “factual witness statements” as vague and ambiguous. 2. Plaintiffs object to this Request to the extent that it requires the production of materials that are protected by the attorney work-product doctrine, attorney-client privilege, the law enforcement investigatory files privilege, or the deliberative process privilege, in conjunction with the joint prosecution privilege. Plaintiffs object to the extent that the request for copies of “factual witness statements” or “factual interviews” could be interpreted to seek production of attorney notes, memoranda, or other confidential documents reflecting the mental impressions of counsel. 7 Ex. A 00010 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 13 of 91 REQUEST FOR PRODUCTION NO. 3: To the extent not produced in response to the preceding requests, all statements, transcripts, reports, notes, or other documents constituting or memorializing factual testimony, interviews, hearings, meetings, witness recollections, witness declarations, or conversations concerning the facts relevant to the Merger or to the factual allegations made in the Complaint, including but not limited to drafts of such documents. Response to Request No. 3: Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff United States responds to Request No. 3 as follows: Plaintiff United States adopts and specifically incorporates by reference its responses and productions in response to Requests 1 and 2 as its response to Request No. 3. Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff States respond to Request No. 3 as follows: Plaintiff States adopt and specifically incorporate by reference their response to Request No. 1 as their response to Request No. 3. Specific Objections to Request No. 3: 1. Plaintiffs object to this Request to the extent that it requires the production of materials that are protected by the attorney work-product doctrine, attorney-client privilege, the law enforcement investigatory files privilege, or the deliberative process privilege, in conjunction with the joint prosecution privilege. 8 Ex. A 00011 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 14 of 91 REQUEST FOR PRODUCTION NO. 4: All exhibits, presentations, or other documents used or disclosed during any testimony, interview, hearing, deposition, meeting, or conversation with a third-party witness or potential witness concerning the Merger or the allegations made in the Complaint. Response to Request No. 4: Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff United States responds to Request No. 4 as follows: Plaintiff United States adopts and specifically incorporates by reference its response and production for Request No. 1 as its response to Request No. 4. Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff States respond to Request No. 4 as follows: Plaintiff States adopt and specifically incorporate by reference their response to Request No. 1 as their response to Request No. 4. Specific Objections to Request No. 4: 1. Plaintiffs object to this Request on the grounds that the phrase “third-party witness” is vague and ambiguous. 2. Plaintiffs object to this Request on the grounds that the phrase “potential witness” is vague and ambiguous. 3. Plaintiffs object to this Request on the grounds that the selection of “exhibits, presentations, or other documents used or disclosed” by employees or agents of the Plaintiffs reflects the mental impression of counsel and is protected by the attorney work-product doctrine. 4. Plaintiffs object to this Request to the extent that it requires the production of materials that are protected by the attorney work-product doctrine, attorney-client privilege, the law enforcement investigatory files privilege, or the deliberative process privilege, in conjunction with the joint prosecution privilege. 9 Ex. A 00012 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 15 of 91 REQUEST FOR PRODUCTION NO. 5: All non-privileged documents discussing or analyzing the Merger, including but not limited to all documents discussing or analyzing geographic market definition, product market definition, market participants, market shares, market concentration, competition, coordination, entry, expansion, capacity, efficiencies, supply, demand, or any other market conditions related to domestic scheduled air passenger service. Response to Request No. 5: Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff United States responds to Request No. 5 as follows: Plaintiff adopts and specifically incorporates by reference its response and production for Request No. 1 as its response to Request No. 5. Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff States respond to Request No. 5 as follows: Plaintiff States adopt and specifically incorporate by reference their response to Request No. 1 as their response to Request No. 5. Specific Objections to Request No. 5: 1. Plaintiffs object to this Request as duplicative or cumulative of Requests No. 1 & 2. 2. Plaintiffs object to this Request to the extent that it requires the production of materials that are protected by the attorney work-product doctrine. REQUEST FOR PRODUCTION NO. 6: All documents supportive of the Merger, including but not limited to communications that express support for the merger. Response to Request No. 6: Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff United States responds to Request No. 6 as follows: Plaintiff adopts and specifically incorporates by reference its response and production for Request No. 1 as its response to Request No. 6. 10 Ex. A 00013 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 16 of 91 Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff States respond to Request No. 6 as follows: Plaintiff States adopt and specifically incorporate by reference their response to Request No. 1 as their response to Request No. 6. Specific Objections to Request No. 6: 1. Plaintiffs object to this Request as duplicative or cumulative of Requests No. 1 & 2. 2. Plaintiffs object to this Request to the extent that it requires the production of materials that are protected by the attorney work-product doctrine, attorney-client privilege, the law enforcement investigatory files privilege, or deliberative process privilege, in conjunction with the joint prosecution privilege. REQUEST FOR PRODUCTION NO. 7: All documents supportive of DOJ’s or any State’s opposition to the Merger. Response to Request No. 7: Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff United States responds to Request No. 7 as follows: Plaintiff adopts and specifically incorporates by reference its response and production for Request No. 1 as its response to Request No. 7. Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff States respond to Request No. 7 as follows: Plaintiff States adopt and specifically incorporate by reference their response to Request No. 1 as their response to Request No. 7. Specific Objections to Request No. 7: 1. Plaintiffs object to this Request as duplicative or cumulative of Requests No. 1 & 2. 2. Plaintiffs object to this Request on the grounds that the phrase “opposition to the Merger” is vague, ambiguous, and overbroad. 11 Ex. A 00014 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 17 of 91 3. Plaintiffs object to this Request to the extent that it requires the production of materials that are protected by the attorney work-product doctrine, attorney-client privilege, the law enforcement investigatory files privilege, law enforcement investigatory files privilege, or deliberative process privilege, in conjunction with the joint prosecution privilege. REQUEST FOR PRODUCTION NO. 8: All subpoenas, civil investigative demands, or other formal or informal requests for documents, testimony, declarations, or other information sent by the DOJ to any third party concerning the Merger or the allegations made in the Complaint; all documents, testimony, declarations, or other information provided in response to such requests; all communications and correspondence concerning the scope of the requests or any limitation to them; and all communications, notes memorializing communications, and correspondence, including draft declarations and comments on such draft declarations, related to such requests. Response to Request No. 8: Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff United States responds to Request No. 8 as follows: Plaintiff adopts and specifically incorporates by reference its response and production for Request No. 1 as its response to Request No. 8. Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff States respond to Request No. 8 as follows: Plaintiff States adopt and specifically incorporate by reference their response to Request No. 1 as their response to Request No. 8. Specific Objections to Request No. 8: 1. Plaintiffs object to this Request as duplicative or cumulative of Requests No. 1, 4 & 5. 2. Plaintiffs object to this Request to the extent that it requires the production of materials that are protected by the attorney work-product doctrine. In particular, Plaintiffs object to the extent that the request for copies of “notes memorializing communications” and “draft declarations and comments on such draft declarations” could be interpreted to seek production of 12 Ex. A 00015 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 18 of 91 attorney notes, memoranda, or other confidential documents reflecting the mental impressions of counsel. REQUEST FOR PRODUCTION NO. 9: All communications with any third party regarding any aspect of the Merger, including, but not limited to: (a) e-mails and other correspondence, presentations, sworn statements, declarations, or affidavits related in any way to the merger, and any drafts of such documents that were given to or received from a third party; (b) all documents and information received by or submitted to the DOJ or any State from any third party or obtained from any third party in connection with the Merger Review; and (c) documents sufficient to identify all third parties with whom the DOJ or any State has communicated regarding the Merger Review, including but not limited to phone logs, interview notes, draft witness statements, and declarations or affidavits. Response to Request No. 9: Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff United States responds to Request No. 9 as follows: Plaintiff adopts and specifically incorporates by reference its response and production for Request No. 1 as its response to Request No. 9. Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff States respond to Request No. 9 as follows: Plaintiff States adopt and specifically incorporate by reference their response to Request No. 1 as their response to Request No. 9. Specific Objections to Request No. 9: 1. Plaintiffs object to this Request as duplicative or cumulative of Requests No. 1 & 4. 2. Plaintiffs object to this Request to the extent that it requires the production of materials that are protected by the attorney work-product doctrine, attorney-client privilege, the law enforcement investigatory files privilege, or the deliberative process privilege, in conjunction with the joint prosecution privilege. 13 Ex. A 00016 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 19 of 91 REQUEST FOR PRODUCTION NO. 10: All documents, declarations, analyses, calculations, or other information supporting (or contradicting) any allegation in the Complaint, including but not limited to: (a) that the Merger “threatens substantial harm to consumers” (Compl. ¶ 1; see also Compl. ¶ 8, 10); (b) that the Merger “would likely substantially lessen competition, and tend to create a monopoly” (Compl. ¶ 13; see also Compl. ¶ 95); (c) that the Merger “would likely result in the elimination of US Airways’ Advantage Fares” (Compl. at 18; see also Compl. ¶ 7); (d) that “Washington, D.C. area passengers would likely see higher prices and fewer choices if the merger were approved” (Compl. ¶ 10); (e) that AMR is “fully capable of emerging from bankruptcy proceedings on its own with a competitive cost structure, profitable existing business, and plans for growth” (Compl. ¶ 12; see also Compl. ¶ 68); (f) that “each city pair is a relevant geographic market and section of the country under Section 7 of the Clayton Act” (Compl. ¶ 28); (g) that “airlines can predictably raise prices for some . . . passengers without raising prices for others” (Compl. ¶ 29); (h) that “the competitive effects of the proposed merger may vary among passengers” (Compl. ¶ 29); (i) that “[a]irlines do not view service at other airports as adequate substitutes for service offered at Reagan National for certain passengers” (Compl. ¶ 31); (j) that “slots at Reagan National Airport constitute a line of commerce, section of the country and relevant market within the meaning of Section 7 of the Clayton Act” (Compl. ¶ 31); (k) that “[i]ncreasing consolidation among large airlines has hurt passengers” (Compl. ¶ 35); (l) that “many relevant markets are highly concentrated” (Compl. at 14); (m) that the Merger “would likely substantially enhance the ability of the industry to coordinate on fares, ancillary fees, and service reductions” (Compl. ¶ 46); (n) that “the benefits from Advantage Fares extend to hundreds of other routes” (Compl. ¶ 51); (o) that “[o]ther airlines have chosen to respond to Advantage Fares with their own low connecting fares in markets where US Airways has nonstop service” (Compl. ¶ 52); (p) that “Advantage Fares have proven highly disruptive to the industry’s overall coordinated pricing dynamic” (Compl. ¶ 54); (q) that the Merger would likely lead to increased “capacity discipline” (Compl. ¶ 59); (r) that “recent experience has shown that capacity discipline has resulted in fewer flights and higher fares” (Compl. ¶ 59); (s) that “each significant legacy airline merger in recent years has been followed by substantial reductions in service and capacity” (Compl. ¶ 60); (t) that “the merger would likely result in higher fees” (Compl. at 27); (u) that “increased consolidation likely has aided the implementation of these [ancillary] fees” (Compl. ¶ 72); 14 Ex. A 00017 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 20 of 91 (v) that “[t]he levels of the ancillary fees charged by the legacy carriers have been largely set in lockstep” (Compl. ¶ 72); (w) that the Merger “would also likely reduce the quality and variety of ancillary services offered by the legacy airlines” (Compl. ¶ 80); (x) that the Merger would have the likely effect of lessening service (Compl. ¶ 96 (e); see also Compl. ¶ 81 (absent the merger, US Airways and AMR “will have greater incentives to grow and compete aggressively through lower ancillary fees, new services, and lower fares”)); (y) that the Merger would likely result in reduced industry capacity (Compl. ¶ 96 (d); see also Compl. ¶ 82 (the merger would likely “create strong incentives for the merged airline to reduce capacity and raise fares”)); (z) that the Merger would “effectively foreclose entry or expansion by other airlines that might increase competition at Reagan National” (Compl. ¶ 83; see also Compl. ¶ 96(f)); (aa) that “[n]ew entry, or expansion by existing competitors, is unlikely to prevent or remedy the merger’s likely anticompetitive effects” (Compl. ¶ 91); (bb) that “[t]he remaining airlines in the United States, including Southwest and JetBlue, have networks and business models that are significantly different from the legacy airlines” and that in certain markets “many passengers view them as a less preferred alternative to the legacy carriers” (Compl. ¶ 93); (cc) that “competition from Southwest, JetBlue, or other airlines would not be sufficient to prevent the anticompetitive consequences of the merger” (Compl. ¶93); (dd) that “[t]here are not sufficient acquisition-specific and cognizable efficiencies that would be passed through to U.S. consumers to rebut the presumption that competition and consumers would likely be harmed by this merger” (Compl. ¶ 94); (ee) that, unless enjoined, the Merger would likely eliminate actual and potential competition between US Airways and American Airlines (Compl. ¶ 96(a)); and (ff) that, unless enjoined, the Merger would likely lessen substantially the “competition in general among network airlines” (Compl. ¶ 96(b)). Response to Request No. 10: Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff United States responds to Request No. 10 as follows: Plaintiff United States adopts and specifically incorporates by reference its response and production for Request No. 1 as its response to Request No. 10. Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff States respond to Request No. 10 as follows: Plaintiff States adopt and specifically incorporate by reference their response to Request No. 1 as their response to Request No. 10. 15 Ex. A 00018 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 21 of 91 Specific Objections to Request No. 10: 1. Plaintiffs object to this Request as duplicative or cumulative of Requests No. 1, 5, 8 & 9. 2. Plaintiffs also object to this Request as overbroad and unduly burdensome. 3. Plaintiffs object to this Request to the extent that it requires the production of documents in the possession of Defendants, including the large volume of documents relating to the transaction that were submitted by Defendants to Plaintiffs in the course of Plaintiffs’ investigation of the proposed transaction. 4. Plaintiffs object to this Request to the extent that it requires the production of materials that are protected by the attorney work-product doctrine, attorney-client privilege, the law enforcement investigatory files privilege, or the deliberative process privilege, in conjunction with the joint prosecution privilege. REQUEST FOR PRODUCTION NO. 11: All documents, declarations, or transcripts that are quoted or referenced in the Complaint. (See, e.g., Compl. ¶¶ 1, 4, 6, 9, 11, 19-22, 34-35, 43-48, 54-57, 61-67, 69-70, 72-80, 89.) Response to Request No. 11: Subject to and without waiving the General Objections, Plaintiff United States will produce responsive documents, declarations, and transcripts that are quoted or referenced in the Complaint. Subject to and without waiving the General Objections, Plaintiff States respond to Request No. 11 as follows: Plaintiff States have no responsive, non-privileged documents that are not identical copies of documents produced by the United States in their custody or control. 16 Ex. A 00019 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 22 of 91 REQUEST FOR PRODUCTION NO. 12: All documents, data and calculations used to create Appendix A to the Complaint, including the basis for determining the HHI numbers shown therein. Response to Request No. 12: Subject to and without waiving the General Objections, Plaintiff United States will produce responsive, non-privileged documents, data, and calculations used to create Appendix A of the Complaint. Subject to and without waiving the General Objections, Plaintiff States respond to Request No. 12 as follows: Plaintiff States have no responsive, non-privileged documents that are not identical copies of documents produced by the United States in their custody or control. REQUEST FOR PRODUCTION NO. 13: All documents that discuss, describe, or relate to the alleged market shares of US Airways, AMR, or any other airline that provides domestic scheduled air passenger service. Response to Request No. 13: Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff United States responds to Request No. 13 as follows: Plaintiff United States adopts and specifically incorporates by reference its response to and production for Requests Nos. 1 and 12 as its response to Request No. 13. Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff States respond to Request No. 13 as follows: Plaintiff States adopt and specifically incorporate by reference their response to Request No. 1 as their response to Request No. 13. 17 Ex. A 00020 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 23 of 91 Specific Objections to Request No. 13: 1. Plaintiffs object to this Request as unduly burdensome to the extent it seeks documents that discuss, describe, or relate to Defendants’ market share that are in the possession of Defendants. 2. Plaintiffs object to this Request on the grounds that it is overbroad, unduly burdensome, and seeks documents that are not relevant nor reasonably calculated to lead to the discovery of admissible evidence, in that it calls for the production of “all documents that discuss, describe, or relate to alleged market shares,” without any limitation on the date the document was dated, created, or updated. 3. Plaintiffs object to this Request to the extent that it requires the production of materials that are protected by the attorney work-product doctrine, attorney-client privilege, the law enforcement investigatory files privilege, or the deliberative process privilege, in conjunction with the joint prosecution privilege. REQUEST FOR PRODUCTION NO. 14: All documents that discuss or describe the impact of low-cost carriers on the competition for domestic air passenger travel. Response to Request No. 14: Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff United States responds to Request No. 14 as follows: Plaintiff United States adopts and specifically incorporates by reference its response and production for Request No. 1 as its response to Request No. 14. Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff States respond to Request No. 14 as follows: Plaintiff States adopt and specifically incorporate by reference their response to Request No. 1 as their response to Request No. 14. 18 Ex. A 00021 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 24 of 91 Specific Objections to Request No. 14: 1. Plaintiffs object to this Request to the extent that it requests the production of documents in the possession of Defendants, including the large volume of documents relating to the transaction that were submitted by Defendants to Plaintiff in the course of Plaintiff’s investigation of the proposed transaction. 2. Plaintiffs object to the phrase “impact of low-cost carriers on the competition” as vague and ambiguous. 3. Plaintiffs object to this Request on the grounds that it is overbroad, unduly burdensome, and seeks documents that are not relevant nor reasonably calculated to lead to the discovery of admissible evidence, in that it calls for the production of “all documents” that discuss or describe “low-cost carriers,” without any limitation on the date the document was dated, created or updated. 4. Plaintiffs object to this Request to the extent that it requires the production of materials that are protected by the attorney work-product doctrine, attorney-client privilege, the law enforcement investigatory files privilege, or the deliberative process privilege, in conjunction with the joint prosecution privilege. 19 Ex. A 00022 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 25 of 91 REQUEST FOR PRODUCTION NO. 15: All documents that constitute, reflect, or contain the facts or forecasts upon which the DOJ based its clearance of the 2005 merger between US Airways and America West (Compl. ¶ 34), including but not limited to factual information, assumptions, and forecasts concerning geographic market definition, product market definition, market participants, market shares, market concentration, capacity, competitive effects, entry, expansion, efficiencies, supply, demand, and other market conditions related to domestic scheduled air passenger service. Response to Request No. 15: Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff United States will produce all public statements made in connection with the closing of the investigation. Specific Objections to Request No. 15: 1. Plaintiff United States objects to the Request as overbroad on the grounds that it seeks “all documents” related to the clearance of the merger. The parties agreed, as reflected in a September 5, 2013, email from Ryan Danks to Defendants’ counsel, that Defendants seek only documents sufficient to show the facts the Division believed were relevant to its enforcement decision with respect to the merger. 2. Notwithstanding the limitation to this Request in Specific Objection No. 1, Plaintiff United States objects to the Request unduly burdensome, in that it seeks documents that are neither relevant nor reasonably calculated to lead to the discovery of admissible evidence. The United States’ exercise of prosecutorial discretion in a different merger bears no relevance to the question of whether the merger between US Airways and American substantially lessens competition. 3. Plaintiff United States objects to this Request to the extent that it requires the production of materials that are protected by the attorney work-product doctrine, attorney-client privilege, 20 Ex. A 00023 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 26 of 91 the law enforcement investigatory files privilege, or the deliberative process privilege, in conjunction with the joint prosecution privilege. 4. Plaintiff United States objects to the Request to the extent it requires the production of confidential material produced to the Antitrust Division in connection with prior investigations in response to a Civil Investigative Demand or pursuant to the Hart-Scott-Rodino Act. Except in limited circumstances not applicable here, such information is absolutely protected from disclosure by statute, unless the Antitrust Division intends to make direct use of such materials in the present action. See 15 U.S.C. § 1313(c); 15 U.S.C. § 18a(h); United States v. Am. Tel. & Tel. Co., 86 F.R.D. 603, 647-48 (D.D.C. 1979). 5. Plaintiff United States objects to the Request to the extent it requires the production of expert materials that would not be subject to discovery under Paragraph 10 of the CMO or Fed. R. Civ. P. 26. REQUEST FOR PRODUCTION NO. 16: All documents that constitute, reflect, or contain the facts or forecasts upon which the DOJ based its clearance of the 2008 merger between Delta and Northwest Airlines (Compl. ¶ 34), including but not limited to factual information, assumptions, and forecasts concerning geographic market definition, product market definition, market participants, market shares, market concentration, capacity, competitive effects, entry, expansion, efficiencies, supply, demand, and other market conditions related to domestic scheduled air passenger service. Response to Request No. 16: Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff United States will produce all public statements made in connection with the closing of the investigation. 21 Ex. A 00024 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 27 of 91 Specific Objections to Request No. 16: 1. Plaintiff United States objects to the Request as overbroad on the grounds that it seeks “all documents” related to the clearance of the merger. The parties agreed, as reflected in a September 5, 2013, email from Ryan Danks to Defendants’ counsel, that Defendants seek only documents sufficient to show the facts the Division believed were relevant to its enforcement decision with respect to the merger. 2. Notwithstanding the limitation to this Request in Specific Objection No. 1, Plaintiff United States objects to the Request unduly burdensome, in that it seeks documents that are neither relevant nor reasonably calculated to lead to the discovery of admissible evidence. The United States’ exercise of prosecutorial discretion in a different merger bears no relevance to the question of whether the merger between US Airways and American substantially lessens competition. 3. Plaintiff United States objects to this Request to the extent that it requires the production of materials that are protected by the attorney work-product doctrine, attorney-client privilege, the law enforcement investigatory files privilege, or the deliberative process privilege, in conjunction with the joint prosecution privilege. 4. Plaintiff United States objects to the Request to the extent it requires the production of confidential material produced to the Antitrust Division in connection with prior investigations in response to a Civil Investigative Demand or pursuant to the Hart-Scott-Rodino Act. Except in limited circumstances not applicable here, such information is absolutely protected from disclosure by statute, unless the Antitrust Division intends to make direct use of such materials in the present action. See 15 U.S.C. § 1313(c); 15 U.S.C. § 18a(h); United States v. Am. Tel. & Tel. Co., 86 F.R.D. 603, 647-48 (D.D.C. 1979). 22 Ex. A 00025 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 28 of 91 5. Plaintiff United States objects to the Request to the extent it requires the production of expert materials that would not be subject to discovery under Paragraph 10 of the CMO or Fed. R. Civ. P. 26. REQUEST FOR PRODUCTION NO. 17: All documents that constitute, reflect, or contain the facts or forecasts upon which the DOJ based its clearance of the 2010 merger between United and Continental (Compl. ¶ 34), including but not limited to factual information, assumptions, and forecasts concerning geographic market definition, product market definition, market participants, market shares, market concentration, capacity, competitive effects, entry, expansion, efficiencies, supply, demand, and other market conditions related to domestic scheduled air passenger service. Response to Request No. 17: Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff United States will produce all public statements made in connection with the closing of the investigation. Specific Objections to Request No. 17: 1. Plaintiff United States objects to the Request as overbroad on the grounds that it seeks “all documents” related to the clearance of the merger. The parties agreed, as reflected in a September 5, 2013, email from Ryan Danks to Defendants’ counsel, that Defendants seek only documents sufficient to show the facts the Division believed were relevant to its enforcement decision with respect to the merger. 2. Notwithstanding the limitation to this Request in Specific Objection No. 1, Plaintiff United States objects to the Request unduly burdensome, in that it seeks documents that are neither relevant nor reasonably calculated to lead to the discovery of admissible evidence. The United States’ exercise of prosecutorial discretion in a different merger bears no relevance to the 23 Ex. A 00026 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 29 of 91 question of whether the merger between US Airways and American substantially lessens competition. 3. Plaintiff United States objects to this Request to the extent that it requires the production of materials that are protected by the attorney work-product doctrine, attorney-client privilege, the law enforcement investigatory files privilege, or the deliberative process privilege, in conjunction with the joint prosecution privilege. 4. Plaintiff United States objects to the Request to the extent it requires the production of confidential material produced to the Antitrust Division in connection with prior investigations in response to a Civil Investigative Demand or pursuant to the Hart-Scott-Rodino Act. Except in limited circumstances not applicable here, such information is absolutely protected from disclosure by statute, unless the Antitrust Division intends to make direct use of such materials in the present action. See 15 U.S.C. § 1313(c); 15 U.S.C. § 18a(h); United States v. Am. Tel. & Tel. Co., 86 F.R.D. 603, 647-48 (D.D.C. 1979). 5. Plaintiff United States objects to the Request to the extent it requires the production of expert materials that would not be subject to discovery under Paragraph 10 of the CMO or Fed. R. Civ. P. 26. 24 Ex. A 00027 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 30 of 91 REQUEST FOR PRODUCTION NO. 18: All documents that constitute, reflect, or contain the facts or forecasts upon which the DOJ based its decision not to seek to block or obtain a consent decree concerning the sale of slots at Newark related to the 2010 merger between United and Continental, including but not limited to factual information, assumptions, and forecasts concerning geographic market definition, product market definition, market participants, market shares, market concentration, capacity, competitive effects, entry, expansion, efficiencies, supply, demand, and other market conditions related to domestic scheduled air passenger service. Response to Request No. 18: Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff United States will produce all public statements made in connection with the closing of the investigation. Specific Objections to Request No. 18: 1. Plaintiff United States objects to the Request as overbroad on the grounds that it seeks “all documents” related to the clearance of the merger. The parties agreed, as reflected in a September 5, 2013, email from Ryan Danks to Defendants’ counsel, that Defendants seek only documents sufficient to show the facts the Division believed were relevant to its enforcement decision with respect to the merger. 2. Notwithstanding the limitation to this Request in Specific Objection No. 1, Plaintiff United States objects to the Request unduly burdensome, in that it seeks documents that are neither relevant nor reasonably calculated to lead to the discovery of admissible evidence. The United States’ exercise of prosecutorial discretion in a different merger bears no relevance to the question of whether the merger between US Airways and American substantially lessens competition. 3. Plaintiff United States objects to this Request to the extent that it requires the production of materials that are protected by the attorney work-product doctrine, attorney-client privilege, 25 Ex. A 00028 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 31 of 91 the law enforcement investigatory files privilege, or the deliberative process privilege, in conjunction with the joint prosecution privilege. 4. Plaintiff United States objects to the Request to the extent it requires the production of confidential material produced to the Antitrust Division in connection with prior investigations in response to a Civil Investigative Demand or pursuant to the Hart-Scott-Rodino Act. Except in limited circumstances not applicable here, such information is absolutely protected from disclosure by statute, unless the Antitrust Division intends to make direct use of such materials in the present action. See 15 U.S.C. § 1313(c); 15 U.S.C. § 18a(h); United States v. Am. Tel. & Tel. Co., 86 F.R.D. 603, 647-48 (D.D.C. 1979). 5. Plaintiff United States objects to the Request to the extent it requires the production of expert materials that would not be subject to discovery under Paragraph 10 of the CMO or Fed. R. Civ. P. 26. 26 Ex. A 00029 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 32 of 91 REQUEST FOR PRODUCTION NO. 19: All documents that constitute, reflect, or contain the facts or forecasts upon which the DOJ based its clearance of the 2011 merger between Southwest Airlines and AirTran (Compl. ¶ 34), including but not limited to factual information, assumptions, and forecasts concerning geographic market definition, product market definition, market participants, market shares, market concentration, capacity, competitive effects, entry, expansion, efficiencies, supply, demand, and other market conditions related to domestic scheduled air passenger service. Response to Request No. 19: Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff United States will produce all public statements made in connection with the closing of the investigation. Specific Objections to Request No. 19: 1. Plaintiff United States objects to the Request as overbroad on the grounds that it seeks “all documents” related to the clearance of the merger. The parties agreed, as reflected in a September 5, 2013, email from Ryan Danks to Defendants’ counsel, that Defendants seek only documents sufficient to show the facts the Division believed were relevant to its enforcement decision with respect to the merger. 2. Notwithstanding the limitation to this Request in Specific Objection No. 1, Plaintiff United States objects to the Request unduly burdensome, in that it seeks documents that are neither relevant nor reasonably calculated to lead to the discovery of admissible evidence. The United States’ exercise of prosecutorial discretion in a different merger bears no relevance to the question of whether the merger between US Airways and American substantially lessens competition. 3. Plaintiff United States objects to this Request to the extent that it requires the production of materials that are protected by the attorney work-product doctrine, attorney-client privilege, 27 Ex. A 00030 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 33 of 91 the law enforcement investigatory files privilege, or the deliberative process privilege, in conjunction with the joint prosecution privilege. 4. Plaintiff United States objects to the Request to the extent it requires the production of confidential material produced to the Antitrust Division in connection with prior investigations in response to a Civil Investigative Demand or pursuant to the Hart-Scott-Rodino Act. Except in limited circumstances not applicable here, such information is absolutely protected from disclosure by statute, unless the Antitrust Division intends to make direct use of such materials in the present action. See 15 U.S.C. § 1313(c); 15 U.S.C. § 18a(h); United States v. Am. Tel. & Tel. Co., 86 F.R.D. 603, 647-48 (D.D.C. 1979). 5. Plaintiff United States objects to the Request to the extent it requires the production of expert materials that would not be subject to discovery under Paragraph 10 of the CMO or Fed. R. Civ. P. 26. 28 Ex. A 00031 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 34 of 91 REQUEST FOR PRODUCTION NO. 20: All documents related to the airline merger analysis outlined in The Year in Review: Economics at the Antitrust Division, 2008-2009, Review of Industrial Organization, 2009, vol. 35, issue 4, pages 349-367, including all documents constituting, setting forth, or relating to the facts, studies, analyses, methods, and estimates that were the “basis” for “conclud[ing] that the merger was likely procompetitive and ought not be challenged,” and all documents referring to this publication that post-date the publication. Response to Request No. 20: Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff United States responds to Request No. 20 as follows: Plaintiff United States adopts and specifically incorporates by reference its response and production for Request No. 16 as its response to Request No. 20. Specific Objections to Request No. 20: 1. Plaintiff United States objects this Request as overbroad and unduly burdensome on the grounds it seeks documents that are neither relevant nor reasonably calculated to lead to the discovery of admissible evidence, and notes that the article contains the disclaimer, “The views in this paper are those of the authors and do not necessarily reflect those of the Antitrust Division.” 2. Plaintiff United States objects to the Request as vague and overbroad on the grounds that it seeks “all documents” related to the airline merger analysis described, and “all documents” referring to the article that are dated after its publication. 3. Plaintiff United States objects to this Request to the extent that it requires the production of materials protected by the attorney work product doctrine, attorney-client privilege, the law enforcement investigatory files privilege, or deliberative process privilege. 4. Plaintiff United States objects to the Request to the extent it requires the production of confidential material produced to the Antitrust Division in connection with prior investigations in 29 Ex. A 00032 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 35 of 91 response to a Civil Investigative Demand or pursuant to the Hart-Scott-Rodino Act. Except in limited circumstances not applicable here, such information is absolutely protected from disclosure by statute, unless the Antitrust Division intends to make direct use of such materials in the present action. See 15 U.S.C. § 1313(c); 15 U.S.C. § 18a(h); United States v. Am. Tel. & Tel. Co., 86 F.R.D. 603, 647-48 (D.D.C. 1979). 5. Plaintiff United States objects to the Request to the extent it requires the production of expert materials that would not be subject to discovery under Paragraph 10 of the CMO or Fed. R. Civ. P. 26. REQUEST FOR PRODUCTION NO. 21: All documents that discuss, describe, or relate to any actual or contemplated transaction involving slots between US Airways and Delta. Response to Request No. 21: Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff United States responds to Request No. 21 as follows: Plaintiff United States adopts and specifically incorporates by reference its response and production for Request No. 1 as its response to Request No. 21. Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff States respond to Request No. 21 as follows: Plaintiff States adopt and specifically incorporate by reference their response to Request No. 1 as their response to Request No. 21. Specific Objection to Request No. 21: Plaintiffs object to this Request to the extent that it requires the production of materials that are protected by the attorney work-product doctrine, attorney-client privilege, law enforcement investigatory files privilege, or the deliberative process privilege, in conjunction with the joint prosecution privilege. 30 Ex. A 00033 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 36 of 91 REQUEST FOR PRODUCTION NO. 22: All non-privileged documents that describe, discuss, measure, estimate, or relate to (a) any actual or potential pro-competitive effects, including but not limited to efficiencies or synergies from the Merger; or (b) any potential or alleged anticompetitive effects from the Merger. Response to Request No. 22: Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff United States responds to Request No. 22 as follows: Plaintiff United States adopts and specifically incorporates by reference its response and production for Request No. 1 as its response to Request No. 22. Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff States respond to Request No. 22 as follows: Plaintiff States adopt and specifically incorporate by reference their response to Request No. 1 as their response to Request No. 22. Specific Objections to Request No. 22: 1. Plaintiffs object to this Request as duplicative or cumulative of Requests No. 1, 8 & 9. 2. Plaintiffs object to this Request to the extent that it requires the production of materials that are protected by the attorney work-product doctrine. REQUEST FOR PRODUCTION NO. 23: For every witness retained to provide testimony at a deposition, hearing or trial in connection with this litigation: (a) documents sufficient to identify all of the witness’s publications and research, written reports, prior testimony and depositions, and all curriculum vitae; (b) copies of all of the witness’s publications, research, reports or prior testimony in any matter that relates to (i) market definition, coordinated effects, or unilateral effects; (ii) competition in domestic scheduled air passenger service; or (iii) prior mergers between companies competing for domestic scheduled air passenger service; (c) all documents, communications, data or other information (other than draft reports or parts thereof) relied upon by any witness retained to provide testimony at trial including, without limitation, all final reports, calculations and computations, as well as computer files of source data, and all original source documents from which computer files and 31 Ex. A 00034 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 37 of 91 source data were constructed; the complete chain of computer programs, computer spreadsheets, source and intermediate data files, and, in hard copy, computer printouts that connect source data to any calculated result; all documents and computer files relating to any editing, corrections, manipulations, or additions to original source data used or referred to in any calculation; all documents and computer files relating to the sequence of computer processing steps for any calculation; all documents and computer files relating to or identifying input and output data sets for each computer program or spreadsheet utilized for any calculation; and all execution logs, source codes and printed output from any computer program utilized for any calculation. Specific Objections to Request No. 23: 1. Plaintiffs object to this Request on the grounds that it constitutes premature expert discovery to the extent that it seeks the disclosure of what information was considered or relied upon by a testifying expert. Expert-related discovery in this action is governed by Fed. R. Civ. P. 26, as modified by Paragraph 10 of the CMO. Plaintiffs will fully comply with the expert discovery requirements of Fed. R. Civ. P. 26, as modified by the CMO, which sets the timing for the disclosure of expert reports, including related facts and data. 2. Plaintiffs object to this Request as overbroad and unduly burdensome in that it requests production of documents that can be obtained more readily, conveniently, or in a less burdensome fashion from others, including documents that are readily available from public sources. 32 Ex. A 00035 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 38 of 91 REQUEST FOR PRODUCTION NO. 24: All documents that DOJ or any State intends to use to support its Request for a permanent injunction. Response to Request No. 24: Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff responds to Request No. 24 as follows: Plaintiff adopts and specifically incorporates by reference its response and production for Request No. 1 as its response to Request No. 24. Subject to and without waiving the following Specific Objections or the General Objections, Plaintiff States respond to Request No. 24 as follows: Plaintiff States adopt and specifically incorporate by reference their response to Request No. 1 as their response to Request No. 24. Specific Objections to Request No. 24: 1. Plaintiffs object to this Request as duplicative or cumulative of Request No. 1, 2, 5 & 8. 2. Plaintiffs object to this Request as premature and inconsistent with paragraph 12 of the CMO, which sets a deadline of October 25, 2013, for the parties to negotiate the timing, method, and manner of the exchange of exhibit lists. Moreover, discovery is ongoing, including discovery from Defendants and non-parties. Plaintiffs may hereafter obtain additional documents that it may use in deposition or trial, and expressly reserve the right to do so. REQUEST FOR PRODUCTION NO. 25: All non-privileged communications between DOJ and one or more of the other Plaintiffs, including Arizona, District of Columbia, Florida, Pennsylvania, Tennessee, Texas, and Virginia, or any other state, federal, or nonU.S. regulatory agency, related to this Merger, or the Merger Review. Specific Objections to Request No. 25: 1. Plaintiffs object to the term “state regulatory agency” as vague and ambiguous. Plaintiffs interpret this term to not include quasi-state entities such as the Allegheny County Airport Authority or other quasi-state entities that oversee airports. 33 Ex. A 00036 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 39 of 91 2. Plaintiffs object to this Request to the extent that it requires the production of materials that are protected by the attorney work-product doctrine in conjunction with the joint prosecution privilege. REQUEST FOR PRODUCTION NO. 26: All non-privileged communications between DOJ and one or more of the other Plaintiffs, including but not limited to Arizona, District of Columbia, Florida, Pennsylvania, Tennessee, Texas, and Virginia, or any other state, federal, or non-U.S. regulatory agency, related to the mergers or DOJ review of the mergers of US Airways and America West (2005), Delta and Northwest Airlines (2008), United and Continental (2010) and Southwest Airlines and AirTran (2011). Specific Objections to Request No. 26: 1. Plaintiffs object to the term “state regulatory agency” as vague and ambiguous. Plaintiffs interpret this term to not include quasi-state entities such as the Allegheny County Airport Authority or other quasi-state entities that oversee airports. 2. Plaintiffs object to this Request to the extent that it requires the production of materials that are protected by the attorney work-product doctrine in conjunction with the joint prosecution privilege. Dated: September 13, 2013 FOR PLAINTIFFS /s/ Ryan J. Danks Attorney U.S. Department of Justice, Antitrust Division 450 Fifth Street, N.W., Suite 8000 Washington, DC 20530 (202) 305-0128 Ryan.Danks@usdoj.gov 34 Ex. A 00037 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 40 of 91 CERTIFICATE OF SERVICE I hereby certify that I caused a true and correct copy of Plaintiffs’ Objections and Responses to Defendants’ First Set of Requests for Production of Documents to be served via electronic mail to all parties to this litigation. Dated: September 13, 2013 /s/ Ryan J. Danks 35 Ex. A 00038 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case Document 84-2 Filed 09/20/13 Page 41 of 91 Exhibit Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 42 of 91 CONFIDENTIAL (PURSUANT TO PROTECTIVE ORDER) UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, v. Case No. 1:13-cv-01236 (CKK) US AIRWAYS GROUP, INC. and AMR CORPORATION Defendants. PLAINTIFFS’ OBJECTIONS AND RESPONSES TO DEFENDANTS’ FIRST SET OF INTERROGATORIES DIRECTED TO ALL PLAINTIFFS Pursuant to Fed. R. Civ. P. 33 and the Local Rules of the United States District Court for the District of Columbia, Plaintiffs object and respond to Defendants’ First Set of Interrogatories Directed to All Plaintiffs. PRELIMINARY STATEMENT The responses to these interrogatories include information that Plaintiffs obtained from Defendants that is subject to the Protective Order and that is designated Confidential. Therefore, Plaintiffs designate their response to Interrogatory 3 below as Confidential, in accordance with the Protective Order. GENERAL OBJECTIONS Plaintiffs object generally to Defendants’ First Set of Interrogatories to the extent that they attempt to impose any obligation on Plaintiffs greater than those imposed or authorized by     REDACTED Ex. B 0039 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 43 of 91 the Federal Rules of Civil Procedure, the Local Civil Rules of the District of Columbia, or any applicable order of the Court. Plaintiffs object generally to Defendants’ First Set of Interrogatories to the extent they seek information protected from discovery and disclosure by the attorney-client privilege, deliberative-process privilege, work-product doctrine, law-enforcement investigative privilege, common-interest privilege, or any other applicable privilege or doctrine. Should any disclosure by Plaintiffs of information protected from discovery occur, it shall not constitute a waiver of any privilege applicable to any other information. Plaintiffs object generally to Defendants’ First Set of Interrogatories to the extent they prematurely seek production of information relating to the anticipated testimony of any of Plaintiffs’ potential expert witnesses. Plaintiffs will produce such information in accordance with the Case Management Order. Plaintiffs’ object generally to Defendants’ First Set of Interrogatories to the extent that they call for Plaintiffs to specify each document, deposition, or other fact or piece of evidence that supports particular contentions that Plaintiffs intend to prove at trial. Such a requirement is overly broad, unduly burdensome, and premature. In that regard, Plaintiffs note that, to the extent a reference is made to documents, depositions, or other evidence in its responses, such reference is made without waiver of this general objection and is not intended to provide an exhaustive list of all evidence that Plaintiffs may ultimately introduce at trial. Plaintiffs will serve their witness and exhibit lists within the time prescribed by the Scheduling Order or other time prescribed by the Court. Plaintiffs object generally to Defendants First Set of Interrogatories to the extent that they request information that is not in the possession, custody, or control of the Antitrust Division of 2    REDACTED Ex. B 0040 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 44 of 91 the Department of Justice, or information from units, departments, divisions, or sections of the offices of the Plaintiff State Attorneys General other than those with antitrust enforcement responsibilities. Plaintiffs have no reason to believe that relevant responsive information is likely found outside these offices and believe that a search for such information would be unduly burdensome. Plaintiffs object generally to the Instructions included in Defendants’ First Set of Interrogatories to the extent they impose burdens beyond those required by the Federal Rules of Civil Procedure or applicable court order. In particular, Plaintiffs object to the Instructions to the extent that they attempt to impose obligations for claiming a privilege or protecting trialpreparation materials that are greater than those set forth in Federal Rule of Civil Procedure 26(b)(5), or purport to require individualized logging in a privilege log of voluminous privileged documents that can be described categorically, such as the Antitrust Division’s internal privileged documents that have not been disclosed to persons outside the Antitrust Division of the Department of Justice. Individual logging of such documents in a privilege log is unduly burdensome and exceeds the obligation imposed by the Federal Rules of Civil Procedure, including Fed. R. Civ. P. 26(b)(5)(ii). Plaintiffs object generally to the term “Previously Cleared Mergers” to the extent it assumes that any of the Plaintiffs “cleared” the four consummated mergers listed. Plaintiffs object generally to Instruction No. 5 to the extent that it attempts to impose obligations beyond those imposed or authorized by Federal Rules of Civil Procedure 26 and 33. 3    REDACTED Ex. B 0041 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 45 of 91 SPECIFIC OBJECTIONS AND RESPONSES TO INTERROGATORIES 1. Identify each Person interviewed by the Plaintiffs (either together or independently) pursuant to the Investigation of the challenged Transaction and provide all factual information obtained from these individuals and entities through such interviews that is relevant to Plaintiffs’ claims in this case. Specific Objections Plaintiffs object to this interrogatory to the extent that it attempts to impose obligations for supplementing an interrogatory response that are greater than those set forth in Federal Rule of Civil Procedure 26(e)(1). Plaintiffs further object to this interrogatory because it requests protected attorney work product prepared in anticipation of litigation, and production of protected attorney work product that conveys attorneys’ mental impressions, conclusions, opinions, and legal theories concerning this litigation. Plaintiffs further object to this interrogatory because it requires Plaintiffs to identify those individuals and entities that it selected to interview during the course of its investigation and in preparation for this litigation, and the topics of interest to Plaintiffs. This information is itself protected attorney work product. Plaintiffs further object to this interrogatory because it requests information protected by the law enforcement investigatory privilege. Response Subject to and without waiving the foregoing objections, Plaintiffs respond that they have produced to Defendants all documents and information relevant to their Investigation into the challenged Transaction in the Antitrust Division’s and State Attorney Generals’ possession, custody, and control that is not subject to an applicable privilege or doctrine, or otherwise exempt from production, including extensive Initial Disclosures pursuant to Fed. R. Civ. P. 26(a) 4    REDACTED Ex. B 0042 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 46 of 91 that identify persons likely to have discoverable information that Plaintiffs’ may use to support their claims. 2. Provide all of the factual information that each of the Plaintiffs relied upon in making a decision not to challenge under the antitrust laws each of the Previously Cleared Mergers. Specific Objections Plaintiffs object to this interrogatory as containing discrete subparts constituting four separate interrogatories because the interrogatory seeks separate answers for “each of the Previously Cleared Mergers,” which is defined by the Interrogatory to include the 2005 merger of US Airways and America West, the 2008 merger of Delta and Northwest Airlines, the 2010 merger of United and Continental, and the 2011 merger of Southwest Airlines and AirTran. Plaintiffs object to this interrogatory because it purports to seek information that is neither relevant to the subject matter of the lawsuit nor reasonably calculated to lead to the discovery of admissible evidence. Plaintiffs’ exercise of prosecutorial discretion in prior investigations—including, in several instances, Plaintiff States’ lack of any investigation—bears no relevance to the question of whether the merger between US Airways and American substantially lessens competition. Plaintiffs also object to this interrogatory because it purports to seek information that is protected by the attorney work-product doctrine, attorney-client privilege, the law enforcement investigatory files privilege, or the deliberative process privilege, in conjunction with the joint prosecution privilege. Plaintiffs also object to this interrogatory because it purports to seek information that is protected from disclosure by federal and state statutes. See, e.g., 15 U.S.C. § 1313(c); 15 U.S.C. § 18a(h); United States v. Am. Tel. & Tel. Co., 86 F.R.D. 603, 647-48 (D.D.C. 1979). 5    REDACTED Ex. B 0043 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 47 of 91 Plaintiffs also object to this interrogatory to the extent it requires the production of information that would not be subject to discovery under Paragraph 10 of the CMO or Fed. R. Civ. P. 26. 3. To the extent Plaintiffs are alleging relevant product and geographic markets that are adversely affected by the challenged Transaction (e.g., “the domestic passenger service market” (Complaint ¶ 36)) other than the city pairs listed in Appendix A to the Complaint, identify each such market and provide all factual information underlying each such market definition. Specific Objections 6    REDACTED Ex. B 0044 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 48 of 91 REDACTED Ex. B 0045 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 49 of 91 8    REDACTED Ex. B 0046 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 50 of 91 9    REDACTED Ex. B 0047 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 51 of 91 REDACTED Ex. B 0048 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 52 of 91 REDACTED Ex. B 0049 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 53 of 91 12    REDACTED Ex. B 0050 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 54 of 91 Dated: September 19, 2013 FOR PLAINTIFFS /s/ Ryan J. Danks Attorney U.S. Department of Justice, Antitrust Division 450 Fifth Street, N.W., Suite 8000 Washington, DC 20530 (202) 305-0128 Ryan.Danks@usdoj.gov 13    REDACTED Ex. B 0051 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 55 of 91 CERTIFICATE OF SERVICE I hereby certify that I caused a true and correct copy of Plaintiffs’ Objections and Responses to Defendants’ First Set of Interrogatories to be served via electronic mail to all parties to this litigation. Dated: September 19, 2013 /s/ Katharine S. Mitchell-Tombras 14    REDACTED Ex. B 0052 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case Document 84-2 Filed 09/20/13 Page 56 of 91 Exhibit Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 57 of 91 FOR IMMEDIATE RELEASE TUESDAY, APRIL 26, 2011 WWW.JUSTICE.GOV AT (202) 514-2007 TDD (202) 514-1888 STATEMENT OF THE DEPARTMENT OF JUSTICE ANTITRUST DIVISION ON ITS DECISION TO CLOSE ITS INVESTIGATION OF SOUTHWEST’S ACQUISITION OF AIRTRAN WASHINGTON – The Department of Justice’s Antitrust Division issued the following statement today after announcing the closing of its investigation into the proposed acquisition of AirTran Airways by Southwest Airlines Company: After a thorough investigation, the division determined that the merger is not likely to substantially lessen competition. The merged firm will be able to offer new service on routes that neither serves today, including new connecting service through Atlanta’s Hartfield Jackson International Airport from cities currently served by Southwest to cities currently served by AirTran. The division said that the presence of low cost carriers like Southwest and AirTran has been shown to lower fares on routes previously served only by incumbent legacy carriers. Although there are overlaps on certain nonstop routes, the division did not challenge the acquisition after considering the consumer benefits from the new service. Also, the airports affected by the overlaps are not subject to restrictions on slots or gate availability. Where such restrictions exist, entry by other airlines may be particularly difficult. Southwest Airlines is based in Dallas. In 2010, it had revenues of $12.1 billion carrying approximately 88 million passengers. Southwest serves 72 cities in the United States. AirTran is based in Orlando. In 2010, it had revenues of $2.6 billion carrying approximately 25 million passengers. AirTran serves 69 cities in the United States, Mexico and the Caribbean. ### 11-523 Ex. C 0053 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 58 of 91 FOR IMMEDIATE RELEASE FRIDAY, AUGUST 27, 2010 WWW.JUSTICE.GOV AT (202) 514-2007 TDD (202) 514-1888 UNITED AIRLINES AND CONTINENTAL AIRLINES TRANSFER ASSETS TO SOUTHWEST AIRLINES IN RESPONSE TO DEPARTMENT OF JUSTICE’S ANTITRUST CONCERNS Department of Justice Closes Investigation, Transfer of Newark, N.J., Assets Resolves Competition Concerns WASHINGTON — The Department of Justice announced today that in light of the agreement by United Airlines Inc. and Continental Airlines Inc. to transfer takeoff and landing rights (slots) and other assets at Newark Liberty Airport to Southwest Airlines Co., the department has closed its investigation into the proposed merger of UAL Corporation, the parent of United, and Continental. United and Continental entered into the arrangement with Southwest in response to the department’s principal concerns regarding the competitive effects of the proposed United/Continental merger. The department conducted a thorough investigation. The proposed merger would combine the airlines’ largely complementary networks, which would result in overlap on a limited number of routes where United and Continental offer competing nonstop service. The largest such routes are between United’s hub airports and Continental's hub at Newark airport, where Continental has a high share of service and where there is limited availability of slots, making entry by other airlines particularly difficult. The transfer of slots and other assets at Newark to Southwest, a low cost carrier that currently has only limited service in the New York metropolitan area and no Newark service, resolves the department’s principal competition concerns and will likely significantly benefit consumers on overlap routes as well as on many other routes. The slot transfer is through a lease that permanently conveys to Southwest all of Continental’s rights in the assets, in compliance with FAA rules. Led by the office of the Ohio Attorney General, the offices of the attorneys general from California, Ohio, Texas, Virginia, Pennsylvania, North Dakota, New Jersey, Hawaii and the District of Columbia have also been investigating the proposed merger. The department is supportive of the states’ efforts to have any of their additional concerns about the proposed merger addressed. United Airlines, based in Chicago, is the third largest carrier in the United States by revenue. In 2009, it collected $16.3 billion in revenue carrying approximately 80 million passengers. United and its regional affiliates offer service to more than 230 destinations in the United States and 30 other countries throughout the world. Ex. C 0054 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 59 of 91 -2Continental Airlines, based in Houston, is the fourth largest carrier in the United States by revenue. In 2009, it collected $12.6 billion in revenue carrying approximately 67 million passengers. Continental and its regional affiliates offer service to 265 destinations in the United States and over 50 other countries throughout the world. Southwest Airlines, based in Dallas, is the sixth largest carrier in the United States by revenue. In 2009, it collected $10.4 billion in revenue carrying approximately 86 million passengers. Southwest serves 69 cities in the United States. The Antitrust Division provides this information under its policy of issuing announcements related to the closing of investigations in appropriate cases. This announcement is limited by the division’s obligation to protect the confidentiality of certain information obtained in its investigations. As in most of its investigations, the division’s evaluation has been highly fact-specific, and many of the relevant underlying facts are not public. Consequently, readers should not draw overly broad conclusions regarding how the division is likely in the future to analyze other collaborations or activities, or transactions involving particular firms. Enforcement decisions are made on a case-by-case basis, and the analysis and conclusions discussed in this statement do not bind the division in any future enforcement actions. Guidance on the division’s policy regarding announcements related to the closing of investigations is available at www.usdoj.gov/atr/public/guidelines/201888.htm. ### 10-974 Ex. C 0055 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 60 of 91 FOR IMMEDIATE RELEASE WEDNESDAY, OCTOBER 29, 2008 WWW.USDOJ.GOV AT (202) 514-2007 TDD (202) 514-1888 STATEMENT OF THE DEPARTMENT OF JUSTICE’S ANTITRUST DIVISION ON ITS DECISION TO CLOSE ITS INVESTIGATION OF THE MERGER OF DELTA AIR LINES INC. AND NORTHWEST AIRLINES CORPORATION WASHINGTON – The Department of Justice’s Antitrust Division issued the following statement today after the Division announced the closing of its investigation of the proposed merger of Delta Air Lines Inc. and Northwest Airlines Corporation: “After a thorough, six-month investigation, during which the Division obtained extensive information from a wide range of market participants–including the companies, other airlines, corporate customers and travel agents–the Division has determined that the proposed merger between Delta and Northwest is likely to produce substantial and credible efficiencies that will benefit U.S. consumers and is not likely to substantially lessen competition. “The two airlines currently compete with a number of other legacy and low cost airlines in the provision of scheduled air passenger service on the vast majority of nonstop and connecting routes where they compete with each other. In addition, the merger likely will result in efficiencies such as cost savings in airport operations, information technology, supply chain economics, and fleet optimization that will benefit consumers. Consumers are also likely to benefit from improved service made possible by combining under single ownership the complementary aspects of the airlines’ networks. “The Division provides this statement under its policy of issuing statements concerning the closing of investigations in appropriate cases. This statement is limited by the Division’s obligation to protect the confidentiality of certain information obtained in its investigations. As in most of its investigations, the Division’s evaluation has been highly fact-specific, and many of the relevant underlying facts are not public. Consequently, readers should not draw overly broad conclusions regarding how the Division is likely in the future to analyze other collaborations or activities, or transactions involving particular firms. Enforcement decisions are made on a case-by-case basis, and the analysis and conclusions discussed in this statement do not bind the Division in any future enforcement actions. Guidance on the Division’s policy regarding closing statements is available at http://www.usdoj.gov/atr/public/guidelines/201888.htm.” Delta, based in Atlanta, is the third largest airline in the United States. In 2007, it collected $19.1 billion in revenue for carrying 73 million passengers more than 126 billion miles. Delta and its domestic regional affiliates offer service to more than 300 destinations in 58 countries. Ex. C 0056 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 61 of 91 -2Northwest, based in Minneapolis, is the fifth largest airline in the United States. Last year, it carried approximately 53 million passengers 72 billion miles for total revenues of $12.5 billion. Northwest serves 239 destinations in 21 countries in North America, Asia and Europe. ### 08-963 Ex. C 0057 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 62 of 91 FOR IMMEDIATE RELEASE THURSDAY, JUNE 23, 2005 WWW.USDOJ.GOV AT (202) 514-2007 TDD (202) 514-1888 STATEMENT BY ASSISTANT ATTORNEY GENERAL R. HEWITT PATE REGARDING THE CLOSING OF THE AMERICA WEST / US AIRWAYS INVESTIGATION End-To-End Merger Cleared WASHINGTON, D.C. – R. Hewitt Pate, Assistant Attorney General in charge of the Department’s Antitrust Division, issued the following statement today after the Department announced the closing of its investigation of the proposed merger of America West and US Airways: “The Antitrust Division has concluded that the proposed merger of America West and US Airways would not reduce competition, and therefore has decided to close its investigation without issuing requests for additional information. There is very little overlap between the networks of America West and US Airways. America West operates primarily in the western United States, with hubs in Phoenix and Las Vegas. In contrast, US Airways operates primarily in the eastern United States, with hubs in Philadelphia, Pittsburgh and Charlotte and substantial presences in Washington, D.C. and New York City. The Division has found that integration of airlines with complementary, end-to-end networks, like those of the merging firms, can achieve efficiencies that benefit consumers. The consolidation of America West and US Airways, which will create the fifth largest domestic carrier, will enable the merged airline to offer U.S. consumers more and better service to more destinations throughout the country.” Background USAirways and America West are the seventh and eight largest U.S. carriers, in terms of revenue passenger miles, according to publicly available information. As a result of the planned merger with America West, which is valued above $1.5 billion, US Airways is expected to emerge from its second bankruptcy. In related transactions, four parties – ACE Aviation (parent of Air Canada), Air Wisconsin, PAR Investments, and the Wellington Group – will invest in the merged carrier. Today’s announcement clears the way for the merger to proceed without antitrust challenge. The parties require a number of additional approvals, including confirmation of the reorganization plan by the bankruptcy court, and do not expect to consummate the merger until September. ### 05-338 Ex. C 0058 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case Document 84-2 Filed 09/20/13 Page 63 of 91 Exhibit Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 64 of 91 Rev Ind Organ DOI 10.1007/s11151-009-9232-1 The Year in Review: Economics at the Antitrust Division, 2008–2009 Ken Heyer · Carl Shapiro · Jeffrey Wilder © Springer Science+Business Media, LLC. 2009 Abstract This paper covers the activities of the Economic Analysis Group (EAG) of the Antitrust Division, U.S. Department of Justice, during 2008–2009. It describes the economic analysis undertaken by EAG in several important investigations, and in other activities as an advocate for competition. Keywords Antitrust · Competition · Mergers 1 Introduction During the past year the Economic Analysis Group (EAG) of the Antitrust Division, U.S. Department of Justice, has been engaged actively in providing economic analysis on a wide range of interesting and important matters. A substantial share of its Ken Heyer is the Economics Director for Economic Analysis at the Antitrust Division, United States Department of Justice. Carl Shapiro is the Deputy Assistant Attorney General for Economic Analysis and the chief economist at the Antitrust Division of the Antitrust Division, United States Department of Justice. Jeffrey Wilder is the Assistant Chief of the Antitrust Division’s Competition Policy Section. Shapiro joined the Division in March 2009 and was not a party to any decisions made prior to that time. The views in this paper are those of the authors and do not necessarily reflect those of the Antitrust Division. K. Heyer (B) · C. Shapiro · J. Wilder Antitrust Division, U.S. Department of Justice, 600 E Street, N.W. Suite 10000, Washington, DC 20530, USA e-mail: ken.heyer@usdoj.gov C. Shapiro e-mail: carl.shapiro@usdoj.gov J. Wilder e-mail: jeffrey.wilder@usdoj.gov 13 ([ ' 8 6 Y 86 $LUZD\V HW DO 1R FY &.. Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 65 of 91 K. Heyer et al. efforts was devoted to merger review; however, considerable attention was given also to other competition matters, including a review of a significant proposed joint venture between two on-line giants. Other activities included the preparation of formal comments to regulatory agencies and filings with the courts. In addition, building on its efforts over the past few years, EAG has through the research efforts of its staff served as an advocate for competition. It has done so by publishing work intended to influence and help improve the design of rules and regulations with a potentially significant impact on competition and, more generally, the performance of the economy. The Division’s economists have also continued to play an important role in the training of attorneys and other economists, both inside the Division and out, and both domestically and internationally. In this review article we report on a number of these activities, with a particular emphasis on ones that raised interesting or complex economic issues. In the area of mergers, we discuss the economic analysis performed by the Division’s economic staff in the investigation of proposed mergers between Coors and Miller (beer), JBS and National (beef packing) and Northwest and Delta (airline travel). Following that, we provide a somewhat more detailed discussion of the Division’s investigation into the proposed joint venture between Yahoo! and Google. We also report on two of the Division’s important competition advocacy efforts: One of these resulted in the filing of formal comments with the Department of Transportation in which we opposed certain expanded elements of antitrust immunity sought by the Star international airline alliance. In another, drawing substantially on input from the Division’s economists, the Department filed an amicus brief with the 2nd Circuit Court of Appeals articulating the Division’s position with respect to so-called “reverse payment” patent settlement cases. In our discussion of these investigations, partly due to space limitations and partly due to confidentiality considerations, we resist the temptation to present in its entirety the Division’s analysis of all the important evidence, or all of the relevant economic issues and arguments. We refrain also from even attempting to provide a complete explanation for why each matter was decided the way it was. Rather, in the interests of focusing on the interesting economics at issue, we at times highlight only the main facts, omitting some details, without in our view doing injustice to the critical economic arguments in play in these cases. For the purposes of these year-in-review articles, the precise facts of a given investigation are of far less importance than is a more general description of the analytical work performed by the Division’s economists. Finally, during the past year economists at the Division continued to publish a considerable amount of original research. Much of this research was based on casework, but a significant fraction dealt with antitrust, applied microeconomics, and econometrics generally. Some of this research was published as part of our EAG Discussion Paper series and included timely papers on the banking industry (Raskovich 2008), failing firm defense in merger analysis (Heyer and Kimmel 2009), and consumer demand for fuel economy (Langer and Miller 2008).1 Among the several publications by our staff economists in professional journals were papers on corporate leniency and 1 A complete list of recent and historical EAG Discussion Papers can be obtained at http://www.usdoj.gov/ atr/public/eag/discussion_papers.htm or by emailed request to janet.ficco@usdoj.gov. 13 ([ ' 8 6 Y 86 $LUZD\V HW DO 1R FY &.. Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 66 of 91 Economics at the Antitrust Division cartel enforcement (Miller 2009), remedies for exclusionary conduct (Werden 2009), and assessing the anticompetitive effects of multiproduct pricing (Carlton et al. 2008). 2 Mergers 2.1 Miller/Coors: Efficiencies Brewing In late 2008, SABMiller plc (Miller) and Molson Coors Brewing Company (Coors) announced their proposal to enter into a joint venture under which the companies would combine their beer operations in the United States and Puerto Rico. The proposed joint venture was analyzed in much the same way the Division evaluates proposed mergers, and after an 8-month investigation the Division announced that the deal was not likely to lessen competition substantially. At the same time that it announced that it had no intention of challenging the joint venture the Division stated publicly that “In one of the key parts of the investigation, the Division verified that the joint venture is likely to produce substantial and credible savings that will significantly reduce the companies’ costs of producing and distributing beer.” The type of efficiencies that the Division found credible in this matter, and the evidence it relied upon in reaching its decision, are worthy of some discussion. First, however, we briefly provide some background on the industry and the pre-venture competition within it. Miller and Coors were at the time of their proposed joint venture two of the three largest beer producers in the country (the third being Anheuser–Busch [AB], whose size exceeded that of either Miller, or Coors, or a combined Miller/Coors). Although numerous domestic and imported beers competed against “the big three” in one or more regions of the country, none had a substantial share of sales. For whatever combination of historical and other reasons, sales of the most widely-known brands–products produced and sold by Miller, Coors, and A–B, greatly exceeded those of their rivals. Concentration in relevant markets was quite high, though (as noted above) the Division found it unlikely that the proposed venture would lessen competition substantially. From the perspective of possible anticompetitive unilateral effects, our investigation determined that, by far, the greatest competition faced by both Miller and Coors came from A–B, not from one another. Relevant evidence consisted not only of documents from the parties and their large rival, but also from an empirical examination of sales data. It was also found that the proposed venture would be unlikely to make coordination among firms in the industry significantly more likely, more complete, or more durable. Neither Coors nor Miller appeared to represent likely coordination-disrupting “mavericks,” and the prospect of significant cognizable efficiencies (discussed below) made net anticompetitive coordinated effects even less likely. Our lengthy investigation of this proposed venture confirmed the parties’ assertions that combining their beer operations was likely to produce large and cognizable efficiencies. A considerable fraction of these efficiencies represented variable cost savings that directly affected the merged entity’s pricing incentives, while other claimed benefits appeared likely to produce nontrivial fixed cost savings. Much of the 13 ([ ' 8 6 Y 86 $LUZD\V HW DO 1R FY &.. Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 67 of 91 K. Heyer et al. efficiencies involved freight cost savings that were based on the ability of the merged firm to redistribute production of the parties’ two brand portfolios across the venture’s multiple plants, which were geographically dispersed. At the time of the transaction, Coors primary production facility was located in Golden, CO, with a secondary facility in Elkton, VA. The several Miller plants were distributed more widely throughout the country; from WI to OH to TX to CA. Customers of the two firms’ products were distributed throughout the country, and by, for example, moving Coors production into some of the Miller facilities (which did not appear in most cases to be operating at or near capacity), average shipping costs across the combined firms’ plants could be reduced considerably. Significantly, in addition to these claimed efficiencies being plausible on their face, additional and non-pretextual evidence helped confirm not only that they were likely to be achieved, but also that they would be substantial in magnitude. Miller had, prior to its decision to join with Coors, commissioned a business consulting firm to analyze potential industry combinations. That firm modeled freight efficiencies as the current combined stand alone freight cost less the model-derived combined freight costs after redistributing optimally the firm’s products across production facilities. We examined the firm’s modeling approach and found it and its resulting estimates to be reasonable. Finally, and as further confirmation of our analysis, the internal analyses of others in the industry-third parties not involved directly in the deal-tended at least broadly to track the claims put forward by the joint venturing firms. In evaluating the implications of the deal for their own business fortunes, these potentially affected third parties examined a potential Miller–Coors combination and reached conclusions consistent with those reached by the Division’s economists. Efficiencies analysis in merger cases is often quite difficult. Assertions can be difficult to test, and even plausible arguments may be subject to legitimate skepticism. However, in matters where we have multiple pieces of evidence that are independently developed, facially plausible, and mutually consistent and reinforcing, our confidence in our conclusions is heightened considerably.2 2.2 JBS/National/Smithfield: The Division’s Beef with a Proposed Merger of Packers In deals announced in March 2008, JBS, (the Brazilian owner of significant US beef processing operations), bid to acquire both the National Beef Packing Company (National) and the Smithfield Beef Group (Smithfield). The acquisitions would have combined the nation’s third, fourth and fifth largest beef packers and created a new largest firm in the industry. In evaluating the proposed acquisitions, among the 2 It may be worth commenting briefly on the fact that the Division did recently challenge a merger of two other beer manufacturers–Anheuser–Busch and InBev. That deal was permitted to proceed only after adequate divestitures were specified in a formal Consent Decree. In the latter Anheuser–Busch/InBev matter we found the two firms to be one another’s principal competitors in a relevant geographic market (upstate New York) and, unlike in the case of Miller/Coors, the evidence for merger-specific efficiencies was very weak. 13 ([ ' 8 6 Y 86 $LUZD\V HW DO 1R FY &.. Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 68 of 91 Economics at the Antitrust Division key economic issues evaluated by the Division’s economists were geographic market definition and competitive effects.3 Beef processors compete both in procuring cattle from farmers and in selling packaged products to retailers. Transportation and other cost considerations may make relevant geographic markets for purchasing cattle much narrower than are geographic markets for selling packaged beef products. A hypothetical single purchaser of cattle within a geographic region narrower than the entire United States might well have considerable monopsony power over cattle farmers in that region even if a hypothetical single seller of the packaged beef coming from that region could not profitably raise prices to retailers. It is, of course, entirely possible that an exercise of monopsony power in regional markets could be economically inefficient and welfare-reducing even if the prices paid by consumers of final products remains unaffected. For example, paying lower prices to suppliers whose marginal cost is upward sloping will call forth less supply from them. This may prove profitable to the purchaser even if there is a highly elastic supply forthcoming from non-victimized producers—additional sales from whom would protect final consumers from a price increase. In such cases, final consumers of the product are not harmed, however the economy is performing below its potential because it is producing an unchanged quantity of the product less efficiently. The Division’s analysis in this matter incorporated considerations of potential harms both upstream (the purchase of cattle from feedlots by regional packing facilities) and downstream (the sale of graded boxed beef by packers to retailers). We found a significant likelihood that the merger might lead not only to competitive harm from lower prices paid to regional cattle suppliers, but also harm to final consumers of beef. This latter effect, which was predicted to be quite modest in percentage terms, arose in part from the fact that although cattle breeders might, in principle, attempt to protect themselves by shipping small “feeder” cattle outside the region prior to fattening and slaughter,4 unutilized packing capacity in the hands of independent firms located outside the region was quite limited. The Division’s upstream concerns were both that the merger might enable the merged firm unilaterally to reduce price for fed cattle in the affected region, and also that market conditions might facilitate coordinated pricing for fed cattle among the region’s few remaining significant packers. One of the techniques used by the Division’s economists to evaluate the likelihood of competitive harm upstream was to employ cross-section econometric analysis of how winning bids for cattle at feedlots varied as a function of the number of independently owned packing facilities located within various distance bands around the feedlot. We found, after controlling for other relevant variables, that winning bids tended to be somewhat higher when the number of independent packing facilities located 3 The Division elected not to challenge the JBS acquisition of Smithfield. Some time after the Division filed a formal Complaint challenging its proposed acquisition of National, JBS withdrew its bid for that company. 4 Shipping costs are much lower for pre-fed cattle. 13 ([ ' 8 6 Y 86 $LUZD\V HW DO 1R FY &.. Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 69 of 91 K. Heyer et al. near a feedlot was greater.5 From these results, along with other pieces of evidence, we concluded that eliminating one of only two or three independent packing facilities that were located relatively near feed lots would result in lower winning bid prices for cattle supplied by those feed lots. One other issue in our decision to challenge the JBS acquisition of National is especially worth noting. The potential harm from enhanced monopsony power in this case, while it was found to be likely, was not predicted to be very large in percentage terms. Concern was heightened, however, by two additional pieces of information. The first is that the volume of commerce in the market was enormous–billions of dollars per year. Hence, even an anticompetitive effect as small as, say, 1%, could lower payments to feed lots of tens of millions of dollars per year. Second, the merger-specific efficiencies from the deal were found to be exceedingly small. In our judgment, the expected net harm from the deal was likely to be quite large. 2.3 Northwest/Delta: An Airline Merger Gets off the Ground In the summer of 2008, Delta Airlines and Northwest Airlines proposed to merge their operations.6 The networks of these two large carriers’ operations overlapped quite a bit; however the vast majority of the overlaps were on routes where one or both of the carriers offered only “connect” service via their hubs and where there was substantial competition from other airlines. In a limited number of city-pairs, however, there was a nonstop horizontal overlap as well; on service between (respectively) Atlanta, Cincinnati, and Salt Lake City, where Delta operates major hubs, and the domestic hubs (Detroit, Minneapolis, and Memphis) operated by Northwest. Key challenges in our investigation included estimating a) the potential anticompetitive effects on the overlap (nonstops and connects), and b) evaluating and estimating the size of potential merger-specific efficiencies, which the parties claimed would be in the many hundreds of millions of dollars annually. Beginning with connecting service, there are literally thousands of domestic citypairs where Northwest and Delta both offer connecting service, including many where both carriers have significant market shares. We were unable to find any empirical support for adverse competitive effects in markets where the two carriers’ face competition from another nonstop carrier or from a Low Cost Carrier (LCC),7 although we did find some evidence of small potential harm on other one-stop routes. 5 Our economists investigated the possibility that these empirical findings might have been the result of spurious correlation—i.e., that some other variable, not included in the model, was responsible for both the lower prices and the greater number of bidders. After looking at candidate missing variables that might in theory have generated our results, we found this alternative explanation to be unsupported by available evidence. 6 The deal was ultimately permitted to go forward without objection from the Antitrust Division. 7 “LCCs” are non-“legacy” airlines, such as Southwest and AirTran who, due to lower labor and other expenses, commonly have lower operating costs than do the major “legacy” airlines (which have large networks and extensive union collective bargaining agreements that originated in the era before the deregulation of the U.S. airlines in the late 1970s. Numerous empirical studies have found a significant “LCC effect” on fares–i.e., controlling for the number of carriers serving a route, it makes a difference whether one or more of them happens to be an LCC. 13 ([ ' 8 6 Y 86 $LUZD\V HW DO 1R FY &.. Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 70 of 91 Economics at the Antitrust Division Of the nonstop overlap routes, there were two categories of markets potentially affected adversely by the merger. One was the five city-pairs in which only Northwest and Delta provided nonstop service. The other was the four city-pairs where Northwest, Delta, and a non-legacy LCC provided nonstop service. Our economists used both publicly available airline data and internal data provided by the carriers to examine the likely consequences of both a merger to monopoly of nonstop carriers and a merger of two legacy carriers where the remaining nonstop competitor would be an LCC. Because the city-pairs where the only nonstop service was provided by Northwest and Delta were markets where the carriers operated hubs at different endpoints, in estimating the merger’s likely competitive effects in these markets our economists compared the performance of carriers in city-pairs where nonstop service was provided by two carriers–each with a hub at only one end–with prices and output in city-pairs where nonstop service was provided between two hubs of the same carrier (e.g., by Northwest between its Minneapolis and Detroit hubs). Consistent with prior research (and conventional wisdom), nonstop domestic service was found to be a relevant antitrust market. In other words, absent efficiencies or entry, a hypothetical monopolist would profitably raise price by at least a small, but significant and nontransitory amount. We found also that the remaining nonstop competition from an LCC on a route would lower considerably the potential anticompetitive effect in a nonstop market. Nevertheless, because there were so few nonstop overlap markets and the volume of commerce on these routes was relatively small, potential harm in these city-pairs was predicted to be modest at most. This implied that if only a fraction of the efficiencies claimed by the parties from combining their large, and largely complementary, networks were found likely to be generated by the merger, these would easily exceed any potential for harm from the deal. Turning then to efficiencies, we considered two potential benefits from the merger; cost savings and increased value to travelers. On the first of these, many of the claimed cost savings were merely asserted, rather than documented. This made it impossible for us to credit them in our analysis. Some of the claimed savings were credited; in particular, those relating to more efficient utilization of gate space. There was, however, an offsetting factor, including estimates from the parties themselves of significant one-time integration costs. On the benefits side of the ledger, the proposed merger might generate consumer benefits by facilitating schedule improvements, by allowing for a more efficient allocation of aircraft across the network, and through marketing synergies that could make the merged carrier’s service more attractive to consumers. Our analysis was complicated by, among other things, the fact that following the merger the parties were planning to adjust the schedules of both carriers’ flights. Generating our own independent predictions of post-merger scheduling was beyond our ability. Therefore, in conducting our analysis we worked with a number of different hypothetical post-merger schedules, including one produced by the parties as part of what appeared to be a legitimate business effort to assess post-merger opportunities, as well as on the actual “but-for” schedules for October 2008 that the two carriers had published the previous June. 13 ([ ' 8 6 Y 86 $LUZD\V HW DO 1R FY &.. Case Document 84-2 Filed 09/20/13 Page 71 of 91 K. Heyer et Our methodology for calculating bene?ts involved comparing the forecasted demand for the merged carrier under plausible post-merger schedules with the fore- casted demand for Northwest and Delta under the but-for schedules. By doing so we could determine how the post-merger schedule changes would be likely to affect the demand for the merged carrier?s service. With no change in rivals? services, a change that allows the merged carrier to attract more customers implies an increase in consumer welfare. Using demand elasticity estimates that are consistent with the empirical literature on the airline industry, along with some neutral assumptions about the nature of con- sumer demand, our economists were able to calculate the change in consumer welfare implied by the predicted traf?c changes for each hypothetical post-merger schedule. Our best estimates of the likely increases in consumer welfare signi?cantly exceeded the feared harm to consumers in the overlap routes served by the two carriers. On this basis we concluded that the merger was likely procompetitive and ought not be challenged. It is worth noting that our methods for estimating merger-speci?c bene?ts produced ?gures that were far below those claimed by the parties. One major reason for this was that the model used by the parties? experts employed a measure of convenience (a variable that essentially measures how many ?ights a carrier offers on a route and how well-timed they are) that generated predictions about future traf?c ?ows that were wildly inconsistent with the predictions made by the model that Northwest uses in the ordinary course of its business. 2.4 Yahoo!/Google: A Searching Analysis of a Proposed Joint Venture8 In June 2008, Google and Yahoo! announced an advertising agreement that would have allowed Google, at Yahoo!?s discretion, to serve ads on Yahoo! Websites.9 In exchange, Google agreed to share a percentage of the revenue generated by these ads with Yahoo!. The deal was non-exclusive, with an initial term of 4years and two 3-year extensions at Yahoo!?s option. Google and Yahoo! delayed implementation of the agreement to allow the Antitrust Division to review its competitive implications. On November 5, 2009, facing advertiser opposition and the specter of a lawsuit by the Antitrust Division, Google and Yahoo! abandoned the agreement. 2.4.1 Background on the Search Advertising Business Today?s search advertising platforms all adhere to the same core business model. In response to a user?s search query, a platform serves up ?algorithmic? search results accompanied by ads both immediately above and to the right of the search results. Advertisements directly above the algorithmic search results generate the most clicks, 8 Carl Shapiro represented one of the parties during this investigation. He had no input into the drafting of this section. 9 As is explained below, in essence Yahoo! would transmit a search query to Google, which would return ads for Yahoo! to display alongside its search results. Springer Ex. 0066 US. v. US Airways et al. No. (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 72 of 91 Economics at the Antitrust Division followed by those to the right, with positions higher on the web page generating more clicks. When a user clicks on an ad, the advertiser whose ad is clicked pays the platform; ads that are not clicked generate no revenue for the platform. Each advertiser’s cost per click, as well as its advertisement’s position on the page, are determined by auction. Advertisers submit bids that specify the maximum cost per click they are willing to pay. Each advertiser’s bid is multiplied by its ad’s quality score, a measure of the ad’s expected relevance to the user derived from historical click-through rates and other factors. Ads are then ordered, with higher bids leading to ad placement in those positions that generate the most clicks. When an ad is clicked, the advertiser pays an amount determined by the bid and quality score for the next highest ad on the page.10 At least for Google’s advertising platform, in the specific case in which all ads’ quality scores are equal, the advertiser pays the bid of the nexthighest bidder. This has led many observers to describe the auction mechanism as a generalized second-price auction.11 Because advertisers could not possibly submit bids on the universe of all user queries, bidding is organized around relatively common keywords. Much of the “secret sauce” of these platforms inheres in the algorithms that they use to aggregate bids on keywords upon which advertisers bid, and their skill in populating pages with relevant ads in response to a wide variety of (at-times obscure) user queries. Importantly, platforms also employ proprietary algorithms to determine how ads are configured on the page. Many queries result in no ads being promoted to the prime real estate immediately above the algorithmic results, or even in no ads being shown at all. Determining how and where a platform will serve up particular ads, if done well, add considerable value to searchers and advertisers by converting advertisements into final sales. However, and in contrast to claims made by the parties,12 a concern during our investigation was that the agreement might have enabled Google more fully to exploit advertisers by manipulating auction parameters such as reserve prices, promotion thresholds, and even the quality scores themselves. Despite the fact that Google and Yahoo! jointly represent a dominant share of the search advertising market, it is not immediately obvious that an agreement would have led to higher prices or that if prices were to increase the effect would be substantial. If Google and Yahoo! users are distinct—for example, if those who search for “tennis racket” on Google do not also search for that product on Yahoo! (and vice-versa)—and if an advertiser’s margin is constant, the advertiser may not view the two platforms as substitutes. If so, even a full merger of the two platforms might have no immediate effect on price. 10 http://googleblog.blogspot.com/2008/10/quality-scores-and-ad-auctions.html. 11 See Athey and Ellison (2007), Edelman et al. (2007), and Varian (2007) for more information on these auction mechanisms. 12 From a Google blog post: “[The agreement] does not let Google raise prices for advertisers. Google does not set the prices manually for ads; rather, advertisers themselves determine prices through an ongoing competitive auction. We have found over years of research that an auction is by far the most efficient way to price search advertising and have no intention of changing that.” http://googleblog.blogspot.com/2008/ 06/our-agreement-to-provide-ad-technology.html. 13 ([ ' 8 6 Y 86 $LUZD\V HW DO 1R FY &.. Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 73 of 91 K. Heyer et al. To see this, consider an advertiser that runs local radio ads to reach populations in both San Francisco and Chicago. In making its purchasing decisions, this advertiser likely invests in each campaign until the benefit of an additional sale, or conversion, is exactly offset by its cost. The price of a television spot in San Francisco has no bearing on the profit-maximizing calculus for Chicago. The possibility that search behavior by internet users followed this pattern (for example, that those searching for “tennis rackets” on Google virtually never searched also for tennis rackets on Yahoo!—and vice-versa) needed to be explored. Such arguments, it should be noted, break down if advertisers are budget constrained, which may be fairly common in the world of search advertising where many advertisers outsource their campaigns to third parties. The argument also breaks down when advertisers face increasing marginal costs or capacity constraints. In these cases, the advertiser likely will view the two media as substitutes and will shift purchases in response to changes in relative prices. Ultimately, whether substitution is significant or not is an empirical question. Answering it proved challenging in several respects. To begin with, advertisers have a variety of ways in which they might respond to price shocks. Consider an advertiser that finds itself displaced from the top ad position on an advertising platform when a competitor suddenly begins to bid more on a keyword. The advertiser can increase its bid to regain the top position, increase its bids on related keywords on the same platform, increase its bids on the same or related keywords on other platforms, or simply do nothing. Further complicating the analysis is the question of how quickly advertisers respond to changes in relative prices. Advertisers are a heterogeneous group. Some monitor tens of thousands of keywords in-house on a daily basis, others outsource their campaigns to specialized advertising firms known as search engine marketers, or SEMs, subject to budget constraints; still others bid on a few keywords and check in every few weeks to see how their ads are performing. Not knowing how, and how quickly, advertisers respond to price shocks made reliable estimation of cross-elasticities of demand between the platforms difficult. An additional challenge was logistical. Given the vast number of user queries that they receive each day, Google and Yahoo! generate, if anything, too much data. Even with statistical sampling, the size of the data sets produced by Google and Yahoo! made structural modeling of the underlying auctions infeasible given the need for expeditious review of the transaction. 2.4.2 Potential Efficiencies Google is, by far, the largest and most successful search engine on the planet. Part of its success owes to its great skill in helping advertisers monetize their advertisements by generating clicks, and ultimately sales, in response to ads. The proposed agreement was touted for its potential to enable both consumers and advertisers on Yahoo! To benefit from its outsourcing this function to Google at least for some keywords. Potential benefits to advertisers included the prospect of Yahoo! outsourcing unused ad space to Google. If the agreement allowed Google to fill this space with ads, resulting in additional sales of advertisers’ good and services, this would surely qualify as a benefit. Beyond that, Google might also have been able to replace Yahoo ads with 13 ([ ' 8 6 Y 86 $LUZD\V HW DO 1R FY &.. Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 74 of 91 Economics at the Antitrust Division more relevant ads, generating both more clicks and more conversions per click. Both would have resulted in increased advertiser surplus and consumer surplus. Some evidence developed during our investigation suggested that Google outperformed Yahoo! in both respects. 2.4.3 Potential Competitive Harm When the revenue-sharing agreement between Google and Yahoo! was announced, several commenters argued that the deal would result in a price floor at the Google price. According to the argument, the agreement creates incentives for Yahoo! to outsource any query for which Google was able to extract a higher price (net of Google’s revenue share) from advertisers than Yahoo!. As a result, Yahoo! could immediately increase its price on these queries. This argument, however, fails to account for the fact that some underlying factors were responsible for the existence of a price differential in the first place. Yahoo! could, of course, decide to increase its price post-agreement; but this would drive many advertisers away from its platform and towards Google for the same reasons it drove them from its platform prior to the agreement. Among more conventional theories of harm is the standard diversion theory that underlies most unilateral effects analysis of differentiated products mergers. Because Google would earn, post-agreement, a share of ad revenue on queries outsourced by Yahoo!, Google would have an increased incentive to raise prices on its own platform. While the theory is certainly valid, harm through this mechanism may have been fairly limited. Because Google would only recapture lost revenues on those queries outsourced by Yahoo! and because Google would keep only a fraction of ad revenue on outsourced queries, its incentive to increase price would be much weaker than would have been the case were Google and Yahoo! to merge outright. Beyond this standard revenue recapture analysis, another consideration was the ability of Google potentially to coordinate pricing with Yahoo! by controlling the configuration of ads on Yahoo! web pages. For example, depending on the precise final terms of their agreement, Google could reduce the number of ads displayed immediately above the algorithmic results on both its own platform and Yahoo!’s. By doing so, it may have been able profitably to restrict industry output and achieve, or come close to achieving, the quantity effect we would expect to observe if Google and Yahoo! merged.13 Beyond the potential for harm from immediate price effects, the agreement created a risk of even greater harmful effects on innovation over the immediate to long run. In a world without the agreement, Yahoo! reaps the benefits of its innovations for all its user queries. With the agreement, Yahoo!’s return on any investments in new search advertising technologies is limited to what it earns on those queries it populates with its own ads after it has implemented its new technology. To the extent that Yahoo! 13 As with any such arrangement, it would (of course) need to be the case that neither Yahoo! nor Google would find it profitable to defect by showing additional ads on its own websites. Both platforms, however, have available a number of mechanisms to monitor compliance. 13 ([ ' 8 6 Y 86 $LUZD\V HW DO 1R FY &.. Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 75 of 91 K. Heyer et al. outsourced a large fraction of its queries to Google, its incentive to innovate would undoubtedly be reduced, especially if innovations are incremental. In addition, because scale is so important in the search advertising business, the effect of having Yahoo! outsource significant business to Google could precipitate a downward spiral, with serious consequences to Yahoo!’s future competitiveness. Search advertising platforms are successful largely to the extent that they match users with relevant ads, and “learning by doing” is a big part of what helps these platforms improve. Knowing which ads are likely to generate a user’s interest is in part a numbers game: The more opportunities that the platform has to observe similar users responding to similar ads, the better is the platform’s ability to match ads to any individual user. The greater the increased profits to Yahoo! from outsourcing, the more outsourcing Yahoo! would have found profitable. And to the extent Yahoo! found the outsourcing of ads to be profitable, this would undermine its future ability to provide relevant ads in response to user queries. While any future degradation of Yahoo!’s platform would have obvious negative implications for consumers and advertisers, it would affect also the many Internet publishers who contract with Google or Yahoo! to provide search technology for their websites. Currently, Google, Yahoo!, and Microsoft compete to offer search bars at the top of partners’ web sites as well as the contextual ads that are displayed alongside partners’ content. Ad revenue generated under these syndication agreements is shared with publishers and is often the only way, other than display or banner ads, for publishers to generate returns on their investments in content. If Yahoo! were no longer able to compete aggressively for these syndication contracts, publisher revenues would surely decline. And, faced with lower revenues, publishers may bring less content to market on the Internet. In the end, the Division determined that the potentially substantial harms from a combination of higher prices in the near term and, perhaps more importantly, weakened future innovation and competition by Yahoo! against Google, were sufficiently large and likely so as to exceed the admittedly nontrivial benefits potentially arising from an outsourcing agreement between the parties. 3 Competition Advocacy 3.1 Star Alliance Antitrust Immunity Over the past 15 years, a number of international airline alliances have formed and grown. Under such alliances, carriers from different countries cooperate to handle passengers travelling internationally. For example, United Airlines is a member of the Star Alliance, which contains twenty-one carriers, including Air Canada, Lufthansa, SAS, Swiss, and TAP. Members of airline alliances agree to provide alliance customers with certain joint services such as code sharing, coordinated reservations and baggage transfer, through ticketing, frequent flyer reciprocity, and lounge sharing. International airline alliances have proven beneficial to connecting passengers who necessarily must 13 ([ ' 8 6 Y 86 $LUZD\V HW DO 1R FY &.. Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 76 of 91 Economics at the Antitrust Division travel on more than one carrier to complete their journey.14 In some ways, these alliances are a substitute for mergers between carriers operating in different countries; such mergers are prohibited by limitations in many countries, including the U.S., on foreign ownership of airlines that operate domestically. Since these alliances involve various forms of cooperation among carriers who are actual or potential competitors, they raise significant antitrust issues. The U.S. Department of Transportation (DOT) has the authority to approve international airline alliances and grant them antitrust immunity on international routes. Carriers have sought antitrust immunity from DOT to shield themselves from possible antitrust liability as they cooperate to carry traffic on international routes. In some cases, such cooperation involves joint setting of fares and the sharing of revenues earned from international passengers. Over the past 16 years, DOT has exercised its authority to grant antitrust immunity to more than twenty alliance agreements. During this time, most of the largest airlines in the world have become members of one of three large alliances, often with antitrust immunity. Many of the immunity grants made by DOT over the years were intended, in large part, to further the foreign policy goals of inducing the governments of the foreign alliance partners’ home countries to enter into “open skies” agreements with the U.S., thus promoting international aviation competition. Within the Star alliance, United and Lufthansa operate a joint venture that was granted antitrust immunity in 1996. These two carriers instituted revenue sharing in 2003, when they changed the name of their venture to the Atlantic Plus (A+) Alliance. Additionally, there is an immunized portion of the Star Alliance containing United, Air Canada, Lufthansa, Austrian, BMI, LOT, SAS, Swiss, and TAP. Both of these immunity grants involve “carve-outs” that exclude certain hub-to-hub routes on which the carriers compete head-to-head for non-stop traffic. Where they are workable, carveouts offer an attractive solution: They preserve competition on the affected routes while allowing the carriers in the alliance to realize broader alliance efficiencies. In considering an alliance application, DOT is required by statute to evaluate the impact of a proposed alliance agreement on competition. As explained by the DOT: “In particular, we cannot approve agreements that substantially reduce or eliminate competition unless they are necessary to meet a serious transportation need or to achieve important public benefits, when that need or those benefits cannot be met or achieved by reasonably available alternatives that are materially less anticompetitive.” DOT Show Cause Order, April 2009, p. 6. In July 2008, Continental Airlines, in conjunction with United Airlines and other members of the immunized portion of the Star Alliance, applied to the DOT for permission for Continental to be admitted to the Star Alliance, including its immunized portion.15 These Applicants also proposed an integrated joint venture, named A++, among Continental, United, Air Canada, and Lufthansa, patterned after the immunized A+ joint venture. In April 2009, DOT issued a Show Cause Order that indicated its 14 See Brueckner (2003), Brueckner and Whalen (2000), and Whalen (2007). 15 Joint Application of Air Canada, et al. Docket OST-2008-0234. 13 ([ ' 8 6 Y 86 $LUZD\V HW DO 1R FY &.. Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 77 of 91 K. Heyer et al. intention to grant authority for Continental to join the immunized Star Alliance and further immunizing the A++ joint venture.16 The DOT Show Cause Order (pp. 7–13) states that the DOT’s competitive analysis treats immunized agreements as a merger, applying traditional Clayton Act merger standards. The Antitrust Division has considerable experience in analyzing international airline alliances. The Division analyzes an immunity application much like a merger, since the immunized carriers will have the legal ability to cease any competition among themselves for activities within the scope of the immunity that is granted. In cases where the Division believes that the proposed alliance will substantially diminish competition, we communicate our concerns to DOT, in meetings and/or in formal comments. In response to the application for Continental to join the Star Alliance with antitrust immunity, the Division met with DOT personnel and subsequently filed comments, which are available to the public in redacted form.17 The Division’s principal concerns arose in four related areas, which we discuss in turn. First, the Division was concerned about a loss of competition on specific transAtlantic routes from New York where Continental competed against a Star Alliance member on a hub-to-hub basis. Concerns were greatest on routes where antitrust immunity would reduce the number of non-stop competitors from two to one. These were routes to Stockholm and Copenhagen (SAS), Zurich (Swiss) and Lisbon (TAP). In addition, on the New York to Zurich route the number of non-stop competitors would decline from three to two. The Division generally favors “carving out” such routes from antitrust immunity, i.e., limiting the grant of immunity to preserve competition on these routes. This approach has been taken in numerous previous grants of immunity. However, the DOT Show Cause Order did not include carve-outs for any of these routes, stating (p. 12): “We tentatively find that each of the nonstop overlap markets will continue to have adequate competition on a nonstop or connecting basis.” The key question was thus well posed: On trans-Atlantic routes, is competition from connecting traffic sufficiently potent that the elimination of all non-stop competition would not harm passengers? The empirical centerpiece of our comments was designed to answer this question by studying the relationship between the number of non-stop carriers on a trans-Atlantic city-pair route and the fares charged on that route.18 Using data for the third quarter of 2008, we focused on one-coupon (oneway) and two-coupon (round trip) coach class (fare class X) tickets. To control for the economics of hubs, we restricted our attention to hub-to-hub routes, of which there were 65. We used as additional explanatory variables the mileage of the route and the route’s population potential. We found that reducing the number of non-stop competitors on a trans-Atlantic hub-to-hub route from two to one raises the average non-stop fare on that route by 15%, ceteris paribus. Likewise, reducing the number of non-stop competitors from three to two raises the average non-stop fare by 6.6%. These findings show directly that the number of non-stop rivals affects fares, whatever disciplining impact connecting traffic has on non-stop fares. We also observed that across the 65 16 Show Cause Order, Docket OST-2008-0234, April 7, 2009. 17 Comments of the Department of Justice on the Show Cause Order, Docket OST-2008-0234, June 26, 2009. 18 For further details, see “Appendix B: Empirical Addendum” to the Department of Justice comments. 13 ([ ' 8 6 Y 86 $LUZD\V HW DO 1R FY &.. Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 78 of 91 Economics at the Antitrust Division routes studied, 73% of coach passengers fly non-stop, even though average connecting fares are 10% lower than average non-stop fares. This empirical work demonstrated that granting immunity would significantly diminish competition on the routes where Continental competed head-to-head with a Star alliance member. In other words, granting antitrust immunity on these routes would be costly to passengers. But that left open the question of whether there might be even larger benefits to passengers of including these routes in any immunity grant. To answer this question, we conducted empirical work to learn whether antitrust immunity is necessary to achieve significant efficiencies in serving connecting passengers. Any such efficiencies could, in principle, loom large, since the number of connecting passengers served by the Star Alliance is far greater than the number of non-stop passengers served on the overlap routes previously noted. Consistent with the empirical literature, we found that international alliances do indeed lead to significantly lower fares, which is consistent with the theory that they reduce a “double marginalization” problem associated with interline traffic. Critically, however, we found that fares charged by immunized alliances are 3.6% higher than fares charged by non-immunized alliances, ceteris paribus. In other words, while alliances generate benefits to connecting passengers, antitrust immunity does not. Indeed, many alliances conduct substantial operations without antitrust immunity. Second, we were concerned about the proposal in the Show Cause Order to remove the pre-existing carve-outs on two routes where United and Lufthansa were the only non-stop competitors: Chicago to Frankfurt and Washington, DC, to Frankfurt. The empirical analysis just cited was directly relevant to this issue. The Show Cause Order proposed removing these carve-outs to enable the A++ joint venture to operate with full antitrust immunity, but the Division was concerned that removing the carve-outs would elevate fares on these two routes without providing offsetting benefits to passengers. Third, we had similar concerns with regard to several city-pair routes between the U.S. and Canada where Continental and Air Canada were the only two carriers offering non-stop traffic: Houston to Calgary, Houston to Toronto, Cleveland to Toronto, and New York to Ottawa. The Division’s experience and previous analysis indicated that elimination of non-stop competition on routes within North America would lead to higher fares, notwithstanding the remaining competition from connecting traffic and notwithstanding the threat of entry onto the route in question. Fourth, the Division was concerned about a loss of competition between Continental and United to provide service to mainland China. Continental and United were the only U.S. carriers providing non-stop service to Beijing from the U.S. mainland. Together, they account for 57% of the available non-stop seats to Beijing, with nonimmunized Star member Air China accounting for another 41%. Since United and Continental serve China from different gateway airports in the U.S., the issue was not the loss of non-stop competition, as it was on the trans-Atlantic routes. Rather, Continental and United were direct competitors in providing connecting service from many U.S. cities to Beijing. Under the DOT’s Show Cause Order, that competition would be lost. The Division suggested carve-outs and other limitations on the immunity grant, so as to allow the Applicants to achieve alliance efficiencies without harming passengers on certain problematic routes: “Thus, the final Order should carve out the transatlantic 13 ([ ' 8 6 Y 86 $LUZD\V HW DO 1R FY &.. Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 79 of 91 K. Heyer et al. and transborder markets where competitive harm is most likely to occur, maintain existing carve outs, and limit immunity to transatlantic markets.” (DOJ Comments, p. 36) Following the filing of our comments, the DOT modified its Show Cause Order. The DOT added a number of carve-outs to the antitrust immunity eventually granted in its Final Order.19 In the end, the DOT accepted some, but not all of the limitations that the Division recommended to the immunity that was granted to the Applicants. The Division’s empirical work was critical to our competition advocacy in this case. 3.2 Reverse Payments in Pharmaceutical Patent Settlements: Cipro Brief All three branches of the Federal government have been struggling for some years with so-called “reverse payments,” in the context of pharmaceutical patent settlements. The term “reverse payment” refers to a situation arising from the peculiar structure of the Hatch–Waxman Act, which established the rules governing the introduction of generic drugs that compete against branded pharmaceuticals that have been subject to patent protection. The courts have been reviewing challenges to patent settlements involving reverse payments. Congress has been considering legislation to bar such agreements or sharply restrict them. And the Federal Trade Commission (FTC) and the Antitrust Division have been formulating their enforcement policies and positions regarding these agreements. The relevant fact pattern arises (approximately) as follows: A would-be generic entrant seeks the approval of the U.S. Food and Drug Administration (FDA) to offer a generic version of a patented drug (along with the entrant’s claim that the patent is invalid or not infringed); the patent holder that sells the branded drug sues the wouldbe generic supplier for patent infringement; and the two reach a settlement of their patent dispute which contains the following two provisions: (1) an agreement by the generic supplier to refrain from entering the market for at least a portion of the time remaining on the patent, and (2) a substantial payment from the patent holder to the generic supplier. This latter element is commonly called a “reverse payment” because it flows from the patent holder to the alleged infringer, unlike conventional royalty payments (or infringement damages payments), which flow in the other direction. There is a large literature that analyzes reverse payments,20 which have been the subject of considerable attention, especially by the FTC, over the past decade. We focus here on the Cipro case before the Second Circuit, in which the Antitrust Division articulated a specific legal and economic standard to be applied to reverse payment cases.21 In this case, the patent holder is Bayer, the generic is Barr, and the drug in question is the antibiotic ciprofloxacin hydrochloride (Cipro). The settlement between Bayer and Barr involved a cash payment from Bayer to Barr of nearly $400 million 19 “Final Order,” Docket OST-2008-0234, July 10, 2009. 20 See, for example, Lemley and Shapiro, “Probabilistic Patents,” Journal of Economic Literature, (2005), 19(2), 75–98, and the references cited therein. For a recent paper with new empirical findings on agreements involving reverse payments, see Hemphill (2009). 21 Arkansas Carpenters Health and Welfare Fund, et al. Bayer et al., Case 05-2851-cv(L), Second Circuit, Brief for the United States in Response to the Court’s Invitation, July 6, 2009. 13 ([ ' 8 6 Y 86 $LUZD\V HW DO 1R FY &.. Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 80 of 91 Economics at the Antitrust Division along with an agreement by Barr to refrain from introducing a generic version of Cipro until 6 months before the expiration of Bayer’s patent. The antitrust dangers associated with reverse payments are straightforward: the incumbent supplier, in this case Bayer, has a strong incentive to pay the would-be entrant, in this case Barr, to refrain from entering the market and driving prices down. Due to the peculiar structure of the Hatch–Waxman Act, by paying off one generic supplier, the patent holder can in some cases forestall entry by any generic for some period of time. Blocking generic entry leads to sharply higher joint profits, since generic entry typically reduces prices substantially, benefiting consumers at the expense of the patent holder that markets the branded drug. In the absence of a patent, a payment by an incumbent supplier to a would-be entrant in exchange for the entrant’s agreement to stay out of the market would be blatantly anticompetitive. Nonetheless, a number of courts have been reluctant to find settlements that involve reverse payments to be illegal agreements under the Sherman Act, §1, observing that patents generally confer on their owners the right to exclude others from practicing the patented invention. Indeed, the Second Circuit itself, in the Tamoxifen case, ruled that reverse payments do not violate the Sherman Act unless either (1) the settlement extends the monopoly beyond the patent’s scope, (2) the patent was procured by fraud, or (3) the infringement suit settlement was objectively baseless.22 Despite this prior ruling, the panel considering the Cipro case solicited the views of the United States. The core economic and legal issue in these cases is how to handle the apparent tension between the Sherman Act, which prohibits agreements that restrict competition, and the Patent Act, which grants exclusionary rights to patent holders. The Antitrust Division’s brief takes the position that reverse payments are “presumptively illegal” because they restrict competition beyond the rights to exclude that are inherent in the patent. More specifically, the brief observes that the patent grant confers on the patent holder a bundle of rights, including the right to seek a court-ordered injunction to prevent another party from continuing to make or sell an allegedly infringing product. However, invoking this right necessarily requires the patent holder to bear a number of risks. Most notably, the court may find the patent to be invalid, or not infringed. In addition, the court may refuse to issue a preliminary or a permanent injunction.23 These risks are greatest for “weak patents”: those relatively likely to be found, in full patent litigation, to be invalid or not infringed. Private settlements involving reverse payments allow patent holders patents to exclude rivals without bearing the risk that their patent will be found invalid or not infringed. Once patents are correctly viewed as probabilistic—any given patent may or may not be found valid and infringed if fully litigated—it is clear that a reverse payment allows a patent holder, especially one with a weak patent, to achieve greater exclusionary power than is inherent in its patent. 22 In re Tamoxifen Citrate Antitrust Litigation, 466 F. 3d 187 (Second Circuit, 2006). 23 Preliminary injunctions apply during the pendency of the patent litigation; they are rarely issued. Per- manent injunctions apply after the patent is found valid and infringed. The Supreme Court’s decision in the eBay case made it more difficult for patent holders to obtain permanent injunctions, especially in cases where the patent holder does not compete against the infringer;. eBay Inc v. MercExchange, L.L.C., 547 U.S. 388 (2006). 13 ([ ' 8 6 Y 86 $LUZD\V HW DO 1R FY &.. Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 81 of 91 K. Heyer et al. The brief filed by the Antitrust Division explains this economic logic, putting it in the context of the relevant patent and antitrust laws and precedents. For reasons given in the brief, the Antitrust Division favors making reverse payments presumptively unlawful, rather than per se unlawful, which would allow the courts to learn more about such agreements, potentially allowing reverse payments in specific situations where they promote rather than stifle competition. As of this writing, the Second Circuit is still considering the case. 4 Conclusion In spite of the economy-wide downturn during the past year, the Division continued to be a busy and intellectually active place. Proposed mergers presented a significant number of challenging economic issues to investigate and evaluate, and we took advantage of a number of competition advocacy opportunities to provide input on important issues of legal and economic policy. This coming year will present additional challenges as the Division, jointly with the FTC, will be holding hearings to help us reassess, and potentially modify, the Horizontal Merger Guidelines. Moreover, the Division, jointly with U.S. Department of Agriculture, will be holding a series of hearings on several issues relating to competition in the agriculture industry. Beyond that, important challenges remain with respect to formulating and implementing sound economic policies towards single-firm conduct, and in continuing our ongoing efforts to forge greater convergence with our sister competition authorities around the world. Acknowledgments The authors would like to thank the outstanding staff economists at the Antitrust Division for their work on the matters discussed herein, as well as many others, over the course of the past year. They would also like to thank Sarolta Lee for assisting in the preparation of this manuscript. References Athey, S., & Ellison, G. (2007). Position auctions and consumer search. Working Paper. Brueckner, J. K. (2003). International airfares in the age of alliances: The effects of codesharing and antitrust immunity. Review of Economics and Statistics, 85(1), 105–118. Brueckner, J. K., & Whalen, W. T. (2000). The price effects of international airline alliances. The Journal of Law and Economics, 43(2), 503–545. Carlton, D., Greenlee, P., & Waldman, M. (2008). Assessing the anticompetitive effects of multiproduct pricing. NBER Working Paper. Edelman, B., Ostrovsky, M., & Schwarz, M. (2007). Internet advertising and the generalized second-price auction: Selling billions of dollars worth of keywords. American Economic Review, 97(1), 242–259. Hemphill, S. (2009). An aggregate approach to antitrust: Using new data and rulemaking to preserve drug competition. Columbia Law Review, 109(4), 629–688. Heyer, K., & Kimmel, S. (2009). Merger review of firms in financial distress. EAG Discussion Paper Series, 09–1. Langer, A., & Miller, N. H. (2008). Automobile prices, gasoline prices, and consumer demand for fuel economy. EAG Discussion Paper Series. 08–11. Lemley, M., & Shapiro, C. (2005). Probabilistic patents. Journal of Economic Literature, 19(2), 75–98. Miller, N. H. (2009). Strategic leniency and cartel enforcement. American Economic Review, 99(3), 750–768. 13 ([ ' 8 6 Y 86 $LUZD\V HW DO 1R FY &.. Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 82 of 91 Economics at the Antitrust Division Raskovich, A. (2008). Should banking be kept separate from commerce. EAG Discussion Paper Series, 08–9. Varian, H. R. (2007). Position auctions. International Journal of Industrial Organization, 25(6), 1163–1178. Werden, G. J. (2009). Remedies for exclusionary conduct should protect and preserve the competitive process. Antitrust Law Journal, 76(1), 65. Whalen, W. T. (2007). A panel data analysis of code-sharing, antitrust immunity, and open skies treaties in international aviation markets. Review of Industrial Organization, 30, 39–61. 13 ([ ' 8 6 Y 86 $LUZD\V HW DO 1R FY &.. Case Document 84-2 Filed 09/20/13 Page 83 of 91 Exhibit Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 84 of 91 AO 88B (Rev. 06/09) Subpoena to Produce Documents, Information, or Objects or to Permit Inspection of Premises in a Civil Action UNITED STATES DISTRICT COURT for the District of Columbia United States of America and Plaintiff States Plaintiff v. US Airways Group, Inc. and AMR Corporation Defendant ) ) ) ) ) ) Civil Action No. 1:13-cv-01236-CKK (If the action is pending in another district, state where: ) SUBPOENA TO PRODUCE DOCUMENTS, INFORMATION, OR OBJECTS OR TO PERMIT INSPECTION OF PREMISES IN A CIVIL ACTION To: United Airlines, Inc. c/o C T Corporation System, registered agent 1015 15th Street, N.W. Washington, DC 20005 ✔ Production: YOU ARE COMMANDED to produce at the time, date, and place set forth below the following ’ documents, electronically stored information, or objects, and permit their inspection, copying, testing, or sampling of the material: [Attached Schedule] Place: U.S. Department of Justice, Antitrust Division Date and Time: 450 5th Street, N.W., Suite 8000, Attn: Barry Joyce Washington, DC 20530 09/30/2013 5:00 pm ’ Inspection of Premises: YOU ARE COMMANDED to permit entry onto the designated premises, land, or other property possessed or controlled by you at the time, date, and location set forth below, so that the requesting party may inspect, measure, survey, photograph, test, or sample the property or any designated object or operation on it. Place: Date and Time: The provisions of Fed. R. Civ. P. 45(c), relating to your protection as a person subject to a subpoena, and Rule 45 (d) and (e), relating to your duty to respond to this subpoena and the potential consequences of not doing so, are attached. Date: 09/04/2013 CLERK OF COURT OR Barry Joyce Signature of Clerk or Deputy Clerk Attorney’s signature The name, address, e-mail, and telephone number of the attorney representing (name of party) United States of America , who issues or requests this subpoena, are: Barry Joyce 450 5th Street Northwest Washington, DC 20530, barry.joyce@usdoj.gov, 202-353-4209 Ex. E 0078 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 85 of 91 AO 88B (Rev. 06/09) Subpoena to Produce Documents, Information, or Objects or to Permit Inspection of Premises in a Civil Action (Page 2) Civil Action No. 1:13-cv-01236-CKK PROOF OF SERVICE (This section should not be filed with the court unless required by Fed. R. Civ. P. 45.) This subpoena for (name of individual and title, if any) was received by me on (date) . ’ I served the subpoena by delivering a copy to the named person as follows: ; or on (date) ’ I returned the subpoena unexecuted because: . Unless the subpoena was issued on behalf of the United States, or one of its officers or agents, I have also tendered to the witness fees for one day’s attendance, and the mileage allowed by law, in the amount of $ My fees are $ . for travel and $ for services, for a total of $ 0.00 I declare under penalty of perjury that this information is true. Date: Server’s signature Printed name and title Server’s address Additional information regarding attempted service, etc: Ex. E 0079 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) . Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 86 of 91 AO 88B (Rev. 06/09) Subpoena to Produce Documents, Information, or Objects or to Permit Inspection of Premises in a Civil Action(Page 3) Federal Rule of Civil Procedure 45 (c), (d), and (e) (Effective 12/1/07) (c) Protecting a Person Subject to a Subpoena. (1) Avoiding Undue Burden or Expense; Sanctions. A party or attorney responsible for issuing and serving a subpoena must take reasonable steps to avoid imposing undue burden or expense on a person subject to the subpoena. The issuing court must enforce this duty and impose an appropriate sanction — which may include lost earnings and reasonable attorney’s fees — on a party or attorney who fails to comply. (2) Command to Produce Materials or Permit Inspection. (A) Appearance Not Required. A person commanded to produce documents, electronically stored information, or tangible things, or to permit the inspection of premises, need not appear in person at the place of production or inspection unless also commanded to appear for a deposition, hearing, or trial. (B) Objections. A person commanded to produce documents or tangible things or to permit inspection may serve on the party or attorney designated in the subpoena a written objection to inspecting, copying, testing or sampling any or all of the materials or to inspecting the premises — or to producing electronically stored information in the form or forms requested. The objection must be served before the earlier of the time specified for compliance or 14 days after the subpoena is served. If an objection is made, the following rules apply: (i) At any time, on notice to the commanded person, the serving party may move the issuing court for an order compelling production or inspection. (ii) These acts may be required only as directed in the order, and the order must protect a person who is neither a party nor a party’s officer from significant expense resulting from compliance. (3) Quashing or Modifying a Subpoena. (A) When Required. On timely motion, the issuing court must quash or modify a subpoena that: (i) fails to allow a reasonable time to comply; (ii) requires a person who is neither a party nor a party’s officer to travel more than 100 miles from where that person resides, is employed, or regularly transacts business in person — except that, subject to Rule 45(c)(3)(B)(iii), the person may be commanded to attend a trial by traveling from any such place within the state where the trial is held; (iii) requires disclosure of privileged or other protected matter, if no exception or waiver applies; or (iv) subjects a person to undue burden. (B) When Permitted. To protect a person subject to or affected by a subpoena, the issuing court may, on motion, quash or modify the subpoena if it requires: (i) disclosing a trade secret or other confidential research, development, or commercial information; (ii) disclosing an unretained expert’s opinion or information that does not describe specific occurrences in dispute and results from the expert’s study that was not requested by a party; or (iii) a person who is neither a party nor a party’s officer to incur substantial expense to travel more than 100 miles to attend trial. (C) Specifying Conditions as an Alternative. In the circumstances described in Rule 45(c)(3)(B), the court may, instead of quashing or modifying a subpoena, order appearance or production under specified conditions if the serving party: (i) shows a substantial need for the testimony or material that cannot be otherwise met without undue hardship; and (ii) ensures that the subpoenaed person will be reasonably compensated. (d) Duties in Responding to a Subpoena. (1) Producing Documents or Electronically Stored Information. These procedures apply to producing documents or electronically stored information: (A) Documents. A person responding to a subpoena to produce documents must produce them as they are kept in the ordinary course of business or must organize and label them to correspond to the categories in the demand. (B) Form for Producing Electronically Stored Information Not Specified. If a subpoena does not specify a form for producing electronically stored information, the person responding must produce it in a form or forms in which it is ordinarily maintained or in a reasonably usable form or forms. (C) Electronically Stored Information Produced in Only One Form. The person responding need not produce the same electronically stored information in more than one form. (D) Inaccessible Electronically Stored Information. The person responding need not provide discovery of electronically stored information from sources that the person identifies as not reasonably accessible because of undue burden or cost. On motion to compel discovery or for a protective order, the person responding must show that the information is not reasonably accessible because of undue burden or cost. If that showing is made, the court may nonetheless order discovery from such sources if the requesting party shows good cause, considering the limitations of Rule 26(b)(2)(C). The court may specify conditions for the discovery. (2) Claiming Privilege or Protection. (A) Information Withheld. A person withholding subpoenaed information under a claim that it is privileged or subject to protection as trial-preparation material must: (i) expressly make the claim; and (ii) describe the nature of the withheld documents, communications, or tangible things in a manner that, without revealing information itself privileged or protected, will enable the parties to assess the claim. (B) Information Produced. If information produced in response to a subpoena is subject to a claim of privilege or of protection as trialpreparation material, the person making the claim may notify any party that received the information of the claim and the basis for it. After being notified, a party must promptly return, sequester, or destroy the specified information and any copies it has; must not use or disclose the information until the claim is resolved; must take reasonable steps to retrieve the information if the party disclosed it before being notified; and may promptly present the information to the court under seal for a determination of the claim. The person who produced the information must preserve the information until the claim is resolved. (e) Contempt. The issuing court may hold in contempt a person who, having been served, fails without adequate excuse to obey the subpoena. A nonparty’s failure to obey must be excused if the subpoena purports to require the nonparty to attend or produce at a place outside the limits of Rule 45(c)(3)(A)(ii). Ex. E 0080 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 87 of 91 RULE 45 SUBPOENA SCHEDULE FOR THE PRODUCTION OF DOCUMENTS If you believe that the Subpoena can be narrowed in any way that is consistent with the Department of Justice’s need for documents and information, please discuss any questions or possible modifications with the Department of Justice representatives identified on the last page of this Subpoena. 1. Submit one copy of each organizational chart in effect for each year from 2011 to 2013, for the company as a whole and for each of the company’s divisions involved in pricing (air fares or ancillary fees) or network planning. 2. Submit one copy each of your business plans, growth and expansion plans, marketing plans, pricing plans, strategic plans, capital budgets, analyses of competitor’s fleet plans, and network plans and fleet plans (e.g., a 5-year or a 10year plan) created at any time since January 1, 2011. 3. Submit one copy of each regularly prepared report that tracks systemwide fare changes. 4. Submit one copy of each regularly prepared report that evaluates other airlines’ fare availability, fare inventory, or yield management. 5. Submit documents sufficient to show each tool (e.g., software, program, database) used by your company to monitor other airlines’ (a) fare changes in public and private tariffs, (b) corporate fares and discounts, (c) fare availability, (d) bookings, and (e) corporate bookings. 6. Submit any studies or analyses by your company, since January 1, 2007, of US Airways’ pricing strategies, and your company’s actual or contemplated responses to any US Airways’ pricing strategies. 7. Submit all documents relating to your company’s decision to raise ticket change fees to $200 in 2013.   8. Submit one copy of each regularly prepared chart or report created since January 1, 2010, that tracks or monitors the ancillary fees of other airlines. 9. Submit one copy of each checked baggage fee policy, each ticket change fee policy, and frequent flyer redemption fee policy posted at any time on your company’s website from January 1, 2008, to present. 10. Submit documents sufficient to show your company’s plans for service at Reagan National Airport, including any slots your company intends to purchase, sell, or lease at Reagan National Airport.   11. Submit a copy of each report, study or analysis that discusses the strengths or 1 Ex. E 0081 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 88 of 91 weaknesses of American Airlines or US Airways as competitors for corporate accounts. 12. Submit all documents reflecting any communication between your company and US Airways or American Airlines that discuss United States and Plaintiff States v. US Airways Group, Inc. and AMR Corporation, Civil Action No. 1:13-cv01236, filed in the United States District Court for the District of Columbia. 13. Submit data created since January 1, 2010, from any model used by your company to estimate or project the market share, passengers or revenue of existing or additional scheduled air passenger service in a city pair that was used in the analysis of the United-Continental merger contained in the Expert Report of Daniel Rubinfeld in Michael C. Malaney et al. v. UAL Corporation, United Airlines, Inc., and Continental Airlines, Inc. (Aug. 24, 2010), including all output files and documents sufficient to interpret such output files, including any definitions of data fields. 14. Submit outbound destination airport/inbound origin airport for roundtrip itineraries (to determine which roundtrip coupons comprise the outbound journey and which roundtrip coupons comprise the return journey) for each ticket itinerary record produced to the Department of Justice in response to Civil Investigative Demand No. 27638.   2 Ex. E 0082 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 89 of 91 DEFINITIONS A. The terms “you,” “your,” “the company” or “your company” mean the company to which the subpoena was served, its parents, predecessors, divisions, subsidiaries, affiliates, partnerships, and joint ventures, and all directors, officers, employees, agents, and representatives of the foregoing. The terms “parent,” “subsidiary,” “affiliate,” and “joint venture” refer to any person in which there is partial (50 percent or more) or total ownership or control between the company and any other person. B. The terms “and” and “or” have both conjunctive and disjunctive meanings.   C. The term “discussing” means analyzing, constituting, summarizing, reporting on, considering, recommending, setting forth, or describing a subject. Documents that contain reports, studies, forecasts, analyses, plans, proposals, evaluations, recommendations, directives, procedures, policies, or guidelines regarding a subject should be treated as documents that discuss the subject. However, documents that merely mention or refer to a subject without further elaboration should not be treated as documents that discuss that subject. D. The term “document” is synonymous in meaning and scope to that term in Federal Rule of Civil Procedure 45(a)(1)(A)(iii). The term includes electronically stored information, including all electronic communications (e.g., emails and attachments), files, data, and databases. The term includes all metadata associated with that document. The term includes each copy that is not identical to any other copy. E. The term “including” means including but not limited to. F. The term “relating to” means in whole or in part constituting, containing, concerning, discussing, describing, analyzing, identifying, or stating. 3 Ex. E 0083 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 90 of 91 INSTRUCTIONS A. In addition to the specific instructions below, this Subpoena incorporates the instructions set forth in Federal Rule of Civil Procedure 45. B. Unless otherwise specified, this Subpoena calls for documents related to air passenger service, and not cargo service. C. Unless otherwise specified, this Subpoena requires the company to submit all responsive documents that were created, altered, or received by the company since January 1, 2011.   D. You do not need to re-submit documents that you already submitted to the Department of Justice pursuant to Civil Investigative Demand No. 27638 issued during the investigation that preceded this lawsuit. E. Submit the response to this Subpoena in the following manner: F. 1. Mark each page of each document submitted – whether in hard-copy or electronic format – with corporate identification and consecutive document control numbers. 2. Provide any index of documents prepared by any person in connection with your response to this Subpoena. If the index is available in electronic form, provide it in that form. 3. Unless otherwise requested by a Department representative, produce electronic documents (e.g., e-mail) and data in electronic form only. Produce electronic documents and data in a format that allows the Department to access and use them, together with instructions and all other materials necessary to use or interpret the data, including record layouts and data dictionaries. For data submitted electronically, submit a description of the data’s source. For documents and data submitted electronically, label each electronic media device so as to identify the contents of that media device. For electronic media containing electronic documents, the label must state which custodians’ documents are contained on the device and the document control numbers of those documents. Before you prepare documents or information for production in electronic form (for example, before you attempt to copy, for your response to this Subpoena, documents or information from an electronically stored source onto a disk or other electronic storage medium), contact a Department of Justice representative to explain the manner in which the documents or information are stored, and the types of information that are available on the electronic source. Department representatives must approve the format and production method for electronic 4 Ex. E 0084 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 84-2 Filed 09/20/13 Page 91 of 91 data in advance of the submission by the company of its response to this Subpoena. G. If the company or its agent uses or intends to use software or technology to identify or eliminate potentially responsive documents and information produced in response to this Subpoena, including search terms, predictive coding, near deduplication, de-duplication and email threading, identify in advance the search terms and method(s) to be used to conduct all or any part of the search. H. If the company is unable to respond to any question fully, supply the information that is available. Explain why such answer is incomplete, the efforts made by the company to obtain the information, and the source from which the complete answer may be obtained. I. Any documents that are withheld in whole or in part from production based on a claim of privilege shall be withheld in accordance with Rule 26(b)(5). If you have any questions about this Subpoena or suggestions for possible modifications, please contact: Barry Joyce at (202) 353-4209 or Shobitha Bhat at (202) 532-4535. 5 Ex. E 0085 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case Document 84-3 Filed 09/20/13 Page 1 of 4 Exhibit 3 Case 1:13-cv-01236-CKK Document 84-3 Filed 09/20/13 Page 2 of 4 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, v. US AIRWAYS GROUP, INC. and AMR CORPORATION, Case No. 1:13-cv-01236-CKK (Before Special Master Levie) Defendants, [PROPOSED] ORDER ON DEFENDANTS’ MOTION TO COMPEL PRODUCTION OF FACTUAL MATERIALS AND INFORMATION REGARDING DOJ’S APPROVALS OF FOUR PRIOR AIRLINE MERGERS Defendants US Airways Group, Inc. and AMR Corporation (together, the “Airlines”) move for an order compelling Plaintiff the United States of America and the Plaintiff States1 to further respond to Interrogatory 2 in the Airlines’ first set of Interrogatories and Requests for Production 15 through 20 in the Airlines’ first set of Request for Production. Having considered the Airlines’ motion, the Plaintiffs’ opposition, and the Airlines’ reply, and having heard argument from counsel, the Airlines’ motion is GRANTED. Plaintiffs are ordered to serve further supplemental responses to Interrogatory 2 that provide all of the factual information that each of the Plaintiffs relied upon in making a decision not to challenge under the antitrust laws the 2005 merger of US Airways and America West, the 2008 merger of Delta and Northwest Airlines, the 2010 merger of United and Continental, and the 2011 merger 1 The Plaintiff States are: the State of Arizona, the District of Columbia, the State of Florida, the State of Michigan, the Commonwealth of Pennsylvania, the State of Tennessee, the State of Texas, and the Commonwealth of Virginia. Case 1:13-cv-01236-CKK Document 84-3 Filed 09/20/13 Page 3 of 4 of Southwest Airlines and AirTrans. Plaintiffs are further ordered to serve further supplemental responses to Requests for Production 15 through 20 and produce the documents sought therein. Plaintiffs shall serve such responses and produce such documents within 10 days of this Order. Pursuant to Local Civil Rule 7(k), a list of attorneys entitled to notice under the Scheduling and Case Management Order is attached hereto as Appendix A. Dated: October 1, 2013 __________________________ Hon. Richard Levie (ret.) Special Master 2 Case 1:13-cv-01236-CKK Document 84-3 Filed 09/20/13 Page 4 of 4 APPENDIX A: LIST OF ATTORNEYS ENTITLED TO NOTICE Ryan Danks, Esq. Kate Mitchell-Tombras, Esq. Patrick Hallagan, Esq. Department of Justice Antitrust Division Transportation, Energy, and Agricultural Section 450 5th Street Northwest, Suite 8000 Washington, DC 20530 ryan.danks@usdoj.gov katharine.mitchell@usdoj.gov f.patrick.hallagan@usdoj.gov John M. Majoras, Esq. Rosanna K. McCalips, Esq. JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (Phone) (202) 626-1700 (Facsimile) jmmajoras@jonesday.com rkmccalips@jonesday.com Mark Levy, Esq. Assistant Attorney General Office of the Attorney General of TX 300 W. 15th Street, 7th Floor Austin, TX 78701 mark.levy@texasattorneygeneral.gov Case Document 85-1 Filed 09/24/13 Page 1 of 6 Exhibit 1 Case 1:13-cv-01236-CKK Document 85-1 Filed 09/24/13 Page 2 of 6 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, Case No. 1:13-cv-01236-CKK (Before Special Master Levie) v. US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants, DEFENDANTS’ MOTION TO COMPEL PRODUCTION OF RELEVANT FACTS OBTAINED FROM THIRD-PARTY INTERVIEWS Defendants move for an order compelling Plaintiffs to respond to Interrogatory 1 of Defendants’ First Set of Interrogatories. Argument Plaintiffs investigated the challenged merger for many months before filing suit, interviewing third parties and gathering information they believe justifies their attempt to block the merger. Defendants’ Interrogatory 1 requests the identities of the third parties who Plaintiffs interviewed and the factual information those witnesses disclosed. Eager to hold back the information they learned, Plaintiffs have objected to answering Interrogatory 1. (Declaration of Steven Bradbury, ¶ 2, Ex. A.) Even though the interrogatory seeks only routine pretrial discovery of facts—not interview memoranda, attorney notes, or other work product—Plaintiffs claim that any response would somehow reveal their attorneys’ mental impressions and legal theories, and that the information is covered by the law enforcement investigatory privilege. (Id.) Not so. Case 1:13-cv-01236-CKK Document 85-1 Filed 09/24/13 Page 3 of 6 The Department of Justice (“DOJ”) has tried this tactic before. It has made similar objections to similar interrogatories in similar antitrust cases—and has lost each time. See United States v. Dean Foods Co., No. 10-CV-59, 2010 WL 3980185, at *3 (E.D. Wis. Oct. 8, 2010) (granting identical motion to compel and ordering DOJ and several plaintiff States to produce factual information learned from third-party interviews in pre-litigation investigation of challenged merger); United States v. AMR Corp., No. 99-1180-JTM, 2001 WL 303048, at *3-*6 (D. Kan. Feb. 7, 2000) (ordering DOJ to disclose facts collected by Antitrust Division attorneys in third-party investigatory interviews); United States v. Dentsply Int’l, Inc., 187 F.R.D. 152, 155 (D. Del. 1999) (rejecting as “against the overwhelming weight of authority” DOJ’s assertion that facts learned from third-party investigatory interviews in alleged monopolization case were not discoverable). The same result follows here. In preparing their case, Plaintiffs had the advantage of months of pre-filing investigation, including conducting numerous third-party interviews. Having chosen to file suit, Plaintiffs cannot now withhold the relevant facts they learned from those third-parties. Absent an order directing Plaintiffs to answer Interrogatory 1 in full, those facts—some of which may undercut Plaintiffs claims and support the merger—will remain locked away in Plaintiffs’ files, a result directly at odds with the fundamental purpose of civil discovery. Plaintiffs’ objections should be overruled, just as they have been in previous cases. I. The Requested Facts Are Not Work Product. The work-product doctrine does not relieve Plaintiffs of their obligation to disclose all relevant facts in their possession. While an attorney’s notes and interview memoranda may be work product, the underlying facts are not: “Mutual knowledge of all the relevant facts gathered by both parties is essential to proper litigation. To that end, either party may compel the other to disgorge whatever facts he has in his possession.” Hickman v. Taylor, 329 U.S. 495, 507 (1947). 2 Case 1:13-cv-01236-CKK Document 85-1 Filed 09/24/13 Page 4 of 6 Following Hickman, courts have “consistently held that the work-product concept furnished no shield against discovery, by interrogatories . . . , of the facts that the adverse party’s lawyer has learned, or the persons from whom he or she learned such facts.” 8 Charles Alan Wright, et al., Federal Practice and Procedure § 2023 (3d ed. 2010); see also 6 James W. Moore, et al., Moore’s Federal Practice § 26.70[2][a] (3d ed. 2009) (“facts are not protected from disclosure by virtue of having been gathered by an attorney”) (citing cases); Fed. R. Civ. P. 26(b)(3), Advisory Committee Notes (1970) (“[O]ne party may discover relevant facts known or available to the other party, even though such facts are contained in a document which is not itself discoverable.”). Accordingly, the attorney work-product doctrine does not protect the identities of third parties interviewed by the opposing party’s attorney or the relevant facts obtained through those interviews. See Dean Foods, 2010 WL 3980185 at *3; Oklahoma v. Tyson Foods, Inc., 262 F.R.D. 617, 624-37 (N.D. Okla. 2009); EEOC v. Jewel Food Stores, Inc., 231 F.R.D. 343, 346 (N.D. Ill. 2005); AMR Corp., 2001 WL 303048 at *3-*6; Dentsply, 187 F.R.D. at 155; Eopollo v. Nat’l R.R. Passenger Corp., 108 F.R.D. 292, 294 (E.D. Pa. 1985). II. The Law Enforcement Privilege Does Not Apply. The law enforcement privilege protects “on-going civil and criminal investigations.” In re Sealed Case, 856 F.2d 268, 271 (D.C. Cir. 1988). It does not immunize facts obtained during an investigation that led to civil litigation. Like any other litigant, when the government files suit, all relevant facts in its possession are discoverable. Conclusion Defendants respectfully request that Plaintiffs be ordered to answer Interrogatory 1 in full. 3 Case 1:13-cv-01236-CKK Document 85-1 Filed 09/24/13 Page 5 of 6 Dated: September 24, 2013 Respectfully submitted, /s/ Richard G. Parker Richard G. Parker (DC Bar #327544) Henry Thumann (DC Bar #474499) Courtney Dyer (DC Bar #490805) O’MELVENY & MYERS LLP 1625 Eye Street, N.W. Washington, D.C. 20006 (202) 383-5300 (Phone) (202) 383-5414 (Facsimile) rparker@omm.com hthumann@omm.com cdyer@omm.com Kenneth R. O’Rourke (Admitted Pro Hac Vice) O’MELVENY & MYERS LLP 400 South Hope Street Los Angeles, CA 90071 (213) 430-6000 (Phone) (213) 430-6407 (Facsimile) korourke@omm.com Paul T. Denis (DC Bar #437040) Steven G. Bradbury (DC Bar #416430) DECHERT LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 (Phone) (202) 261-3333 (Facsimile) paul.denis@dechert.com steven.bradbury@dechert.com Charles F. Rule (DC Bar #370818) CADWALADER, WICKERSHAM & TAFT LLP 700 Sixth Street, N.W. Washington, DC 20001 (202) 862-2200 (Phone) (202) 862-2400 (Facsimile) rick.rule@cwt.com Attorneys for Defendant US Airways Group, Inc. 4 Case 1:13-cv-01236-CKK Document 85-1 Filed 09/24/13 Page 6 of 6 /s/ John M. Majoras John M. Majoras (DC Bar #474267) Paula Render (Admitted Pro Hac Vice) Michael S. Fried (DC Bar #458357) Rosanna K. McCalips (DC Bar #482859) JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (Phone) (202) 626-1700 (Facsimile) jmmajoras@jonesday.com prender@joensday.com msfried@jonesday.com rkmccalips@jonesday.com Mary Jean Moltenbrey (DC Bar #481127) PAUL HASTINGS LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 (Phone) (202) 551- 0225 (Facsimile) mjmoltenbrey@paulhastings.com Attorneys for Defendant AMR Corporation 5 Case Document 85-2 Filed 09/24/13 Page 1 of 9 Exhibit 2 Case 1:13-cv-01236-CKK Document 85-2 Filed 09/24/13 Page 2 of 9 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, v. US AIRWAYS GROUP, INC. and AMR CORPORATION, Case No. 1:13-cv-01236-CKK (Before Special Master Levie) Defendants, SECOND DECLARATION OF STEVEN G. BRADBURY I, Steven G. Bradbury, being over the age of 18, do hereby declare as follows: 1. I am a partner in the law firm Dechert LLP and a counsel of record for Defendant US Airways Group, Inc., in this action. I submit this Declaration in support of Defendants’ Motion to Compel Production of Relevant Facts Obtained from Third-Party Interviews. 2. Plaintiffs investigated the antitrust implications of Defendants’ merger for many months before filing their Complaint in this action. Based on information available to Defendants, Defendants have reason to believe that as part of their investigation, Plaintiffs conducted numerous interviews of third parties regarding the likely effects of the merger, and Plaintiffs maintain in their files memoranda memorializing the factual information learned in those third-party interviews. 3. On August 30, 2013, Defendants served their First Set of Interrogatories Directed to All Plaintiffs, Interrogatory 1 of which states: 1. Identify each Person interviewed by the Plaintiffs (either together or independently) pursuant to the Investigation of the challenged Transaction and provide all factual information obtained from Case 1:13-cv-01236-CKK Document 85-2 Filed 09/24/13 Page 3 of 9 these individuals and entities through such interviews that is relevant to Plaintiffs’ claims in this case. 4. On September 19, 2013, Plaintiffs served their Objections and Responses to Defendants’ First Set of Interrogatories. Attached to this Declaration as Exhibit A is a true and correct copy of the relevant pages from Plaintiffs’ Objections and Responses addressing Defendants’ Interrogatory 1. Plaintiffs have objected to Interrogatory 1 on grounds that the identities of interviewees and all facts gained from the interviews are protected attorney work product and that any response would reveal attorneys’ mental impressions, conclusions, opinions, and legal theories. Plaintiffs have also asserted that Interrogatory 1 requests information covered by the law enforcement investigatory privilege. Plaintiffs have refused to respond to Interrogatory 1 beyond referring Defendants to Plaintiffs’ Initial Disclosures and Plaintiffs’ general production of documents and information relevant to their investigation of the challenged merger. See Ex. A at 4-5. 5. As required by Local Civil Rule 7(m), Defendants have met and conferred with Plaintiffs regarding the substance of their objections to Interrogatory 1, but the parties have been unable to resolve this discovery dispute. I declare under penalty of perjury that the foregoing is true and correct. Dated this 23rd day of September 2013. Washington, D.C. ________________________________ Steven G. Bradbury 2 Case Document 85-2 Filed 09/24/13 Page 4 of 9 X. Case 1:13-cv-01236-CKK Document 85-2 Filed 09/24/13 Page 5 of 9 CONFIDENTIAL (PURSUANT TO PROTECTIVE ORDER) UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, v. Case No. 1:13-cv-01236 (CKK) US AIRWAYS GROUP, INC. and AMR CORPORATION Defendants. PLAINTIFFS’ OBJECTIONS AND RESPONSES TO DEFENDANTS’ FIRST SET OF INTERROGATORIES DIRECTED TO ALL PLAINTIFFS Pursuant to Fed. R. Civ. P. 33 and the Local Rules of the United States District Court for the District of Columbia, Plaintiffs object and respond to Defendants’ First Set of Interrogatories Directed to All Plaintiffs. PRELIMINARY STATEMENT The responses to these interrogatories include information that Plaintiffs obtained from Defendants that is subject to the Protective Order and that is designated Confidential. Therefore, Plaintiffs designate their response to Interrogatory 3 below as Confidential, in accordance with the Protective Order. GENERAL OBJECTIONS Plaintiffs object generally to Defendants’ First Set of Interrogatories to the extent that they attempt to impose any obligation on Plaintiffs greater than those imposed or authorized by U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 85-2 Filed 09/24/13 Page 6 of 9 the Federal Rules of Civil Procedure, the Local Civil Rules of the District of Columbia, or any applicable order of the Court. Plaintiffs object generally to Defendants’ First Set of Interrogatories to the extent they seek information protected from discovery and disclosure by the attorney-client privilege, deliberative-process privilege, work-product doctrine, law-enforcement investigative privilege, common-interest privilege, or any other applicable privilege or doctrine. Should any disclosure by Plaintiffs of information protected from discovery occur, it shall not constitute a waiver of any privilege applicable to any other information. Plaintiffs object generally to Defendants’ First Set of Interrogatories to the extent they prematurely seek production of information relating to the anticipated testimony of any of Plaintiffs’ potential expert witnesses. Plaintiffs will produce such information in accordance with the Case Management Order. Plaintiffs’ object generally to Defendants’ First Set of Interrogatories to the extent that they call for Plaintiffs to specify each document, deposition, or other fact or piece of evidence that supports particular contentions that Plaintiffs intend to prove at trial. Such a requirement is overly broad, unduly burdensome, and premature. In that regard, Plaintiffs note that, to the extent a reference is made to documents, depositions, or other evidence in its responses, such reference is made without waiver of this general objection and is not intended to provide an exhaustive list of all evidence that Plaintiffs may ultimately introduce at trial. Plaintiffs will serve their witness and exhibit lists within the time prescribed by the Scheduling Order or other time prescribed by the Court. Plaintiffs object generally to Defendants First Set of Interrogatories to the extent that they request information that is not in the possession, custody, or control of the Antitrust Division of 2 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 85-2 Filed 09/24/13 Page 7 of 9 the Department of Justice, or information from units, departments, divisions, or sections of the offices of the Plaintiff State Attorneys General other than those with antitrust enforcement responsibilities. Plaintiffs have no reason to believe that relevant responsive information is likely found outside these offices and believe that a search for such information would be unduly burdensome. Plaintiffs object generally to the Instructions included in Defendants’ First Set of Interrogatories to the extent they impose burdens beyond those required by the Federal Rules of Civil Procedure or applicable court order. In particular, Plaintiffs object to the Instructions to the extent that they attempt to impose obligations for claiming a privilege or protecting trialpreparation materials that are greater than those set forth in Federal Rule of Civil Procedure 26(b)(5), or purport to require individualized logging in a privilege log of voluminous privileged documents that can be described categorically, such as the Antitrust Division’s internal privileged documents that have not been disclosed to persons outside the Antitrust Division of the Department of Justice. Individual logging of such documents in a privilege log is unduly burdensome and exceeds the obligation imposed by the Federal Rules of Civil Procedure, including Fed. R. Civ. P. 26(b)(5)(ii). Plaintiffs object generally to the term “Previously Cleared Mergers” to the extent it assumes that any of the Plaintiffs “cleared” the four consummated mergers listed. Plaintiffs object generally to Instruction No. 5 to the extent that it attempts to impose obligations beyond those imposed or authorized by Federal Rules of Civil Procedure 26 and 33. 3 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 85-2 Filed 09/24/13 Page 8 of 9 SPECIFIC OBJECTIONS AND RESPONSES TO INTERROGATORIES 1. Identify each Person interviewed by the Plaintiffs (either together or independently) pursuant to the Investigation of the challenged Transaction and provide all factual information obtained from these individuals and entities through such interviews that is relevant to Plaintiffs’ claims in this case. Specific Objections Plaintiffs object to this interrogatory to the extent that it attempts to impose obligations for supplementing an interrogatory response that are greater than those set forth in Federal Rule of Civil Procedure 26(e)(1). Plaintiffs further object to this interrogatory because it requests protected attorney work product prepared in anticipation of litigation, and production of protected attorney work product that conveys attorneys’ mental impressions, conclusions, opinions, and legal theories concerning this litigation. Plaintiffs further object to this interrogatory because it requires Plaintiffs to identify those individuals and entities that it selected to interview during the course of its investigation and in preparation for this litigation, and the topics of interest to Plaintiffs. This information is itself protected attorney work product. Plaintiffs further object to this interrogatory because it requests information protected by the law enforcement investigatory privilege. Response Subject to and without waiving the foregoing objections, Plaintiffs respond that they have produced to Defendants all documents and information relevant to their Investigation into the challenged Transaction in the Antitrust Division’s and State Attorney Generals’ possession, custody, and control that is not subject to an applicable privilege or doctrine, or otherwise exempt from production, including extensive Initial Disclosures pursuant to Fed. R. Civ. P. 26(a) 4 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case 1:13-cv-01236-CKK Document 85-2 Filed 09/24/13 Page 9 of 9 that identify persons likely to have discoverable information that Plaintiffs’ may use to support their claims. 2. Provide all of the factual information that each of the Plaintiffs relied upon in making a decision not to challenge under the antitrust laws each of the Previously Cleared Mergers. Specific Objections Plaintiffs object to this interrogatory as containing discrete subparts constituting four separate interrogatories because the interrogatory seeks separate answers for “each of the Previously Cleared Mergers,” which is defined by the Interrogatory to include the 2005 merger of US Airways and America West, the 2008 merger of Delta and Northwest Airlines, the 2010 merger of United and Continental, and the 2011 merger of Southwest Airlines and AirTran. Plaintiffs object to this interrogatory because it purports to seek information that is neither relevant to the subject matter of the lawsuit nor reasonably calculated to lead to the discovery of admissible evidence. Plaintiffs’ exercise of prosecutorial discretion in prior investigations—including, in several instances, Plaintiff States’ lack of any investigation—bears no relevance to the question of whether the merger between US Airways and American substantially lessens competition. Plaintiffs also object to this interrogatory because it purports to seek information that is protected by the attorney work-product doctrine, attorney-client privilege, the law enforcement investigatory files privilege, or the deliberative process privilege, in conjunction with the joint prosecution privilege. Plaintiffs also object to this interrogatory because it purports to seek information that is protected from disclosure by federal and state statutes. See, e.g., 15 U.S.C. § 1313(c); 15 U.S.C. § 18a(h); United States v. Am. Tel. & Tel. Co., 86 F.R.D. 603, 647-48 (D.D.C. 1979). 5 U.S. v. US Airways et al. No. 1:13-cv-01236 (CKK) Case Document 85-3 Filed 09/24/13 Page 1 of 4 Exhibit 3 Case 1:13-cv-01236-CKK Document 85-3 Filed 09/24/13 Page 2 of 4 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, v. US AIRWAYS GROUP, INC. and AMR CORPORATION, Case No. 1:13-cv-01236-CKK (Before Special Master Levie) Defendants, [PROPOSED] ORDER ON DEFENDANTS’ MOTION TO COMPEL RELEVANT FACTS OBTAINED FROM THIRD-PARTY INTERVIEWS Defendants US Airways Group, Inc. and AMR Corporation (together, the “Airlines”) move for an order compelling Plaintiff the United States of America and the Plaintiff States1 to respond to Interrogatory 1 of Defendants’ First Set of Interrogatories. Having considered the Airlines’ motion, the Plaintiffs’ opposition, and the Airlines’ reply, the Airlines’ motion is GRANTED. Plaintiffs are ordered to respond to Defendants’ Interrogatory 1 by identifying each person interviewed by Plaintiffs on or before August 12, 2013, pursuant to Plaintiffs’ investigation of the challenged transaction, and by providing all factual information obtained from those interviews that is relevant to Plaintiffs’ claims in this case. Plaintiffs shall serve such responses within 10 days of this Order. 1 The Plaintiff States are: the State of Arizona, the District of Columbia, the State of Florida, the State of Michigan, the Commonwealth of Pennsylvania, the State of Tennessee, the State of Texas, and the Commonwealth of Virginia. Case 1:13-cv-01236-CKK Document 85-3 Filed 09/24/13 Page 3 of 4 Pursuant to Local Civil Rule 7(k), a list of attorneys entitled to notice under the Scheduling and Case Management Order is attached hereto as Appendix A. Dated: October __, 2013 __________________________ Hon. Richard Levie (ret.) Special Master 2 Case 1:13-cv-01236-CKK Document 85-3 Filed 09/24/13 Page 4 of 4 APPENDIX A: LIST OF ATTORNEYS ENTITLED TO NOTICE Ryan Danks, Esq. Kate Mitchell-Tombras, Esq. Patrick Hallagan, Esq. Department of Justice Antitrust Division Transportation, Energy, and Agricultural Section 450 5th Street Northwest, Suite 8000 Washington, DC 20530 ryan.danks@usdoj.gov katharine.mitchell@usdoj.gov f.patrick.hallagan@usdoj.gov John M. Majoras, Esq. Rosanna K. McCalips, Esq. JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (Phone) (202) 626-1700 (Facsimile) jmmajoras@jonesday.com rkmccalips@jonesday.com Mark Levy, Esq. Assistant Attorney General Office of the Attorney General of TX 300 W. 15th Street, 7th Floor Austin, TX 78701 mark.levy@texasattorneygeneral.gov Case Document 86-1 Filed 09/26/13 Page 1 of 5 EXHIBIT 1 Case 1:13-cv-01236-CKK Document 86-1 Filed 09/26/13 Page 2 of 5 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ____________________________________ ) ) ) Plaintiffs, ) ) ) v. ) ) US AIRWAYS GROUP, INC., et al., ) ) Defendants. ) ____________________________________) UNITED STATES OF AMERICA, et al., Civil Action No. 13-1236-CKK (Before Special Master Levie) PLAINTIFFS’ OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL PRODUCTION OF INTERVIEW-RELATED WORK PRODUCT Defendants do not dispute that notes and memoranda prepared during Plaintiffs’ investigations of the proposed merger are protected from discovery under the workproduct doctrine. Mot. at 2. Nonetheless, Defendants argue that they are entitled to the identities of the third-parties interviewed by Plaintiffs and the facts that Plaintiffs’ attorneys chose to ask about and memorialize from those interviews. This argument is foreclosed by Supreme Court and Circuit precedent and has been directly rejected in recent antitrust enforcement actions, which Defendants fail to address. The Supreme Court has held that an interrogatory constituting a “naked, general demand” for all facts learned in non-party interviews—the very interrogatory Defendants propound here—necessarily reveal the opinions and mental processes of counsel, and therefore is improper. Hickman v. Taylor, 329 U.S. 495, 510-13 (1947). Hickman, and later Upjohn Co. v. United States, 449 U.S. 383, 401 (1981), made clear that facts memorialized by attorneys during interviews of potential witnesses are protected work1 Case 1:13-cv-01236-CKK Document 86-1 Filed 09/26/13 Page 3 of 5 product. “No legitimate purpose is served” by “forcing an attorney to repeat or write out all that witnesses have told him and to deliver the account to his adversary.” Hickman, 329 U.S. at 512-13; see also Upjohn, 449 U.S. at 401 (disclosing material from interview memoranda necessarily “reveal[s] the attorneys’ mental processes in evaluating the [information]”). Such “mental impressions” are “often described as opinion work product,” and are “virtually undiscoverable’” United States v. Deloitte LLP, 610 F.3d 129, 135 (D.C. Cir. 2010). Recognizing that “the Supreme Court [has] held that work product immunity extended to oral statements made by witnesses to attorneys ‘whether presently in the form of mental impressions or memoranda,’” the D.C. Circuit has also held that parties cannot request facts contained in witness interview notes and memoranda instead of the notes or memoranda themselves. In re Sealed Case, 856 F.2d 268, 273 (D.C. Cir. 1988) (citations omitted). 1 Other courts have also rejected attempts to obtain protected information through interrogatories as making “distinction[s] without a difference.” S.E.C. v. Sentinel Mgmt. Group, Inc., 2010 WL 4977220, at *7 (N.D. Ill. Dec. 2, 2010); see also F.T.C. v. Hope Now Modifications, LLC, 2011 WL 2634029, at *5 (D.N.J. July 5, 2011); Norwood v. F.A.A., 993 F.2d 570, 576 (6th Cir. 1993). 1 It is well-settled in this Circuit that factual information contained in otherwise protected work product is shielded from discovery. See, e.g., Judicial Watch, Inc. v. D.O.J., 432 F.3d 366, 371 (D.C. Cir. 2005) (“The circuit’s case law is clear that ‘[t]he work-product doctrine simply does not distinguish between factual and deliberative material’ . . . . In other words, factual material is itself privileged when it appears within documents that are attorney work product.”) (citation omitted); Tax Analysts v. I.R.S., 117 F.3d 607, 620 (D.C. Cir. 1997) (same). 2 Case 1:13-cv-01236-CKK Document 86-1 Filed 09/26/13 Page 4 of 5 Notably, courts have rejected this identical tactic in other antitrust enforcement actions, including the two most recent cases raising the issue. See Ex. A (Apple Orders) at 2; Ex. B (Blue Cross Order) at 5; Ex. C (Visa USA Order) at 1. Defendants do not address these cases and incorrectly assert that no court has upheld the Antitrust Division’s objections to similar discovery requests. 2 “As the work product sought here is based on oral statements from witnesses, a far stronger showing is required than the ‘substantial need’ and ‘without undue hardship’ standard applicable to discovery of work-product protected documents and other tangible things.” In re Sealed Case, 856 F.2d at 273. Even if—contrary to controlling case law— Plaintiffs’ attorneys’ mental impressions were merely fact work product, Defendants have not met their burden showing that they are entitled to the requested material. Defendants cannot make such a showing because Plaintiffs have provided Defendants the names of individuals likely to have discoverable information and all non-party documents and data received during Plaintiffs’ investigations. Thus, Defendants are well-positioned to obtain the information they are seeking without free-riding off Plaintiffs’ workproduct. See Ex. B (Blue Cross Order) at 6. Finally, the work-product doctrine precludes Defendants from obtaining a list of people interviewed during Plaintiffs’ investigation. See Chiperas v. Rubin, 1998 WL 531845, at *1 (D.D.C. Aug. 24, 1998); Tracy v. NVR, Inc., 250 F.R.D. 130, 132-33 (W.D.N.Y. 2008) (collecting cases). 2 The courts in Apple, Blue Cross, Sentinel Mgmt., and Hope Now concluded, either explicitly or implicitly, that case law cited by Defendants is contrary to the Supreme Court’s decisions in Hickman and Upjohn. 3 Case 1:13-cv-01236-CKK Document 86-1 Filed 09/26/13 Page 5 of 5 CONCLUSION For the foregoing reasons, Defendants’ motion to compel should be denied. Respectfully submitted, FOR THE PLAINTIFFS /s Mark W. Ryan F. Patrick Hallagan Juan A. Arteaga Ryan Danks United States Department of Justice Antitrust Division 450 Fifth Street Northwest, Suite 8100 Washington, DC 20530 phone: 202-305-0128 e-mail: ryan.danks@usdoj.gov 4 Case Document 86-2 Filed 09/26/13 Page 1 of 22 EXHIBIT 2 Case Case1:13-cv-01236-CKK 1:12-cv-02826-DLC Document Document86-2 125 Filed F led 09/26/13 09/14/12 Page Page 21 of of 22 2 EXHIBIT A Case Case1:13-cv-01236-CKK 1:12-cv-02826-DLC Document Document86-2 125 Filed F led 09/26/13 09/14/12 Page Page 32 of of 22 2 EXHIBIT A Case Case1:13-cv-01236-CKK 1:12-cv-02826-DLC Document Document86-2 124 Filed F led 09/26/13 09/14/12 Page Page 41 of of 22 3 EXHIBIT A Case Case1:13-cv-01236-CKK 1:12-cv-02826-DLC Document Document86-2 124 Filed F led 09/26/13 09/14/12 Page Page 52 of of 22 3 EXHIBIT A Case Case1:13-cv-01236-CKK 1:12-cv-02826-DLC Document Document86-2 124 Filed F led 09/26/13 09/14/12 Page Page 63 of of 22 3 EXHIBIT A 2:10-cv-14155-DPH-MKM Case 1:13-cv-01236-CKK DocDocument # 178 Filed 86-205/30/12 Filed 09/26/13 Pg 1 of Page 14 Pg 7 of ID22 4405 EXHIBIT B UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION United States of America and the State of Michigan, Plaintiffs, vs. Blue Cross Blue Shield of Michigan, Civil Action No. 10-14155 District Judge Denise Page Hood Magistrate Judge Mona K. Majzoub Defendant. _____________________________/ ORDER DENYING BCBS’S MOTION TO COMPEL RESPONSES TO INTERROGATORIES [80] AND GRANTING PLAINTIFFS’ MOTION TO COMPEL ANSWERS TO PLAINTIFFS’ FIRST INTERROGATORY [100] Plaintiffs United States of America and Michigan have filed this antitrust suit against Defendant Blue Cross Blue Shield of Michigan. (Dkt. 66, August 12, 2011 Order at 1.) Plaintiffs allege that BCBS used “most favored nation” clauses in its agreements with various hospitals that violate the Sherman Act, 15 U.S.C. § 1, and the Michigan Antitrust Reform Act, Michigan Compiled Law § 445.772, by unreasonably restraining trade and commerce. (Id.) BCBS has MFNs or similar clauses with at least 70 of Michigan’s 131 general acute care hospitals. (Id. at 2.) Before the Court are two of the parties’ motions to compel. (Dkt. 80, 100.) The Court has been referred these motions for determination pursuant to 28 U.S.C. § 636(b)(1)(A). (Dkt. 86, 106.) The Court has reviewed the pleadings, dispenses with a hearings, and issues this order.1 I. BCBS’s motion to compel responses to interrogatories (dkt. 80) 1 The Court dispenses with a hearing pursuant to Eastern District of Michigan Local Rule 7.1(f)(2). 1 2:10-cv-14155-DPH-MKM Case 1:13-cv-01236-CKK DocDocument # 178 Filed 86-205/30/12 Filed 09/26/13 Pg 2 of Page 14 Pg 8 of ID22 4406 EXHIBIT B A. The contested interrogatories The following interrogatories are at issue in this first motion: Interrogatory #1 For each individual or entity interviewed by the DOJ pursuant to its [] investigation of Blue Cross related to this matter, identify in detail all facts known to these individuals and entities that are relevant to Plaintiffs’ claims against Blue Cross. Interrogatory #2 For each individual or entity that provided information in any investigation of Blue Cross’ proposed acquisition of Physicians Health Plan of Michigan, identify in detail all facts known to these individuals and entities that are relevant to Plaintiffs’ claims against Blue Cross. (Dkt. 80, BCBS’s Mot. to Compel Interrog., Ex. 1.) The parties have submitted a joint statement of resolved and unresolved issues. (Dkt. 97.) In the Joint Statement, Plaintiffs abandon their arguments that the law enforcement investigatory privilege is a proper objection to BCBS’s contested interrogatories. (Id.) Plaintiff also state that they no longer object to the contested interrogatories on the basis that the interrogatories are vague and ambiguous. (Id.) B. The parties’ positions BCBS argues that facts that the United States gathered in an investigation before it filed suit against Blue Cross are not protected by the work product doctrine and therefore discoverable. (Dkt. 97, Joint Statement at 1.) BCBS maintains that the contested interrogatories seek facts, not mental impressions or strategy; BCBS therefore argues that it does not need to show a substantial need for the requested information. (Id. at 3.) The United States casts the issue differently and argues that the work product doctrine protects the information in and related to the investigation. (Dkt. 97, Joint Statement at 2.) The 2 2:10-cv-14155-DPH-MKM Case 1:13-cv-01236-CKK DocDocument # 178 Filed 86-205/30/12 Filed 09/26/13 Pg 3 of Page 14 Pg 9 of ID22 4407 EXHIBIT B United States argues that the identities of the individuals as well as the underlying facts are protected by the work product doctrine because “[the information’s] disclosure would reveal the thought processes and strategic assessments of Plaintiffs’ counsel in deciding whom to interview.” (Id. at 2-3.) The United States also argues that “facts obtained in oral interviews are work product reflecting the mental impressions of counsel, and . . . are discoverable only under extraordinary circumstances, if at all.” (Id. at 3.) The United States adds that BCBS can show neither extraordinary circumstances nor a substantial need for the information it seeks. (Id.) C. Work product doctrine The work product doctrine’s purpose is to allow an attorney to “assemble information, sift what he considers to be the relevant from the irrelevant facts, prepare his legal theories and plan his strategy without undue and needless interference . . . to promote justice and to protect [his] clients’ interests.” United States v. Roxworthy, 457 F.3d 590, 593 (6th Cir. 2006) (quoting Hickman v. Taylor, 329 U.S. 495, 511) (insertion in Roxworthy). The work product doctrine protects “documents and tangible things prepared in anticipation of litigation by or for a party or by or for that party’s representative” from discovery. Id. (citing Fed.R.Civ.P. 26(b)(3)). But not “all written materials obtained or prepared by an adversary’s counsel with an eye toward litigation are necessarily free from discovery in all cases. Where relevant and non-privileged facts remain hidden in an attorney’s file and where production of those facts is essential to the preparation of one’s case, discovery may properly be had.” In re Antitrust Grand Jury, 805 F.2d 155, 163 (6th Cir. 1986) (quoting Hickman, 329 U.S. at 510-11)). There are two types of work product–fact and opinion–only fact work product is at issue 3 2:10-cv Case14155-DPH-MKM 1:13-cv-01236-CKKDoc Document # 178 Filed 86-2 05/30/12 Filed 09/26/13 Pg 4 ofPage 14 Pg 10 of ID 22 4408 EXHIBIT B here.2 Id. Fact work product is “written or oral information transmitted to the attorney and recorded as conveyed by the client.” Id. Courts presume that fact work product is discoverable, “upon a showing of substantial need and inability to otherwise obtain without material hardship.” In re Columbia/HCA Healthcare Corp. Billing Practices Litigation, 293 F.3d 289, (6th Cir. 2002) (reh’g and reh’g en banc den.) (citation omitted). Once the party asserting fact work product has established that the documents were prepared in anticipation of litigation, then the burden shifts to the requesting party to show “substantial need and undue hardship.” Gruenbaum v. Werner Enter., Inc., 270 F.R.D. 298, 303 (S.D.Ohio 2010) (citation omitted). “In considering [the substantial need issue,] ‘attention is directed at alternative means of acquiring the information that are less intrusive to the lawyer’s work and [at] whether or not the information might have been furnished in other ways.’” Arkwright Mut. Ins. Co. v. National Union Fire Ins. Co. of Pittsburgh, PA., 19 F.3d 1432, (6th Cir. 1994) (Table) (quoting Toledo Edison v. GA Technologies, Inc., 847 F.2d 335, 340 (6th Cir. 1988) (implied overruling on other grounds recognized by Regional Airport Auth. of Louisville v. LFG, LLC., 460 F.3d 697, 713-14 (6th Cir. 2006)). D. Analysis The work product doctrine protects the information that BCBS seeks. Plaintiffs’ precomplaint investigation and facts learned are fact work product that the Court will protect. While the Court recognizes, as stated above, that fact work product is discoverable “upon a showing of substantial need and inability to other obtain [the information] without material hardship,” the Court 2 Opinion work product is “any material reflecting the attorney’s mental impressions, opinions, conclusions, judgments or legal theories. In re Antitrust Grand Jury, 805 F.2d at 16364 (citations omitted). Although parties can waive opinion work product protection, courts afford this type of work product almost “absolute immunity.” Id. at 164. The Court finds that the opinion work product is not at issue, here. 4 2:10-cv Case14155-DPH-MKM 1:13-cv-01236-CKKDoc Document # 178 Filed 86-2 05/30/12 Filed 09/26/13 Pg 5 ofPage 14 Pg 11 of ID 22 4409 EXHIBIT B finds that BCBS has not met its burden to show that it has a substantial need and the inability to otherwise obtain the information.3 This case is not a story of David versus Goliath. Here, Plaintiffs and BCBS are both Goliath–they have equal means to obtain the information BCBS’s interrogatories seek. BCBS argues that it does not need to demonstrate a “substantial need” for the information the interrogatories seeks. (Dkt. 95, BCBS’s Reply at 95.) The Court disagrees. The United States conducted the pre-complaint investigation in anticipation of litigation. And the United States’ attorneys conducted this investigation. The investigation’s results are therefore work product. But BCBS does alternatively argue that there is a substantial need for the information the interrogatories seek–for “it is one thing for Blue Cross to request an interview with a hospital regarding negotiations in which it was on the other side of the table; it is quite another thing for the federal government to do so.” (Id.) BCBS adds that, “[i]t is apparent that when the United States Department of Justice contacts a person or entity to request an interview . . . it elicits a certain level of cooperation that Blue Cross cannot expect.” (Id.) BCBS further adds that “it is no solution to suggest that Blue Cross may simply interview the persons listed in Plaintiffs’ Initial Disclosures to learn the same information.” (Id.) BCBS continues, “even if [BCBS] could [interview those people,] those individuals’ recollection may not be the same now as it was when DOJ interviewed them, some nearly two years ago.” (Id.) BCBS maintains that a suggestion that it could easily 3 BCBS has submitted several out-of-district cases in support of its position that the work product doctrine cannot shield the facts at issue from discovery requests. (BCBS’s Mot. to Compel, Exs. 3-5.) While those cases do stand for BCBS’s position, the Court is not persuaded by them. Those cases do not address the Sixth Circuit’s standard, specifically the burden that BCBS must prove that it has a substantial need for the information and that it cannot get the information without an undue hardship to it. 5 2:10-cv Case14155-DPH-MKM 1:13-cv-01236-CKKDoc Document # 178 Filed 86-2 05/30/12 Filed 09/26/13 Pg 6 ofPage 14 Pg 12 of ID 22 4410 EXHIBIT B depose the 288 people listed in the initial disclosures is not “legitimate” because the DOJ has “taken the position that Blue Cross should be able to take only 170 depositions, at most.” (Id.) The Court is not persuaded by BCBS’s position. While the Court understands that BCBS will suffer a burden, all discovery must burden one party or the other. And the Court finds that, in a case of this scale, BCBS has not proven to the Court that the burden placed on it would be undue. BCBS acknowledges it can get the information it requests in its interrogatories from conducting its own discovery; the Court finds that BCBS’s request, therefore, is an attempt to piggy-back on the work done by the United States. Ross v. Abercrombie & Fitch Co., [] 2008 WL 821059, at *2 (S.D.Ohio Mar. 24, 2008) (“Certainly, a part of the rationale for the doctrine is to prevent opposing counsel simply from piggy-backing on the work done by other[.]”). The Court finds Ross v. Abercrombie & Fitch Co., [] 2008 WL 821059, at *3-4 (S.D.Ohio Mar. 24, 2008) helpful. There, the court addressed an argument by the defendant that BCBS puts forth here. Abercrombie’s justification for overcoming the work product privilege here is tied to its belief that without such information, it will be required to depose or interview in excess of eighty witnesses to find out what support may exist for certain allegations in the complaint. The Court does not view that as a substantial hardship in a case of this magnitude, especially when discovery is in its infancy and it is impossible even to predict when the first wave of document production will be substantially complete. Further, the allegations of the complaint about which Abercrombie has inquired are pleaded with a high degree of specificity. Presumably, many of the former Abercrombie employees whose names appear on the initial disclosures can be ruled out as sources of this information either because of dates of employment, where they were located at the time of the alleged actions, or the positions they held. The mere fact that counsel may have to do some investigative work to determine which witnesses have knowledge of which relevant facts is clearly insufficient to justify an intrusion into the particulars of how opposing counsel structured their interviews and how much credence they gave to the statements of individual witnesses. 6 2:10-cv Case14155-DPH-MKM 1:13-cv-01236-CKKDoc Document # 178 Filed 86-2 05/30/12 Filed 09/26/13 Pg 7 ofPage 14 Pg 13 of ID 22 4411 EXHIBIT B Here, as in Abercrombie, the mere fact that BCBS will have to do some work to get the same information as Plaintiffs does not mean that BCBS is entitled to Plaintiffs’ fact work product. E. Conclusion The Court therefore denies BCBS’s motion compel responses to interrogatories. II. Plaintiffs’ motion to compel BCBS to answer Plaintiff’s first interrogatory (dkt. 100) Plaintiffs have filed their own motion to compel, which addresses Plaintiffs’ first interrogatory. A. Plaintiffs’ first interrogatory The first interrogatory: Describe in detail “the extensive factual and economic support for [BCBS’s] MFNs’ procompetitive effects” (Defendant Blue Cross Blue Shield of Michigan’s Reply Brief in Support of its Motion to Dismiss the City of Pontiac’s Complaint at 4 n.5, City of Pontiac v. Blue Cross Blue Shield of Michigan, et al., No. 2:11-cv-10276 (E.D.Mich. filed Aug. 22, 2011) (Dkt. #153)), including, without limitation, separate for each subpart, identification of: (a) each and every hospital provider agreement in which a Blue Cross MFN provision has contributed, to any extent, to Blue Cross paying lower hospital reimbursement rates to (or obtaining greater discounts from) any Michigan hospital than it would have paid or obtained without the MFN provisions; and (b) each and every hospital provider agreement in which a Blue Cross MFN provision has contributed, to any extent, to Blue Cross paying lower hospital reimbursement rates to any Michigan hospital, relative to the rates Blue Cross had been paying to the hospital before the hospital lowered its rates. (Dkt. 100, Pls.’ Mot. to Compel, Ex. 2, Pls.’ First Interrog. to Def.) BCBS objected to Plaintiffs’ interrogatory. (Dkt. 100, Pls.’ Mot. to Compel, Ex. 3, Def.’s Objection to Pls.’ First Interrog.) 7 2:10-cv Case14155-DPH-MKM 1:13-cv-01236-CKKDoc Document # 178 Filed 86-2 05/30/12 Filed 09/26/13 Pg 8 ofPage 14 Pg 14 of ID 22 4412 EXHIBIT B BCBS asserted various objections: overly broad and burdensome; premature contention interrogatory; work-product doctrine; seeks information relating to the anticipated testimony of BCBS’s expert witnesses; and vague and ambiguous. (Dkt. 100, Pls.’ Mot. to Compel, Ex. 3, Def.’s Objection to Pls.’ First Interrog.) B. Analysis The Court finds that BCBS’s objections are not warranted. The Court therefore grants Plaintiffs’ motion to compel and orders BCBS to respond to the interrogatory within 45 days. The Court addresses the objections.4 1. The interrogatory is a contention interrogatory, but it is not impermissible BCBS argues that Plaintiffs’ first interrogatory is a contention interrogatory that it does not have to answer at the present. Rule 33 [] provides that “an interrogatory is not objectionable merely because it asks for an opinion or contention that relates to fact or the application of law to fact.” Fed.R.Civ.P. 33(a)(2). Such interrogatories, known as “contention interrogatories,” service legitimate and useful purposes, such as ferreting out unsupportable claims, narrowing the focus and extent of discovery, and clarifying the issues for trial. Starcher v. Correctional Med. Sys., Inc., 144 F.3d 418, 421 n.2 (6th Cir. 1998). A court may postpone a response to contention interrogatories until discovery is closer to completion. “[B]ut the court may order that the interrogatory need not be answered until designated discovery is complete . . .” Fed.R.Civ.P. 33(a)(2). The rule protects the responding party from being hemmed into fixing its position without adequate information. Strauss v. Credit Lyonnais, S.A., 242 F.R.D. 199, 233 (E.D.N.Y. 2007). In re Dow Corning Corp., 95-2012, 2010 WL 3927728, at *12 (E.D.Mich. June 15, 2010) 4 The parties have submitted a joint statement of resolved and unresolved issues. (Dkt. 109.) The parties state that they have not resolved any of the issues in Plaintiffs’ motion to compel (Id.) The parties lay out four unresolved issues–BCBS’s objections to Plaintiff’s first interrogatory: vagueness; premature contention interrogatory; work product; and premature disclosure of expert opinion. (Id.) 8 2:10-cv Case14155-DPH-MKM 1:13-cv-01236-CKKDoc Document # 178 Filed 86-2 05/30/12 Filed 09/26/13 Pg 9 ofPage 14 Pg 15 of ID 22 4413 EXHIBIT B (Hood, J.). “Contention interrogatories may take several forms. They may ask a party to state what it contends, or whether it makes a specified contention; to state all the facts upon which it bases a contention; to state the legal or theoretical basis for a contention; and to explain or defend how the law invoked applies to facts.” Schweinfurth v. Motorola, Inc., 050024, 2007 WL 6025288, at *4 (N.D.Ohio Dec. 3, 2007). “The party serving contention interrogatories has the burden of proving how an earlier response serves the goals of discovery.” Schweinfurth, 2007 WL 6025288, at *5. “[T]he party ‘must be able to show that there is good reason to believe that answers to its well-tailored questions will contribute meaningfully to clarifying the issues in the case, narrowing the scope of the dispute, or setting up early settlement discussion, or that such answers are likely to expose a substantial basis for a motion under . . . Rule 56.’” Id. (citation omitted). Cleveland Constr., Inc. v. Gilbane Bldg. Co., 05-471, 2006 WL 2167238, at *7 (E.D.Ky. July 31, 2006) (citation omitted) (“Defendants are expected to have, even at an early stage, some good faith basis in fact and law for such claim and defense . . . . Accordingly, Plaintiff’s Interrogatories which primarily seek the basis for the defense and related counterclaim, even if they are assumed to be contention interrogatories, should be answered at this time.”). Plaintiffs argue that their first interrogatory seeks neither an opinion nor a contention. (Pls.’ Mot. at 6.) Plaintiffs maintain that their interrogatory seeks a “detailed description” of “the extensive factual and economic support for the MFN’s procompetitive effects” that [BCBS] told this Court exists.” (Id. at 5-6.) Plaintiffs argue that, “because Blue Cross started broadly employing MFN clauses 9 2:10-cv-14155-DPH-MKM Case 1:13-cv-01236-CKK DocDocument # 178 Filed 86-205/30/12 Filed 09/26/13 Pg 10 ofPage 14 16 Pgof ID22 4414 EXHIBIT B in hospital contracts in 2007, by now it should be well aware of any instances where the clauses resulted in Blue Cross paying lower hospital rates than it paid before implementing an MFN clause.’ (Pls.’ Mot. at 8.) BCBS states that the interrogatory would require it “first to identify the procompetitive effects that it may assert in this litigation and then explain how the facts support those theories.” (BCBS’s Resp. at 1.) BCBS adds that “Plaintiffs are asking Blue Cross to provide its legal expert economic theories of this case at a point when discover[y] has barely even begun.” (Id.) Here, Plaintiffs’ interrogatory asks for the basis of one of BCBS’s defenses–that BCBS’s MFN clauses caused procompetitive effects. The interrogatory, on its face, is not impermissible. The interrogatory is requesting BCBS to provide the factual basis for its assertion that its MFN clauses caused procompetitive effects. BCBS has stated that it has some of this information at its disposal–information related to whether prices increased or decreased after the MFN clauses were put into effect; BCBS should therefore have to provide this information to Plaintiffs. If BCBS finds that it cannot answer certain parts of the interrogatory, such as if certain information is in a third-party’s possession, it must state so, but that is not a reason to not answer the parts of the interrogatory that it can answer. This interrogatory is not one that is best served at the end of discovery. The Court therefore finds that, although Plaintiffs’ interrogatory is a contention interrogatory that seeks the factual basis for a defense, the interrogatory is permissible. The Court will order its answer. 2. BCBS has not met its burden to show that the interrogatory requests work product The Court wholly agrees with Plaintiffs regarding BCBS’s work product objection. 10 2:10-cv-14155-DPH-MKM Case 1:13-cv-01236-CKK DocDocument # 178 Filed 86-205/30/12 Filed 09/26/13 Pg 11 ofPage 14 17 Pgof ID22 4415 EXHIBIT B BCBS has not carried its burden to show that the information Plaintiffs seek was created by attorneys or representations in anticipation of litigation. 3. The interrogatory does not call for expert opinion Plaintiffs argue that BCBS’s objection that the interrogatory seeks expert opinion is incorrect. (Pls.’ Mot. at 10.) Plaintiffs state that they are seeking factual support for BCBS’s claim, not anything that requires for an opinion. (Id.) BCBS argues that “[m]uch of this information may come from [BCBS’s] economic experts, whose reports containing their economic analyses are not due until 30 days after the close of fact discovery.” (BCBS’s Resp. at 14-15.) BCBS adds that “[e]conomics is a subject for expert testimony[.]” (Id. at 15.) Rule 26(b)(4)(D): “Ordinarily, a party may not, by interrogatories or deposition, discover facts known or opinions held by an expert who has been retained or specially employed by another party in anticipation of litigation or to prepare for trial and who is not expected to be called as a witness at trial.” The Rule give two exceptions: one dealing with physical and mental examinations, the other exception requires “showing exceptional circumstances under which it is impracticable for the party to obtain facts or opinions on the same subject by other means.” Fed.R.Civ.P. 26(b)(4)(D)(i), (ii). Neither of those exceptions applies here. The Court finds that the interrogatory does not call for expert opinion or facts known only to experts. BCBS states that it “may have basic facts at its disposal now, such as whether the cost of hospital services went up or down following entry of a hospital contract that contains an MFN clause.” (BCBS’s Resp. at 1.) This information is responsive to the interrogatory. The Court orders BCBS to 11 2:10-cv-14155-DPH-MKM Case 1:13-cv-01236-CKK DocDocument # 178 Filed 86-205/30/12 Filed 09/26/13 Pg 12 ofPage 14 18 Pgof ID22 4416 EXHIBIT B produce it. BCBS adds, “[b]ut other facts–such as whether an MFN clause caused the hospitals to agree to a different price with Blue Cross than they would have agreed to without the MFN–is information that resides with third-party hospitals.” (Id.) If BCBS does not have the information, such as this third-party information, then BCBS must state so. Either way, BCBS has not persuaded the Court that the information the interrogatory seeks is solely in the hands of experts, retained for this litigation, or that the information cannot be obtained without the experts’ aid. The Court overrules this objection. 4. The interrogatory is not vague BCBS also objected to the interrogatory, arguing that it was vague. (Pls.’ Mot., Ex. 3, BCBS’s Objections at 5.) BCBS argues that “MFNs” and “MFN provisions” are vague and ambiguous. (Id.) BCBS adds that “MFN-pluses” is misleading, inaccurate, and argumentative. (Id.) BCBS further adds that it “understands the term ‘MFN’ to refer to the most-favored-nation provisions included in some contracts between Blue Cross and certain Michigan hospitals, which provision are the subject of this litigation, but to date Plaintiffs have not specifically identified each contract provision they believe to be at issue.” (Id.) BCBS also argues that the interrogatory is vague and ambiguous “because the phrase ‘Blue Cross paying lower hospital reimbursement rates . . . relative to the rates Blue Cross had been paying to the hospital before the hospital lowered its rates’ is tautological and incomprehensible.” (Id.) Plaintiffs counter that the interrogatory is straightforward. (Pls.’ Mot. at 10.) Plaintiffs add that “the listed subparts are merely specific examples of what Plaintiffs seek: any factual information of which Blue Cross has become aware since . . . August 2010.” 12 2:10-cv-14155-DPH-MKM Case 1:13-cv-01236-CKK DocDocument # 178 Filed 86-205/30/12 Filed 09/26/13 Pg 1 ofPage 14 19 Pgof ID22 4417 EXHIBIT B (Id.) The Court does not find BCBS’s objection genuine. The parties know exactly what clauses, and those clauses’ effects, are at issue in this case. The interrogatory is not vague. 5. Overly broad and unduly burdensome To the extent that BCBS argues that the interrogatory is overly broad and unduly burdensome, for BCBS has not asserted that objection in the Joint Statement, the Court disagrees. This case is a large one, and providing factual and economic support for 70 alleged contracts with MFN clauses does not seem unreasonable to the Court. C. Conclusion Plaintiffs state, “[i]f Blue Cross has facts, it should state them . . . [i]f it has no facts, or does not know it, it should so state.” (Pls.’ Reply at 5.) Plaintiffs are exactly right. For the above-state reasons, the Court grants Plaintiffs’ motion to compel BCBS to answer Plaintiff’s first interrogatory. The Court overrules BCBS’s objections. The Court therefore orders BCBS to respond to Plaintiffs’ first interrogatory within 45 days of this order. NOTICE TO THE PARTIES Pursuant to Federal Rule of Civil Procedure 72(a), the parties have a period of fourteen days from the date of this Order within which to file any written appeal to the District Judge as may be permissible under 28 U.S.C. § 636(b)(1). Dated: May 30, 2012 s/ Mona K. Majzoub MONA K. MAJZOUB UNITED STATES MAGISTRATE JUDGE 13 2:10-cv-14155-DPH-MKM Case 1:13-cv-01236-CKK DocDocument # 178 Filed 86-205/30/12 Filed 09/26/13 Pg 14 ofPage 14 20 Pgof ID22 4418 EXHIBIT B PROOF OF SERVICE I hereby certify that a copy of this Order was served upon Counsel of Record on this date. Dated: May 30, 2012 s/ Lisa C. Bartlett Case Manager 14 Filed 09/26/13 Page 21 of 22 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK UNITED STATES OF AMERICA, Plaintiff, 98 Civ. 7076 (BSJ) v. I I ORDER VISA USA, INC., VISA INTERNATIONAL CORP., AND MASTERCARD I INTERNATIONAL, I I Defendants. BARBARA s. JONES UNITED STATES DISTRICT JUDGE Having reviewed defendant VISA USA, Inc.?s Motion to Compel Pursuant to Fed. R. Civ. P. 37(a), the parties? memoranda and affidavits, the pertinent case law, and the pertinent Rules, the Court: ORDERS that the United States shall provide to the Court for its in camera review the information necessary for the Court to determine whether the identities Of the four interviewees for whom the United States claims a so?called informant privilege should remain undisclosed. DENIES defendant VISA motion to compel disclosure of interview notes, summaries or transcripts taken by or for the United States because defendant VISA USA has failed to make the requisite showing to overcome the qualified protection afforded such documents under the work product doctrine. Filed 09/26/13 Page 22 of 22 DENIES defendant VISA USA's motion to compel disclosnre of economic analyses prepared by consultants to the United States because defendant VISA USA has failed to make the requisite showing to require disclosure of non?testifying expert materials. Disclosure of testifying expert materials shall be made in accordance with Fed. R. Civ. P. and at the times specified in the parties' case management plan. SO ORDERED: 424% 9r] fEarbara s. Joneig/ STATES TRICT JUDGE New York, New York January 27, 1999 Case 1:13-cv-01236-CKK Document 87 Filed 09/26/13 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ____________________________________ ) ) ) Plaintiffs, ) ) ) v. ) ) US AIRWAYS GROUP, INC., et al., ) ) Defendants. ) ____________________________________) UNITED STATES OF AMERICA, et al., Civil Action No. 13-1236-CKK (Before Special Master Levie) NOTICE OF SUBMISSION TO SPECIAL MASTER OF PLAINTIFFS RESPONSE TO DEFENDANTS’ MOTION TO COMPEL PRODUCTION OF FACTUAL MATERIALS AND INFORMATION REGARDING DOJ’S APPROVALS OF FOUR PRIOR AIRLINE MERGERS Pursuant to the Order Appointing Special Master, dated September 4, 2013, Plaintiffs hereby give notice that they have submitted their Response to Defendants’ Motion to Compel Productions of Factual Materials and Information Regarding DOJ’s Approvals of Four Prior Airline Mergers to Special Master Richard A. Levie for his consideration. A copy of Plaintiffs’ Response is attached as Exhibit 1. /s/ Ryan Danks U.S. DEPARTMENT OF JUSTICE Antitrust Division 450 5th Street NW, Suite 8100 Washington, DC 20001 (202) 305-0128 Fax: (202) 514-6525 Email: ryan.danks@usdoj.gov Case Document 87-1 Filed 09/26/13 Page 1 of 11 EXHIBIT 1 Case 1:13-cv-01236-CKK Document 87-1 Filed 09/26/13 Page 2 of 11 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DISTRICT OF COLUMBIA __________________________________________ ) ) ) Plaintiffs, ) ) v. ) ) US AIRWAYS GROUP, INC., et al., ) ) Defendants. ) __________________________________________) UNITED STATES OF AMERICA, et al., No. 1:13-CV-01236-CKK (Before Special Master Levie) PLAINTIFFS’ OPPOSITION TO DEFENDANTS’ MOTION TO COMPEL PRODUCTION OF INTERNAL ANALYSES OF PRIOR AIRLINE MERGERS Defendants’ motion to compel claims to call for “factual materials and information regarding DOJ’s approval of four prior airline mergers.” 1 But Defendants expressly declined Plaintiffs’ offer to produce the basic factual materials collected in earlier investigations and have made clear that they do not seek mere facts—such as the number of overlap routes between merging airlines or numbers of passengers on particular routes. Rather, Defendants explicitly seek Plaintiffs’ “own analysis” (Motion at 4) of facts when evaluating the legality of the proposed mergers and determining whether to challenge them in court. Such confidential assessments and internal deliberations are plainly privileged and no court has ever ordered similar disclosures by federal antitrust enforcement officials (or by state officials), as far as we know. Defendants appear to believe that “factual analyses” leading to enforcement decisions have less protection than “legal analyses.” That distinction has no basis in law. Prosecutorial Defendants requested documents from the United States and directed a related interrogatory to all Plaintiffs, thus all Plaintiffs join in this response. 1 Case 1:13-cv-01236-CKK Document 87-1 Filed 09/26/13 Page 3 of 11 decisions are a product of analyses of facts and law applicable to specific situations. The D.C. Circuit has explained that information “culled” from a “much larger universe of facts” gathered by an agency reflects “an exercise of judgment as to what issues are most relevant” to an enforcement decision and is privileged under the deliberative process privilege. Ancient Coin Collectors Guild v. Dep’t of State, 641 F.3d 504, 513 (D.C. Cir. 2011). Judge Kollar-Kotelly recently reached the same conclusion, holding that an agency’s “own analysis” of data provided in investigations “falls squarely within the [deliberative process] privilege.” Am. Petroleum Tankers Parent, LLC v. United States, __ F. Supp. 2d __, 2013 WL 3462575, at *12 (D.D.C. July 10, 2013). Yet this is precisely the sort of “factual analyses” sought here. Motion at 5, 7. The requested analyses also are protected work product because they were prepared “in the course of an active investigation focusing upon specific events and a specific possible violation by a specific party,” SafeCard Servs., Inc. v. SEC, 926 F.2d 1197, 1203 (D.C. Cir. 1991). Many of the requested materials are also protected by the attorney-client privilege and investigative files privilege. Defendants have no need for these privileged internal analyses, which are irrelevant to the lawfulness of the challenged merger. The compelled disclosure of such analyses would significantly harm the quality of agency decisionmaking by chilling deliberations among government attorneys and economists in future investigations. I. Government Decisions Not To Challenge Different Airline Mergers Are Irrelevant To Whether This Merger Is Lawful. Defendants’ proposed merger follows four other airline mergers in the last eight years that have significantly reduced the number of major national airlines. Plaintiffs did not sue to enjoin those mergers, but that is not a defense to this lawsuit. Increased concentration through consolidation invariably leads to heightened concerns about subsequent mergers and every 2 Case 1:13-cv-01236-CKK Document 87-1 Filed 09/26/13 Page 4 of 11 merger must be evaluated on its own terms in light of current industry conditions. How Plaintiffs analyzed other mergers years ago when industry conditions were different has no bearing on legality of this merger. In claiming relevance, Defendants cite a single case, United States v. Leggett & Platt, Inc., 542 F.2d 655 (6th Cir. 1976). Leggett, however, makes clear that whether “the government failed to prosecute civil antitrust actions to divest other industry acquisitions is in and of itself irrelevant,” because “‘discriminatory enforcement’ is, as a matter of law, no defense.” Id. at 658. While the court also suggested that “factual materials” in files from “other industry acquisitions are relevant, and thereby discoverable unless privileged,” id., 2 Defendants declined Plaintiffs’ offer to produce the basic factual materials from earlier investigations, making clear that is not what they wanted. II. Plaintiffs’ Internal Analyses Of Prior Airline Mergers Are Privileged. A. Deliberative Process The deliberative process privilege “‘prevent[s] injury to the quality of agency decisions’ by allowing government officials freedom to debate alternative approaches in private.” In re Sealed Case, 121 F.3d 729, 737 (D.C. Cir. 1997) (citation omitted). The privilege protects “documents and other materials that would reveal advisory opinions, recommendations and deliberations comprising part of a process by which governmental decisions and policies are formulated.” Id. (citation and internal quotation marks omitted). “[P]redecisional materials, ‘even if ‘factual’ in form’ may be covered by the privilege if they ‘reflect an agency’s preliminary positions or ruminations about how to exercise discretion on some policy matter’ The court did not make any relevance determinations but instead remanded to the district court to consider relevance and privilege under the work-product doctrine and deliberative process privilege. Id. at 657, 660. 2 3 Case 1:13-cv-01236-CKK Document 87-1 Filed 09/26/13 Page 5 of 11 and thus would ‘expose the deliberative process within an agency.’” In re Apollo Group, 251 F.R.D. 12, 28 (D.D.C. 2008) (Kollar-Kotelly, J.) (citations omitted). The deliberative process privilege applies to the requested analyses. They were created for the purpose of evaluating the antitrust merits of the mergers and informing the agency head’s decision whether to challenge the merger. The analyses are therefore both “predecisional” and “deliberative.” See In re Sealed Case, 121 F.3d at 737; see also United States v. Farley, 11 F.3d 1385, 1389 (7th Cir. 1993) (documents were privileged because “they were clearly part of the deliberative process leading to [the Antitrust Division’s] decision to sue”); Lone Star Indus. v. F.T.C., 1984 WL 21979, at *6 (D.D.C. 1984) (memoranda and analysis of market definition “inform[ing] and contribut[ing] to . . . recommendations” were deliberative). Defendants’ effort to distinguish between work performed by government attorneys and government economists is unfounded, as the privilege extends to analyses conducted by antitrust enforcers’ in-house economists as well. E.g., F.T.C. v. Warner Commc’ns Inc., 742 F.2d 1156, 1161-62 (9th Cir. 1984) (Bureau of Economics memoranda recommending merger challenge were deliberative because they would reveal FTC “[a]nalyses”). Defendants argue that the privilege does not apply to “‘purely factual reports.’” Motion at 5. But Defendants are not simply seeking facts from the earlier investigations. Instead, they seek “analyses” specifically undertaken to guide government enforcement decisions. Motion at 2-7, 9. Adding the word “factual” to their demands does nothing to undercut the protections of the deliberative process privilege. These analyses reflect Plaintiffs’ exercise of judgment in sifting through the relevant universe of information and focusing on what attorneys and economists consider important in a given case and are thus privileged. See Ancient Coin, 641 F.3d at 513; see also Montrose Chem. Corp. of Cal. v. Train, 491 F.2d 63, 71 (D.C. Cir. 1974) 4 Case 1:13-cv-01236-CKK Document 87-1 Filed 09/26/13 Page 6 of 11 (“The work of the assistants in separating the wheat from the chaff is surely just as much part of the deliberative process as is the later milling by running the grist through the mind of the administrator.”). Just two months ago, a request to obtain a slide “reflect[ing] the Maritime Administration culling and performing its own analysis of the data provided by the Defendant” was rejected because the material “falls squarely within the [deliberative process] privilege.” Am. Petroleum, 2013 WL 3462575, at *12 (emphasis added) (Kollar-Kotelly, J.). So too does Defendants’ request here for “[a]ll documents that constitute, reflect, or contain the facts or forecasts upon which the DOJ based its clearance of the [four prior mergers],” or, as the Motion to Compel describes it—“DOJ’s own analysis,” Motion at 4 (emphasis added). The other cases cited by Defendants (Motion at 5-6) are quite different. They involve retrospective (not pre-decisional) information, McGrady v. Mabus, 635 F. Supp. 2d 6 (D.D.C. 2009); no exercise of judgment by the government, Playboy Enters., Inc. v. DOJ, 677 F.2d 931 (D.C. Cir. 1982); see Mapother v. D.O.J., 3 F.3d 1533, 1539 (D.C. Cir. 1993); a rulemaking or determination of general agency policy (and not an investigation of a specific event for a legal violation), Am. Radio Relay League, Inc. v. F.C.C., 524 F.3d 227 (D.C. Cir. 2008); Public Citizen, Inc. v. O.M.B., 598 F.3d 865 (D.C. Cir. 2009), or interpretation of a final, public consent decree, rather than internal analyses, United States v. Motorola, Inc., 1999 WL 552558, at *2 (D.D.C. May 27, 1999). And in Vento v. IRS, 714 F. Supp. 2d 137 (D.D.C. 2010), no document production was ordered. B. Work Product The work-product doctrine recognizes “that to prepare for litigation, an attorney must ‘assemble information, sift what he considers to be the relevant from the irrelevant facts, prepare 5 Case 1:13-cv-01236-CKK Document 87-1 Filed 09/26/13 Page 7 of 11 his legal theories and plan his strategy without undue and needless interference.’” United States v. Deloitte LLP, 610 F.3d 129, 134 (D.C. Cir. 2010) (quoting Hickman v. Taylor, 329 U.S. 495, 511 (1947)). “Any part of [a document] prepared in anticipation of litigation, not just the portions concerning opinions, legal theories, and the like, is protected by the work product doctrine.” Tax Analysts v. IRS, 117 F.3d 607, 620 (D.C. Cir. 1997). This protection extends to all analyses and related materials that Defendants are seeking here, as they all were prepared as part of Plaintiffs’ evaluation of the legality of specific proposed airline mergers (and not some other general purpose). “[W]here an attorney prepares a document in the course of an active investigation focusing upon specific events and a specific possible violation by a specific party, it has litigation sufficiently ‘in mind’ for that document to qualify as attorney work product.” SafeCard, 926 F.2d at 1203. Materials and recommendations by government economists and other non-testifying experts prepared as part of these investigations are similarly protected. See Fed. R. Civ. Proc. 26(b)(3)(B) & (4)(D); Exxon Corp. v. F.T.C., 476 F. Supp. 713, 717-20 (D.D.C. 1979) (economist memoranda, recommendations, and communications with attorneys were work product). Defendants’ suggestion that the work product doctrine does not protect “facts” misses the point. Motion at 7. “‘The work-product doctrine simply does not distinguish between factual and deliberative material.’” Martin v. Office of Special Counsel, 819 F.2d 1181, 1187 (D.C. Cir. 1987). As Defendants have narrowed their requests, Defendants want only those facts Plaintiffs deemed significant to prior enforcement decisions. That determination of significance is work product, protecting all the factual material therein. See Judicial Watch, Inc. v. D.O.J., 432 F.3d 366, 371 (D.C. Cir. 2005) (“[F]actual material is itself privileged when it appears within 6 Case 1:13-cv-01236-CKK Document 87-1 Filed 09/26/13 Page 8 of 11 documents that are attorney work product.”); cf. Hickman, 329 U.S. at 512-14 (notes of “facts” from witness interviews are work product). Defendants rely throughout their argument on United States v. Motorola. The issue in that case, however, was not the Antitrust Division’s internal analyses of an enforcement decision but interpretation of public consent decree terms, i.e., what the parties to the decree intended. Given that dispute (which was essentially a matter of contract interpretation), the court permitted limited discovery to explore the government’s “knowledge and expectations when the consent decree was entered.” 1999 WL 552558 at *2. Notably, however, the Motorola court recognized that both deliberative process and work-product protections might limit the scope of the inquiry. Id. at *2. Nor did it compel the production of any internal documents as Defendants seek here. C. Attorney-Client The attorney-client privilege applies to government attorneys, United States v. Jicarilla Apache Nation, 131 S. Ct. 2313, 2320 (2011), and covers communications between counsel and “employees at varying levels of seniority in [the] agency.” Judicial Watch, Inc. v. Dep’t of Treas., 802 F.Supp.2d 185, 203 (D.D.C. 2011). It applies here to documents prepared by attorneys to inform their superiors’ enforcement decisions. Defendants’ claim that their requests “do not seek confidential attorney advice,” Motion at 8, is wrong, as attorneys’ internal advice to their superiors on the merits of a merger is confidential attorney advice. Defendants also are wrong that the privilege is completely subsumed by the deliberative process privilege, id., because, unlike that privilege, the attorneyclient privilege is absolute. Blumenthal v. Drudge, 186 F.R.D. 236, 241 (D.D.C. 1999). 7 Case 1:13-cv-01236-CKK Document 87-1 Filed 09/26/13 Page 9 of 11 D. Investigatory Files Plaintiffs’ files from civil or criminal investigations and testimony concerning their contents are privileged. Friedman v. Bache Halsey Stuart Shields, Inc., 738 F.2d 1336, 1341 (D.C. Cir. 1984); McPeek v. Ashcroft, 202 F.R.D. 332, 336 (D.D.C. 2001). This privilege applies to the requested discovery because disclosure would chill future investigations and is not needed by Defendants. See Tuite v. Henry, 98 F.3d 1411, 1417 (D.C. Cir. 1996) (discussing several relevant considerations). Defendants claim that the privilege is inapplicable because disclosure of closed investigations “will not jeopardize any ongoing law enforcement matter.” Motion at 8. But if the requested materials are compelled here to allow Defendants to argue inconsistency, nothing would prevent future litigants from raising the same argument. As a consequence, all Plaintiffs’ future merger investigations would be chilled because of the possibility of subsequent disclosure of investigative contents. III. Defendants Cannot Demonstrate Substantial Need For the Analyses. The Defendants have targeted their request at Plaintiffs’ internal thinking. Thus, the sought materials are “opinion work product,” which is “‘virtually undiscoverable.’” Deloitte, 610 F.3d at 135 (citation omitted); see also Apollo, 251 F.R.D. at 23 n.5 (materials revealing attorneys’ mental impressions are opinion work product). Even if the requested materials were considered only fact work product—or were protected solely by the deliberative process privilege—Defendants have not established the “substantial need” required to pierce these protections. As explained above, Plaintiffs’ thinking about the earlier mergers is irrelevant to this case. Any legitimate need Defendants have for information from prior mergers could be satisfied by the basic factual materials in those merger investigations or from other sources. Even assuming arguendo that Plaintiffs’ analyses of that 8 Case 1:13-cv-01236-CKK Document 87-1 Filed 09/26/13 Page 10 of 11 material has some marginal relevance, it is not enough to justify the consequent “chill” the compelled disclosure would have on future government deliberations. Warner, 742 F.2d at 1162. IV. Plaintiffs Have Not Waived Any Privileges. Finally, Defendants claim that Plaintiffs—particularly the United States—have waived privileges by “issu[ing] public closing statements about the prior mergers” and by permitting Division economists to publish an article discussing the Delta-Northwest merger. Motion at 9. But the one-page closing statements are non-specific, rely on public information and serve the important purpose of informing the public and the parties of whether a given merger will be the subject of a lawsuit. No court has ever held that such routine announcements give rise to waivers of privilege. Moreover, the announcements do not cite nor otherwise disclose any confidential documents reflecting internal analyses. Thus, there has been no waiver. See Rockwell Int’l Corp. v. D.O.J., 235 F.3d 598, 604-05 (D.C. Cir. 2001) (the Department did not waive workproduct protection for documents where “none of [its] actions was inconsistent with keeping the documents secret”). Likewise, the publication of the article does not constitute a waiver, as the Division’s economists published the article in their personal capacity and avoided any reference to confidential material. Even if either the closing statements or the article effected a waiver due to voluntary disclosure, the waiver would apply only to the disclosed material, not the entire subject matter. Cf. Rockwell, 235 F.3d at 604-07. 9 Case 1:13-cv-01236-CKK Document 87-1 Filed 09/26/13 Page 11 of 11 CONCLUSION The motion to compel should be denied. Respectfully submitted. FOR THE PLAINTIFFS /s Mark W. Ryan Stephanie A. Fleming Ryan Danks United States Department of Justice Antitrust Division 450 Fifth Street Northwest, Suite 8100 Washington, DC 20530 phone: 202-305-0128 e-mail: ryan.danks@usdoj.gov 10 Case 1:13-cv-01236-CKK Document 89 Filed 09/27/13 Page 1 of 3 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, v. US AIRWAYS GROUP, INC. and AMR CORPORATION, Case No. 1:13-cv-01236-CKK (Before Special Master Levie) Defendants, NOTICE OF SUBMISSION TO SPECIAL MASTER OF DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO COMPEL RELEVANT FACTS OBTAINED FROM THIRD-PARTY INTERVIEWS Pursuant to the Order Appointing Special Master, dated September 4, 2013, Defendants US Airways Group, Inc. and AMR Corporation hereby give notice that Defendants’ Reply in Support of Motion to Compel Relevant Facts Obtained from Third-Party Interviews (attached hereto as Exhibit One) has been submitted to Special Master Richard A. Levie for his consideration. Case 1:13-cv-01236-CKK Document 89 Filed 09/27/13 Page 2 of 3 Dated: September 27, 2013 Respectfully submitted, /s/ Courtney Dyer Richard G. Parker (DC Bar #327544) Henry Thumann (DC Bar #474499) Courtney Dyer (DC Bar #490805) O’MELVENY & MYERS LLP 1625 Eye Street, N.W. Washington, DC 20006 (202) 383-5300 (Phone) (202) 383-5414 (Facsimile) rparker@omm.com hthumann@omm.com cdyer@omm.com Kenneth R. O’Rourke (Admitted Pro Hac Vice) O’MELVENY & MYERS LLP 400 South Hope Street Los Angeles, CA 90071 (213) 430-6000 (Phone) (213) 430-6407 (Facsimile) korourke@omm.com Paul T. Denis (DC Bar #437040) Steven G. Bradbury (DC Bar #416430) Gorav Jindal (DC Bar #416430) DECHERT LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 (Phone) (202) 261-3333 (Facsimile) paul.denis@dechert.com steven.bradbury@dechert.com gorav.jindal@dechert.com Charles F. Rule (DC Bar #370818) CADWALADER, WICKERSHAM & TAFT LLP 700 Sixth Street, N.W. Washington, DC 20001 (202) 862-2200 (Phone) (202) 862-2400 (Facsimile) rick.rule@cwt.com Attorneys for Defendant US Airways Group, Inc. 2 Case 1:13-cv-01236-CKK Document 89 Filed 09/27/13 Page 3 of 3 /s/ John M. Majoras John M. Majoras (DC Bar #474267) Paula Render (Admitted Pro Hac Vice) Michael S. Fried (DC Bar #458357) Rosanna K. McCalips (DC Bar #482859) JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 (Phone) (202) 626-1700 (Facsimile) jmmajoras@jonesday.com prender@jonesday.com msfried@jonesday.com rkmccalips@jonesday.com Mary Jean Moltenbrey (DC Bar #481127) PAUL HASTINGS LLP 875 15th Street, NW Washington, DC 20005 (202) 551-1725 (Phone) (202) 551- 0225 (Facsimile) mjmoltenbrey@paulhastings.com Attorneys for Defendant AMR Corporation 3 Case 1:13-cv-01236-CKK Document 92 Filed 10/01/13 Page 1 of 2 IN THE 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. ____________________________________ Civil Action No. 1:13-cv-01236-CKK MOTION FOR A STAY OF LITIGATION IN LIGHT OF LAPSE OF APPROPRIATIONS The United States of America hereby moves for a stay of the proceedings in the above-captioned case. 1. At the end of the day on September 30, 2013, the appropriations act that had been funding the Department of Justice expired and appropriations to the Department lapsed. The Department does not know when funding will be restored by Congress. 2. Absent an appropriation, Department of Justice attorneys and employees are generally prohibited from working, even on a voluntary basis, except in very limited circumstances, including “emergencies involving the safety of human life or the protection of property.” 31 U.S.C. § 1342. This is creating difficulties for the Department to perform the functions necessary to support its litigation efforts and, accordingly, the Department’s policy is to seek a stay in all pending civil litigation. 3. Undersigned counsel therefore respectfully requests a stay of all proceedings in this case until Congress has restored appropriations to the Department. If this motion for a stay is granted, 1 Case 1:13-cv-01236-CKK Document 92 Filed 10/01/13 Page 2 of 2 undersigned counsel will notify the Court as soon as Congress has appropriated funds for the Department. The United States requests that, at that point, all current deadlines for the parties be extended day-for-day with the duration of the lapse in appropriations. If the Court denies the request, the government will comply with the Court’s order, which would constitute express legal authorization for the activity to continue. 4. Counsel for the United States has consulted with counsel for Defendants, who advise that they object to this motion. Therefore, although we greatly regret any disruption caused to the Court and the other litigants, the United States hereby moves for a stay of all proceedings in this case until funding is restored and Department of Justice attorneys are permitted to resume their usual civil litigation functions. Counsel for the United States will attend today’s status conference. Respectfully submitted, /s/ Mark W. Ryan Ryan Danks U.S. DEPARTMENT OF JUSTICE Antitrust Division 450 5th Street NW, Suite 8100 Washington, DC 20530 Phone: (202) 305-0128 Fax: (202) 514-6525 mark.w.ryan@usdoj.gov ryan.danks@usdoj.gov Attorneys for Plaintiff United States Dated: October 1, 2013 2 Case 1:13-cv-01236-CKK Document 93 Filed 10/01/13 Page 1 of 2 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, v. Civil Action No. 13-cv-1236 (CKK) US AIRWAYS GROUP, INC., et al., Defendants. ORDER (October 1, 2013) Currently before the Court is Plaintiff the United States of America’s [92] Motion for a Stay of Litigation in Light of Lapse of Appropriations. Plaintiff has requested a stay due to the lapse of appropriations to the Department of Justice, stating that absent an appropriation, Department of Justice attorneys and employees are generally prohibited from working, except in very limited circumstances, including “emergencies involving the safety of human life or the protection of property.” 31 U.S.C. § 1342. Defendants have opposed Plaintiff’s motion for a stay. The Court concludes that a stay would be inappropriate here for a number of reasons. This case involves a pending merger agreement between two major airlines, with a deadline for completion of January 18, 2014. The closing of this merger has been delayed by the affirmative actions of Plaintiffs in filing this case and seeking injunctive relief to block the merger. In light of these considerations, and the amount of money at stake in this merger, this case is clearly significant for both sides. Furthermore, the resolution of Defendant American Airline’s pending bankruptcy proceedings hinges on the proceedings in this case. In addition, various amici – Case 1:13-cv-01236-CKK Document 93 Filed 10/01/13 Page 2 of 2 particularly employees of the Defendants – have a vested interest in the adjudication of this case without delay. Indeed, because of the need for the prompt resolution of this matter, the Court has set an expedited discovery and trial schedule. A stay at this point would undermine this schedule and delay the necessary speedy disposition of this matter. It is essential that the Department of Justice attorneys continue to litigate this case. Accordingly, for the reasons set forth above, it is, this 1st day of October, 2013, hereby ORDERED that Plaintiff the United States of America’s [92] Motion for a Stay of Litigation in Light of Lapse of Appropriations is DENIED. SO ORDERED. /s/ COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE 2 Case 1:13-cv-01236-CKK Document 94 Filed 10/01/13 Page 1 of 1 October 1, 2013 The Honorable Colleen Kollar-Kotelly United States District Court for the District of Columbia 333 Constitution Avenue, NW Washington, DC 20001 Re: submitted via ECF United States, et al. v. US Airways Group, Inc., and AMR Corporation Case No. 1:13-cv-01236-CKK Notice of Settlement of the Claims of the State of Texas Judge Kollar-Kotelly: The State of Texas wishes to notify the Court that it has entered into a settlement agreement with US Airways Group, Inc. and AMR Corporation. The agreement resolves the claims of the State of Texas, but it does not purport to address the claims of the other plaintiff states or the Department of Justice. The State of Texas is in the process of meeting and conferring with all parties to the litigation to notify them of the settlement. Once we can assure the court that no party opposes our position, the State of Texas will file its Motion to Voluntarily Dismiss its Claims with Prejudice. Regards, /s/ Mark A. Levy Mark A. Levy Assistant Attorney General Office of the Attorney General of Texas Consumer Protection Division – Antitrust Section 300 W. 15th Street, 7th Floor Austin, Texas 78701 Telephone: 512-936-1847 Facsimile: 512-320-0975 Mark.Levy@texasattorneygeneral.gov cc: All Counsel POST OFFICE BOX 12548, AUSTIN, TEXAS 78711-2548 TEL:(512) 463-2100 WEB: An Equal Employment Opportunity Employer · Printed on Recycled Paper WWW OAG STATE TX US Case 1:13-cv-01236-CKK Document 95 Filed 10/02/13 Page 1 of 2 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ____________________________________ ) ) ) Plaintiffs, ) ) ) ) v. ) US AIRWAYS GROUP, INC., and ) ) AMR CORPORATION ) ) Defendants. ) ____________________________________) UNITED STATES OF AMERICA, et al. Case No. 1:13-cv-01236-CKK PLAINTIFF STATE OF TEXAS’S MOTION TO VOLUNTARILY DISMISS ITS CLAIMS WITH PREJUDICE Pursuant to Federal Rule of Civil Procedure 41(a)(2), Plaintiff State of Texas moves the Court to dismiss its claims with prejudice. The State of Texas has reached an out-of-court settlement agreement with Defendants. A Certificate of Conference follows this Motion. Dated: October 2, 2013 Respectfully Submitted, By: /s/ Mark A. Levy Mark A. Levy Assistant Attorney General Office of the Attorney General of Texas Consumer Protection Division – Antitrust Section 300 W. 15th Street, 7th Floor Austin, Texas 78701 Telephone: 512-936-1847 Facsimile: 512-320-0975 Mark.Levy@texasattorneygeneral.gov Case 1:13-cv-01236-CKK Document 95 Filed 10/02/13 Page 2 of 2 CERTIFICATE OF CONFERENCE I certify that the State of Texas has met and conferred with Defendants and Plaintiffs prior to filing this Motion. No party opposes this Motion. All counsel of record have been served with a copy of the Motion on October 2, 2013. /s/ Mark A. Levy Mark A. Levy Assistant Attorney General Case 1:13-cv-01236-CKK Document 95-1 Filed 10/02/13 Page 1 of 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ____________________________________ ) ) ) Plaintiffs, ) ) ) ) v. ) US AIRWAYS GROUP, INC., and ) ) AMR CORPORATION ) ) Defendants. ) ____________________________________) UNITED STATES OF AMERICA, et al. Case No. 1:13-cv-01236-CKK [PROPOSED] ORDER GRANTING MOTION TO VOLUNTARILY DISMISS CLAIMS OF PLAINTIFF STATE OF TEXAS Upon consideration of Plaintiff State of Texas’s Motion to Voluntarily Dismiss its Claims with Prejudice, the Court has determined that the Motion should be, and is hereby, GRANTED. SO ORDERED. Dated: Washington, D.C. _____________, 2013 __________________________________ COLLEEN KOLLAR-KOTELLY United States District Judge Case 1:13-cv-01236-CKK Document 97 Filed 10/03/13 Page 1 of 6 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ______________________________________ ) ) ) Plaintiffs ) ) v. ) Civil Action No. 1:13-cv-01236 (CKK) ) ) US AIRWAYS GROUP, INC., ) 111 W. Rio Salado Parkway ) Tempe, AZ 85281 ) ) and ) ) AMR CORPORATION, ) 4333 Amon Carter Boulevard ) Fort Worth, TX 76155 ) ) Defendants. ) ______________________________________) UNITED STATES OF AMERICA, et al., MOTION FOR ADMISSION OF ATTORNEY PRO HAC VICE Pursuant to Local Civil Rule 83.2(d), Proposed Interveners The Transport Workers Union of America AFL-CIO (“TWU”) respectfully moves the Court for the admission and appearance of attorney Sharon L. Levine, Esq. pro hac vice in the referenced action. This motion is supported by the Declaration of Sharon L. Levine. This motion is also supported by Jeffrey Blumenfeld, an active member of the bar of this Court, as the sponsoring member for Ms. Levine’s admission pro hac vice. 1 Case 1:13-cv-01236-CKK Document 97 Filed 10/03/13 Page 2 of 6 Dated: October 3, 2013 Respectfully submitted, /s/ Jeffrey Blumenfeld Jeffrey Blumenfeld (DC Bar #181768) Lowenstein Sandler, LLP 1251 Avenue of the Americas New York, NY 10020 T: 212-204-8699 M: 202.255.6300 jblumenfeld@lowenstein.com Attorneys for Transport Workers Union of America AFL-CIO 2 Case Document 97 Filed 10/03/13 Page 3 of 6 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs Civil Action No. 1:13-cv-01236 (CKK) US AIRWAYS GROUP, INC, 111 W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION, 4333 Amon Carter Boulevard Fort Worth, TX 76155 Defendants. DECLARATION OF SHARON LEVINE, ESQ. IN SUPPORT OF MOTION FOR ADMISSION PRO HAC VICE I, Sharon L. Levine, Esq., hereby declare: I. My name, of?ce address, and telephone numbers are as follows: Sharon L. Levine Lowenstein Sandler LLP 65 Livingston Avenue Roseland, New Jersey 07068 Tel. 973?597-2500 2. I have been admitted to the following courts and bars: Supreme Court of New Jersey, the United States District Court for the District of New Jersey, and the Third Circuit Court of Appeals. 3. I am in good standing with all courts, and bars in which I am admitted and have Case Document 97 Filed 10/03/13 Page 4 of 6 not been subject to discipline by them. 4. I have not previously been admitted pro hac vice to this Court. 5. I do not have an of?ce located within the District of Columbia. I declare under penalty of perjury that the foregoing is true and correct. Dated: September 2, 2013 Sharon L. Levine Case Document 97 Filed 10/03/13 Page 5 of 6 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs Civil Action No. (CKK) US AIRWAYS GROUP, INC, 1 ll W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION, 4333 Amen Carter Boulevard Fort Worth, TX 76155 Defendants. ORDER GRANTING MOTION FOR ADMISSION OF ATTORNEY SHARON L. LEVINE PRO HAC VICE The Court, having reviewed Proposed Interveners The Transport Workers Union of America motion for admission of attorney Sharon L. Levine pro hac vice and for good cause shown, grants attorney Sharon L. Levine pro hac vice admission to this Court. IT IS SO ORDERED. Dated: Hon. Colleen KolIarnKotelly, United States District Judge Case 1:13-cv-01236-CKK Document 97 Filed 10/03/13 Page 6 of 6 CERTIFICATE OF SERVICE I hereby certify that I have this day caused a copy of the foregoing Motion for Admission of Attorney Pro Hac Vice to be served upon all counsel of record through the Court’s CM/ECF notification system. October 3, 2013 /s/Jeffrey Blumenfeld Jeffrey Blumenfeld Case Document 101 Filed 10/07/13 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, Civil Action No. 13-cv-1236 (CKK) V. US AIRWAYS GROUP, INC., et al., Defendants. ORDEB (October 1, 2013) The Court has received Plaintiff State of Texas?s [95] Motion to Voluntarily Dismiss its Claims with Prejudice. Upon consideration of this motion, it is, this Liday of October, 2013 hereby ORDERED that Plaintiff State of Texas?s [95] Motion to Voluntarily Dismiss its Claims with Prejudice is GRANTED. SO ORDERED. o?a; COLLEEN UNITED STATES DISTRICT JUDGE Case 1:13-cv-01236-CKK Document 99 Filed 10/08/13 Page 1 of 3 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA __________________________________________ ) UNITED STATES OF AMERICA, et al., ) ) Plaintiffs, ) ) ) Civil Action No. 13-1236-CKK v. ) ) US AIRWAYS GROUP, INC., et al., ) ) Defendants. ) __________________________________________) PLAINTIFFS’ STATEMENT IN OPPOSITION TO TRANSPORT WORKERS UNION’S MOTION TO INTERVENE By Minute Order dated October 7, 2013, the Court asked the parties to submit a brief statement of position with respect to the motion by The Transport Workers Union of America AFL-CIO (“TWU”) to intervene as a party defendant in this litigation. Plaintiffs respectfully submit this statement in opposition to the TWU motion. The TWU motion fails to meet the standards for intervention as of right as set forth in Federal Rule of Civil Procedure 24(a). Despite closely monitoring this action since its inception and participating in an amicus brief at an earlier stage urging the Court to resolve this action on an expedited schedule, the TWU has waited until the eve of the close of fact discovery and only six weeks before the start of trial to file its request for intervention. This request is untimely. See, e.g., United States v. British Am. Tobacco Australia Servs., Ltd., 437 F.3d 1235, 1238-39 (D.C. Cir. 2006) (affirming denial of untimely motion for intervention). Moreover, the TWU’s interest in seeing the merger between US Airways and American Airlines completed is adequately protected by the current defendants. See, e.g., Jones v. Prince George’s County, 348 F.3d 1014, 1019-20 (D.C. Cir. 2003) (would-be intervenor’s interests Case 1:13-cv-01236-CKK Document 99 Filed 10/08/13 Page 2 of 3 “perfectly congruent” with and adequately represented by the existing plaintiff; “quibbles over litigation tactics” and trial strategy do not make the litigating party an inadequate representative). Defendants are well represented and are vigorously defending this action. In fact, they have made the supposed benefits that the proposed merger will confer upon the employees of the “new” American Airlines a central focus of their legal and public relations defense of the merger, and they have listed the president of another union as a likely witness at trial. 1 Finally, the TWU concedes that it “does not have an independent cause of action or defense to plead” in this action. Am. Mot. at 2. While the absence of such an independent cause of action or defense alone does not bar intervention, it certainly supports the denial of the TWU’s attempt to intervene at this late stage of the action. See, e.g., United States v. Metro. St. Louis Sewer Dist., 569 F.3d 829, 840 (8th Cir. 2009) (“Judicial efficiency is not promoted by allowing intervention by a party with no interest upon which it could seek judicial relief in a separate lawsuit.”); Southern Christian Leadership Conference v. Kelley, 747 F.2d 777, 779 (D.C. Cir. 1984) (Rule 24(a) “impliedly refers not to any interest the applicant can put forward, but only to a legally protectable one”); see also Am. Horse Protection Ass’n, Inc. v. Veneman, 200 F.R.D. 153, 157 (D.D.C. 2001) (when assessing the adequacy of an intervenor’s claimed interest, courts should “place primary emphasis” on the other relevant factors, including whether the interest is already being sufficiently represented by an existing party). 1 See Press release from AMR Corporation and U.S. Airways Group entitled “Companies Will Mount Vigorous and Strong Defense of Merger; Combined Airline Will Offer Benefits to Consumers, Communities and Employees,” Aug. 13, 2013 (“Employees of the combined airline will benefit from being part of a company with a more competitive and strong financial foundation . . . . The merger will also provide a path to improved compensation and benefits for employees.”); US Airways’ Ans. (Docket No. 79) at 4 (“Blocking the merger will not sharpen competition – it will prolong this cycle of crisis to the detriment of passengers, the employees of American and U.S. Airways, and the communities the airlines serve.”); American Airlines’ Ans. (Docket No. 80) at 2 (“The merger would also . . . welcome job stability for many thousands of airline employees who have been among the victims of this industry’s tumultuous past.”). 2 Case 1:13-cv-01236-CKK Document 99 Filed 10/08/13 Page 3 of 3 For these reasons and others that would be more fully explained if the Court requested full briefing, Plaintiffs respectfully oppose the TWU’s motion to intervene. Respectfully submitted, FOR THE PLAINTIFFS / s/ Mark W. Ryan Juan A. Arteaga Ryan Danks United States Department of Justice Antitrust Division 450 Fifth Street Northwest, Suite 8100 Washington, DC 20530 phone: 202-532-4753 e-mail: mark.w.ryan@usdoj.gov 3 Case 1:13-cv-01236-CKK Document 100 Filed 10/08/13 Page 1 of 4 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, Case No. 1:13-cv-01236-CKK v. US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants, DEFENDANTS’ RESPONSE TO AMENDED MOTION OF TRANSPORT WORKERS UNION TO INTERVENE Pursuant to the Court’s October 7, 2013 Minute Order, Defendants US Airways Group, Inc. and AMR Corporation (together, the “Airlines”) respectfully submit this response to the Amended Motion of the Transport Workers Union of America AFL-CIO (“TWU”) to Intervene as of Right or, Alternatively, to Appear as Amicus Curiae (Dkt. 98) (“Am. Mot.”). The Airlines greatly value the interests of TWU’s members and support TWU’s participation in this case as amicus curiae. There is no need for TWU to intervene, however, because the interests of TWU and its members in this case are fully aligned with – and thus adequately represented by – the Airlines. TWU’s motion to intervene should thus be denied.1 A party may intervene as of right under Rule 24(a)(2) only if: (1) the motion to intervene is timely; (2) the party claims a legally cognizable interest relating to the property or transaction which is the subject of the action; (3) the action’s disposition might otherwise impair or impede The Airlines take no position as to “whether the failure to file a pleading with a motion to intervene constitutes a defect,” Am. Mot. at 2, except to note that TWU’s inability to plead “an independent cause of action or defense,” id., is further evidence that TWU should participate in this action, if at all, as amicus curiae. 1 1 Case 1:13-cv-01236-CKK Document 100 Filed 10/08/13 Page 2 of 4 the party’s ability to protect that interest; and (4) the party’s interest is not adequately represented by existing parties. See In re Endangered Species Act Section 4 Deadline Litig., 270 F.R.D. 1, 4 (D.D.C. 2010). Even assuming TWU satisfies its burden with respect to the first three of these requirements, it does not satisfy the fourth. TWU’s Amended Motion to Intervene explains why it is in the interest of all TWU workers to have this merger approved – and that interest is fully aligned with the Airlines’ interest. While the Airlines appreciate TWU’s desire to convey to the Court all the reasons the proposed merger is procompetitive and consistent with the antitrust laws, the Airlines are making precisely these same points. Compare Mem. in Supp. of Am. Mot. (“Mem.”) at 6 (“without the merger, the stand-alone American Airlines will find it more difficult to compete effectively against its much larger rivals, new Delta and new United”), with AMR Corp.’s Answer (Dkt. 80) at 1 (“This transaction would create a third comprehensive, global network carrier . . . fully capable of competing with the two that exist today [Delta and United] . . .”) and US Airways Group, Inc.’s Answer (Dkt. 79) at 3. TWU’s ultimate goal is the same as the Airlines’, and its arguments for that end result are the same as those urged by the Airlines.2 See Building & Constr. Trades Dep’t, AFL-CIO, v. Reich, 40 F.3d 1275, 1282 (D.C. Cir. 1994) (affirming denial of motion to intervene where the movant “offered no argument not also pressed by” the defendant); Schoenman v. FBI, 263 F.R.D. 23, 25 (D.D.C. 2009) (denying motion to intervene because, among other things, the movant’s “alleged interest . . . [was] already adequately represented by Plaintiff himself”). 2 The Airlines understand and commend TWU’s concern over “the risk to TWU- represented employees” should the merger be blocked. Mem. at 6. For the purposes of intervention, however, the motives or rationale for litigating an issue are not relevant; all that matters is whether the ultimate objectives and interests overlap. See Dairy Maid Dairy v. United States, 147 F.R.D. 109, 112 (E.D. Va. 1993). -2- Case 1:13-cv-01236-CKK Document 100 Filed 10/08/13 Page 3 of 4 Furthermore, TWU’s intervention would complicate the proceedings, potentially jeopardizing the trial schedule that the parties, the Special Master, and the Court are working to implement. TWU can fully achieve its goal of ensuring that its members’ interests are “adequately presented to the Court,” Mem. at 10, by participating as amicus curiae along with other unions representing the employees of both Airlines. If TWU is permitted to intervene rather than simply act as amicus, these other unions and similar interested parties – all of whom can legitimately claim a deep interest in seeing the merger approved – may also seek to intervene, further complicating the tight trial schedule. The Court “has broad discretion to permit . . . proposed intervenors to participate as amici curiae.” Dist. of Columbia v. Potomac Elec. Power Co., 826 F. Supp. 2d 227, 237 (D.D.C. 2011). Exercise of that discretion is particularly appropriate here, since permitting TWU to act as amicus curiae together with other interested employee unions would “adequately serve[] the purposes of the desired intervention without unduly delaying or prejudicing the [existing] parties.” In re Vitamins Antitrust Litig., No. 99-0197, 2004 U.S. Dist. LEXIS 31702, at *33 (D.D.C. Nov. 30, 2004) (denying motion to intervene). In any case, TWU is not entitled to intervene as of right, and its request to do so should be denied.3 3 TWU does not seek permissive intervention under Rule 24(b) and could not meet that Rule’s requirements in any event. Under Rule 24(b), “the court may permit anyone to intervene who: (A) is given a conditional right to intervene by a federal statute; or (B) has a claim or defense that shares with the main action a common question of law or fact.” TWU has no statutory right to intervene and readily acknowledges that it “does not have an independent cause of action or defense to plead.” Am. Mot. at 2. -3- Case 1:13-cv-01236-CKK Document 100 Filed 10/08/13 Page 4 of 4 Dated: October 8, 2013 Respectfully submitted, /s/ Richard G. Parker Richard G. Parker (DC Bar #327544) Henry Thumann (DC Bar #474499) Courtney Dyer (DC Bar #490805) O’MELVENY & MYERS LLP 1625 Eye Street, N.W. Washington, DC 20006 (202) 383-5300 rparker@omm.com hthumann@omm.com cdyer@omm.com /s/ John M. Majoras John M. Majoras (DC Bar #474267) Paula Render (admitted pro hac vice) Michael S. Fried (DC Bar #458347) Rosanna K. McCalips (DC Bar #482859) JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 (202) 879-3939 jmmajoras@jonesday.com prender@jonesday.com msfried@jonesday.com rkmccalips@jonesday.com Kenneth R. O’Rourke (admitted pro hac vice) O’MELVENY & MYERS LLP 400 South Hope Street Los Angeles, CA 90071 (213) 430-6000 korourke@omm.com Mary Jean Moltenbrey (DC Bar #481127) PAUL HASTINGS LLP 875 15th Street, N.W. Washington, DC 20005 (202) 551-1725 mjmoltenbrey@paulhastings.com Paul T. Denis (DC Bar #437040) Steven G. Bradbury (DC Bar #416430) DECHERT LLP 1900 K Street, N.W. Washington, DC 20006 (202) 261-3300 paul.denis@dechert.com steven.bradbury@dechert.com Attorneys for Defendant AMR Corporation Charles F. Rule (DC Bar #370818) Andrew Forman (DC Bar #477425) CADWALADER, WICKERSHAM & TAFT LLP 700 Sixth Street, N.W. Washington, DC 20001 (202) 862-2200 rick.rule@cwt.com andrew.forman@cwt.com Attorneys for Defendant US Airways Group, Inc. -4- Case 1:13-cv-01236-CKK Document 108-1 Filed 10/17/13 Page 1 of 10 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, Case No. 1:13-cv-01236-CKK v. US AIRWAYS GROUP, INC. and AMR CORPORATION, Trial Commences: November 25, 2013 Defendants, [PROPOSED] TRIAL PROCEDURES ORDER In order to administer this civil action in a manner fair to the litigants and consistent with the Parties’ interest in completing this litigation in the shortest possible time and at the least possible cost, it is hereby ORDERED that the Parties1 shall comply with each of the directives set forth in this Order. 1 The Parties are Plaintiffs the United States of America, the State of Arizona, the District of Columbia, the State of Florida, the State of Michigan, the Commonwealth of Pennsylvania, the State of Tennessee, and the Commonwealth of Virginia (collectively, the “Plaintiffs”), and Defendants US Airways Group, Inc. and AMR Corporation (collectively, the “Defendants”). Case Document 108-1 Filed 10/17/13 Page 2 of 10 SCHEDULE OF EVENTS AND DEADLINES November 8 Parties exchange ?nal witness lists November 12 Parties exchange ?nal exhibit lists Parties exchange deposition designations and designation summaries Parties exchange proposed stipulations November 15 Parties exchange amendments to ?nal witness lists Parties exchange amendments to ?nal exhibit lists Parties exchange objections and counter-designations for depositions Parties ?le trial briefs Amici ?le briefs Parties ?le non-Daubert motions in lirnine Parties exchange supplemental and/or rebuttal expert reports (per prior order) November 17 Parties exchange objections to exhibit lists November 18 Parties meet and confer re: objections to exhibit lists Parties exchange objections to counter-designations for depositions Parties ?le oppositions to non-Daubert motions in lirnine November 20 Parties ?le ?nal witness lists as amended Parties ?le replies in support of non-Daubert motions in lirnine Parties ?le ?nal exhibit lists as amended Parties ?le stipulations Close of expert discovery (per prior order) November 21 Pretrial conference at 10:30 a.m. (per prior order) Parties lodge joint compilation of all deposition designations (noting outstanding objections and re?ecting agreed con?dentiality redactions) with Chambers Parties lodge electronic copies of trial exhibits (re?ecting agreed con?dentiality redactions) with Chambers November 22 Parties ?le responses to trial briefs and/or amicus briefs November 25 First day of trial (per prior order) December 16 or 17 Estimated last day of trial Case Document 108-1 Filed 10/17/13 Page 3 of 10 December 21 (est.) Parties ?le proposed ?ndings of fact and conclusions of law ?ve days after the last day of trial (but if the ?fth day is a federal holiday, then six days after the conclusion of trial) December 30 (est.) Parties ?le post-trial briefs, including oppositions to proposed ?ndings of fact and conclusions of law fourteen days after the last day of trial (but if the fourteenth day is a federal holiday, then ?fteen days after the conclusion of trial) [If the Court is amenable, Parties waive the ?ling of replies to proposed ?ndings of fact and conclusions of law.] January 6, 2014 Closing arguments Case 1:13-cv-01236-CKK Document 108-1 Filed 10/17/13 Page 4 of 10 OTHER PROVISIONS 1. Calculation of Time a) 2. The term “day(s),” as used in this Order, refers to calendar days. Trial Briefs and Pretrial Conference a) By the date listed in the Schedule of Events and Deadlines (“Schedule”), each side shall file a trial brief. These briefs shall be in lieu of the pretrial statements contemplated in Local Civil Rule 16.5. Each side’s brief shall not exceed 50 pages of text. Each side may file one 10-page brief responding to the opposing side’s brief and/or any briefs filed by amici by the date listed in the Schedule. b) A final Pretrial Conference will be held on the date and at the time listed in the Schedule. 3. Post-Trial Briefing a) On the dates listed in the Schedule, each side (or each Party) shall file proposed findings of fact and conclusions of law. Within 24 hours of filing, each side (or each Party) shall deliver to Chambers a CD or DVD containing an electronic copy of their proposed findings of fact and conclusions of law hyperlinked to the authorities relied upon and, to the extent feasible, admitted exhibits and trial testimony. b) The findings of fact shall set forth in paragraph form, separately numbered, all factual contentions relied upon by each Party in support of its claims or defenses and shall be free of pejorative language or argument. c) Conclusions of law shall be supported by appropriate citation to legal authority. d) On the date specified in the Schedule, each side (or each Party) shall file a document incorporating (1) a post-trial brief and (2) an opposition to the opposing side’s (or 4 Case 1:13-cv-01236-CKK Document 108-1 Filed 10/17/13 Page 5 of 10 opposing Parties’) findings of fact and conclusions of law. The brief component of this document shall not exceed 25 pages of text. 4. Motions in Limine a) The timing of motions in limine shall be governed by the Schedule. b) Motions in limine and oppositions thereto shall not exceed ten pages of text, and replies shall not exceed five pages of text. 5. Daubert Motions and Experts a) Daubert motions, if any, shall be filed not later than 72 hours after the filing of the written direct testimony of the expert(s) to which they pertain, and any opposition shall be filed not later than 72 hours of the filing of the motion. b) Daubert motions and oppositions thereto shall not exceed fifteen pages of text, and replies shall not exceed seven pages of text. c) Experts designed by a Party shall be entitled to keep one copy of their expert report(s), deposition testimony, and trial testimony following the conclusion of this matter. 6. Exhibits a) On the date listed in the Schedule, the Parties shall exchange final lists of exhibits to be offered at trial (subject to amendment as described in the following subsection), other than solely for impeachment or rebuttal. No side’s list shall exceed [Defendants’ proposal: 400 / Plaintiffs’ proposal: 800] exhibits. b) On the date listed in the Schedule, the Parties shall exchange amendments to their final lists of exhibits to be offered at trial, other than solely for impeachment or rebuttal. Again, no side’s list shall exceed [Defendants’ proposal: 400 / Plaintiffs’ proposal: 800] total exhibits. 5 Case 1:13-cv-01236-CKK Document 108-1 Filed 10/17/13 Page 6 of 10 c) Upon request, a Party shall provide a copy of any exhibit on its exhibit list to another Party. d) On the date listed in the Schedule, the Parties shall exchange any objections to the opposing side’s exhibits. On the date listed in the Schedule, the Parties shall meet and confer about these objections. e) On the date listed in the Schedule, the Parties shall file a list of all exhibits to be used at trial, other than solely for impeachment or rebuttal, as amended. f) No Party shall be permitted to offer any exhibit at trial that is not disclosed on its final exhibit list as amended without leave of Court for good cause, unless it is offered solely for impeachment or rebuttal. g) Procedures to Provide Exhibits i. On the date listed in the Schedule, each Party shall deliver to Chambers one or more CDs/DVDs containing electronic copies of the exhibits listed by that Party. Submitted exhibits shall include all agreed confidentiality redactions. ii. For any witness being called for live testimony, the calling Party must provide, at the time the witness takes the stand to testify, binders of the exhibits the calling Party intends to use during the witness’s direct examination during that day of trial. Two copies shall be provided to the Court, one copy shall be provided for use by the witness, and three copies shall be provided to the opposing Parties. iii. Five days following the last day of testimony, Parties shall jointly deliver to Chambers one or more CDs/DVDs containing electronic copies of all non-sealed exhibits admitted into evidence, and, separately, one or more CDs/DVDs containing electronic copies of all sealed exhibits admitted into evidence. 6 Case 1:13-cv-01236-CKK Document 108-1 Filed 10/17/13 Page 7 of 10 7. Deposition Designations and Counter-Designations a) On the date listed in the Schedule, the Parties shall exchange designations of deposition testimony to be offered at trial, other than solely for impeachment or rebuttal, and a one-page summary of each deposition designated. b) On the date listed in the Schedule, the Parties shall exchange counter-designations of deposition testimony and any objections to the opposing side’s deposition designations. c) On the date listed in the Schedule, the Parties shall exchange objections to the opposing side’s counter-designations. d) On the date listed in the Schedule, the offering Party shall file the combined deposition designations and counter-designations and objections thereto. Only the portions of the transcript that have been designated or counter-designated shall be filed. To accompany the designations, the offering Party shall file one or more CDs or DVDs containing copies of all exhibits cited in the designated portions of the deposition testimony but no other exhibits. All designated transcripts, along with their exhibits, shall include all agreed confidentiality redactions. e) No Party shall be permitted to offer any deposition testimony at trial that was not disclosed before commencement of trial without leave of Court for good cause, unless it is offered solely for impeachment or rebuttal. 8. Witness Lists and Testimony a) On the date listed in the Schedule, the Parties shall exchange final witness lists (subject to amendment as described in the following subsection). If a listed witness has not previously been deposed by the opposing side in this litigation, the opposing side is entitled to take that witness’s deposition before he or she testifies. 7 Case 1:13-cv-01236-CKK Document 108-1 Filed 10/17/13 Page 8 of 10 b) On the date listed in the Schedule, the Parties shall exchange amendments to their final witness lists. c) On the date listed in the Schedule, the Parties shall file final witness lists as amended. These witness lists shall note the names of the Parties’ witnesses and their affiliation/title. d) Direct testimony shall be submitted by written declaration or affidavit, in a question and answer format, unless the witness is an “adverse” witness or a non-party who did not cooperate in the drafting of his/her written direct testimony, in which case the witness shall appear live. e) A witness submitting written direct testimony must appear live for cross- examination, unless the opposing side declines to examine the witness, in which case the witness need not appear at all. f) Written direct testimony must be exchanged between Parties by 8:00 a.m. three days before the witness appears for cross examination, and a copy of such testimony, reflecting unresolved objections, will be filed with the Court by 5:00 p.m. two days before the witness appears for cross examination. g) For live witnesses, a Party must notify the other side of the witnesses it will call to testify and, to the extent practical, the length of the witnesses’ expected testimony three days before that testimony is expected. h) Within 24 hours of receiving notice from an opposing Party that the opposing Party intends to call that Party’s witness adversely, the recipient Party shall provide the noticing Party a list of the general subjects about which the witness is expected to testify during live testimony. After that witness’s adverse examination is complete, the witness shall be tendered 8 Case 1:13-cv-01236-CKK Document 108-1 Filed 10/17/13 Page 9 of 10 for examination by the opposing Party. Consistent with Federal Rule of Evidence 611(c), such examination shall be without “scope” limitations, so that the witness need appear at trial on only one occasion. i) No Party shall be permitted to call any witness who was not disclosed on its final witness list as amended without leave of the Court for good cause, unless he or she is called solely for impeachment or rebuttal. 9. Demonstrative Exhibits a) Pursuant to the Scheduling and Case Management Order, demonstrative exhibits, other than those to be used by experts, do not need to be included on exhibit lists, but unless otherwise agreed or ordered, need to be provided to trial counsel for the Parties at least 24 hours before any such exhibit may be introduced, or otherwise used, at trial. b) Demonstratives must be marked for identification as trial exhibits even if not moved into evidence. 10. Trial Time a) Trial is expected to last approximately 10-12 court days. Trial will be held from 9:00 a.m. to 5:00 p.m. on November 25-27, December 2-6, December 9, part of December 10, December 13, and, if necessary, December 16-20 or such other dates and times as the Court shall determine. b) Examination time: Each side shall be entitled to [Defendants’ proposal: 30 hours of examination time / Plaintiffs’ proposal: an equal portion of the examination time allowed to Parties in the current trial schedule] (whether direct, cross, re-direct, or re-cross). Opening and closing time limits are in addition to the aforementioned examination time limit. 9 Case 1:13-cv-01236-CKK Document 108-1 Filed 10/17/13 Page 10 of 10 c) Openings and closings: The Parties shall have 90 minutes per side to present their opening statements, with this time split between the various Parties per side as they see fit. The date and time of closing arguments shall be determined by the Court. Notwithstanding Section 9(a) (Demonstrative Exhibits), the Parties are not required to exchange demonstratives to be used in opening statements or closing arguments. Dated: October __, 2013 ___________________________________ HON. COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE 10 Case 1:13-cv-01236-CKK Document 109-1 Filed 10/21/13 Page 1 of 2 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA et al., Plaintiffs, Case No. 1:13-cv-01236-CKK v. US AIRWAYS GROUP, INC. et al., Defendants. ORDER This matter came before the court on the motion of the Allied Pilots Association, Association of Professional Flight Attendants, Association of Flight Attendants-CWA, and the Communications Workers of America, AFL-CIO for leave to file an amicus curiae brief in support of Defendants US Airways Group, Inc. and AMR Corporation that addresses the merits of the above-captioned dispute. Case 1:13-cv-01236-CKK Document 109-1 Filed 10/21/13 Page 2 of 2 On consideration of the motion and other papers filed in this case, IT IS HEREBY ORDERED that the motion is GRANTED, and The Allied Pilots Association, Association of Professional Flight Attendants, Association of Flight Attendants-CWA, and the Communications Workers of America, AFL-CIO shall be permitted to file a brief amicus curiae addressing the merits. Dated: ______________________ _____________________________ United States District Court Judge 2 Case 1:13-cv-01236-CKK Document 110 Filed 10/23/13 Page 1 of 1 UNITED STATES DISTRICT COURT for the District of Columbia UNITED STATES OF AMERICA, et. al., Plaintiffs, vs. US AIRWAYS GROUPS, INC., and AMR CORPORATION, Defendants. ATTORNEY APPEARANCE CASE NUMBER: Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly To the Clerk of this court and all parties of record: Enter my appearance as counsel in this case for Amicus Curiae State of Oklahoma I certify that I am admitted to practice in this court. I am registered in this Court’s Electronic Filing System. October 23, 2013 s/ PATRICK R. WYRICK PATRICK R. WYRICK, OBA #21874 SOLICITOR GENERAL OKLAHOMA OFFICE OF THE ATTORNEY GENERAL 313 NE 21st Street Oklahoma City, OK 73105 (405) 521-3921; (405) 522-0669 Fax Service email: fc.docket@oag.state.ok.us patrick.wyrick@oag.ok.gov Case 1:13-cv-01236-CKK Document 111 Filed 10/23/13 Page 1 of 3 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et. al., Plaintiffs, v. US AIRWAYS GROUPS, INC. and AMR CORPORATION, Defendants. ) ) ) ) ) ) ) ) ) Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly NOTICE OF INTENT TO FILE AMICUS CURIAE BRIEF BY OKLAHOMA ATTORNEY GENERAL E. SCOTT PRUITT The State of Oklahoma by and through its duly elected Attorney General E. Scott Pruitt respectfully submits this notice of intent to file an amicus curiae brief in support of the merger between the Defendant, US Airways Groups, Inc. and AMR Corporation. This amicus brief may be joined by other state Attorneys General. DATED: October 23, 2013 Respectfully submitted, E. SCOTT PRUITT OKLAHOMA ATTORNEY GENERAL s/ PATRICK R. WYRICK PATRICK R. WYRICK, OBA #21874 SOLICITOR GENERAL THOMAS A. BATES, OBA #15672 FIRST ASSISTANT ATTORNEY GENERAL 313 NE 21st Street Oklahoma City, OK 73105 (405) 521-3921 (405) 522-0669 Fax patrick.wyrick@oag.ok.gov Tom.Bates@oag.ok.gov Attorneys for Amicus Curiae State of Oklahoma Case 1:13-cv-01236-CKK Document 111 Filed 10/23/13 Page 2 of 3 CERTIFICATE OF SERVICE I hereby certify that on October 23, 2013, the foregoing Notice was filed with the Clerk of the Court using the Court’s CM/ECF system, served electronically via the Court’s CM/ECF system on all ECF participants and by first class mail on the following: Albert L. Hogan , III SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 155 North Wacker Drive Suite 2700 Chicago, IL 60606-1720 James A. Keyte SKADDEN, ARPS, SLATE, MEAGHER & FLOM, LLP 4 Times Square New York, NY 10036-6522 Jay M. Goffman SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 4 Times Square New York, NY 10036 John Wm Butler , Jr SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 155 North Wacker Drive Suite 2700 Chicago, IL 60606-1720 Kenneth B. Schwartz SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 4 Times Square New York, NY 10036 Sharon L. Levine LOWENSTEIN SANDLER LLP 65 Livingston Avenue Roseland, NJ 07068 s/ PATRICK R. WYRICK Case Document 111 Filed 10/23/13 Page 3 of 3 Case Document 112 Filed 10/28/13 Page 1 of 5 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, US AIRWAYS GROUP, INC., et al., Defendants. 3 Case No. MOTION FOR LEAVE TO FILE AMICUS CURIAE BRIEF BY WORTH INTERNATIONAL AIRPORT BOARD, CITY OF CHARLOTTE CHARLOTTE DOUGLAS. INTERNATIONAL AIRPORT, CITY OF PHILADELPHIA, AND CITY OF PHOENIX PHOENIX SKY HARBOR INTERNATIONAL AIRPORT The Dallas/Fort Worth International Airport Board, the City of Charlotte Charlotte Douglas International Airport, the City of Philadelphia, and the City of Phoenix Phoenix Sky Harbor International AirpOI't (the ?amid?? respectfully move this Court for pennission to ?le a brief amfcus curiae in support of Defendants US Airways Group, Inc. and AMR Corporation that will address the merits of the disputed merger (the "?merger?). Amici intend to explain why they support the merger and will address the bene?ts to competition that the merger will yield. Pursuant to Local Rule 7011), amicz' have sought'consent of the parties to this litigation to ?le the instant motion. Defendants US Airways Group, Inc. and AMR Corporation. have both consented to .amz?ci?s ?ling of a brief amicus curiae on the merits. Counsel for amici contacted counsel of record for the United States via e-mail to. obtain consent on Friday, October 25, 2013;. however, as of the time? of ?ling of this motion, counsel for amici have received no response. Case Document 112 Filed 10/28/13 Page 2 of 5 I. INTEREST OF THE AMICI As set forth below, amici all operate major international hub airports hosting ?ights by American Airlines and/or US Airways. Due to the merger?s positive rami?cations for competition generally, as well the bene?ts it will provide for each of the amici and their respective communities, amici have a substantial interest in this case and their perspectives are relevant to its disposition. The Dallas/Fort Worth International Airport Board, located at 3200 East Air?eld Drive, DFW Airport, TX, 75261, is a joint airport board of the Cities of Dallas and Fort Worth, Texas. It was created in 1968 by a contract between Dallas and Fort Worth, as authorized by Texas statutes. The Board has eleven voting members appointed by the City Councils of Dallas and Fort Worth. DFW International Airport hosts ?ights for US Airways and is a major hub for American Airlines. Charlotte Douglas International Airport, located at 5501 Josh Birmingham Pkwy, Charlotte, NC 28208,- is owned and operated by the City of Charlotte. The. Airport is Operated ?nancially on a fully self-sustaining basis. Charlotte Douglas hosts ?ights for American Airlines and is a major hub for US Airways. The City of Philadelphia, Department of Comn?mrce, Division of Aviation owns and operates Philadelphia International Airport, located at .8800 Essington Drive, Philadelphia, PA 19153. The Airport hosts ?ights for American Airlines and is a major hub for US Airways. The City of Phoenix owns and operates. Phoenix Sky Harbor International Airport, located at 3400 Sky Harbor Blvd, Phoenix, AZ. 8503.4. The airport hosts ?ights for American Airlines. and is a major hub for US Airways. Case Document 112 Filed 10/28/13 Page 3 of 5 II. ARGUMENT An amicus curiae ?does not. repreSent? the parties but participates only for the bene?t of the Court.? Hard Drive Productions, Inc. v. Does 14,495,. 892 F..Supp.2d 3'34, 337 (D.D.C. 2012) (citations omitted). It is solely within the Court?s discretion to determine ?the fact, extent, and manner? of participation by the amicus. Id. Courts will ?nd amicus participation appropriate when (1) ?a party is. not represented competently or is not rep-resented at all,? (.2) ?the amicus has an interest in some other case that may be affected by the decision in the present case,? or (3) ?when the amicus has unique information or perspective that can help the court beyond the help that the lawyers for the parties: are able. to provide.? Jin- v. Ministry of State Sec, 557 F.Supp.2d 131, 137 (quoting Ryan v. Commodity Futures Trading Comm 125 F.3d 1062, 1064 (7th Cir.1997)). Here, amici can provide unique information and perspective regarding the pending merger between US Airways Group, Inc. and AMR Corporation. In their brief, amici intend to discuss how blocking the merger will not increase competition; rather, such action would decrease? competition both domestically and globally, to the detriment of the traveling public and labor, as well as to airports and their [Ocal corriInunities. In addition, amici will discuss the- bene?ts of the merger generally and how it will create a third comprehensive and viable global network that would be fully capable of competing with the other major airlines, to the bene?t of the ?ying public. Finally, amici will discuss the importance of the merger to the airports and those using them. .A mici are uniting in a single brief to reduce any burden on the Court. Amici will not participate in the presentation of evidenCe, will comply with any applicable page limitations and Case Document 112 Filed 10/28/13 Page 4 of 5 other terms of amicus participation, and will "participate in oral argument only to the extent that the Court requests s'uch argument. CONCLUSION Amici reSpectfully request that this court allow them for leave to submit a brief amt-cats curiae on the merits of this matter, on such terms established by the Court. Dated: October 28, 2013. Respectfully submitted, ls/ David H. Bambereer David H. Bamberger DC Bar 362285 Paul D. Schmitt DC B-ar'# 1007680 DLA Piper LLP (US) 500 8th Street, NW Washington, DC 20004 Tel: (202) 799-4500 Fax: (202) 799-5500 paul.schmitt@dlapiper.com Counsel for Dallas/Fort Worth International Airport Board, City of Charlotte Charlotte Douglas International Airport, City. of Philadelphia, and City of Phoenix Phoenix Sky Harbor International Airport Case Document 112 Filed 10/28/13 Page 5 of 5 CERTIFICATE OF SERVICE I hereby certify that on October 28, 2013-, the foregoing Motion was ?led with the Clerk of the Court using the Court?s CWECF system, "served electronically via the Court?s system upon counsel of record, and was served via ?rst-class regular mail upon the following: Albert Hogan, John Wm Butler Jr ARPS, SLATE, MEAGHER FLOM LLP 155 North Wacker Drive Suite 2700 Chicago, IL 60606-1720 Attorneys for amicus Of?cial Committee of Unsecured Creditors James A. Keyte Jay M. Goffman Kenneth. B. Schwartz SKADDEN, ARP-S, SLATE, MEAGHER FLOM, LLP 4 Times Square New York, NY 1003 6-6522 Attorneys for amicus Of?cial Committee of Creditors Sharon L. Levine LOWENSTEIN SANDLER LLP 65 Livingston Avenue- Roseland, NJ 07068 Attorney for amicus Transport Workers Union of America David H. Bamberger David H. Bamberger DC Bar 362285 D-LA Piper LLP (US) 500 8th Street, Washington-,- DC 20004 Tel: (202) 799-4500 Fax: (202) 799?5500 david.bamberger@dlapiper.com Case Document 112-1 Filed 10/28/13 Page 1 of 1 IN THE UNITED STATES. DISTRICT COURT FOR THE DISTRICT OF COLUNIBIA UNITED STATES OF AMERICA, et Plaintiffs, Case No. US AIRWAYS GROUP, INC, et Defendants. (PROPOSED) ORDER AND this day of 2013, this matter having come before the Court on the Motion for Leave to File Amicus Curiae Brief in support of Defendants US Airways Group, Inc. and. AMR Corporation by Dallas/Fort Worth International Airport Board, the City of Charlotte Charlotte Douglas International Airport, the City of Philadelphia, and the City of Phoenix - Phoenix Sky Harbor International Airport, IT IS HEREBY ORDERED that the Motion is GRANTED. The aforementioned parties shall be permitted to ?le a brief amicus curiae addressing the merits of the case. Said brief must no later than SO ORDERED. Date United States District Court Judge Case 1:13-cv-01236-CKK Document 113-1 Filed 10/28/13 Page 1 of 1 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. ______________________________________ ) Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly [PROPOSED] ORDER GRANTING MOTION OF OFFICIAL COMMITTEE OF UNSECURED CREDITORS FOR LEAVE TO FILE AMICUS CURIAE MERITS BRIEF IN SUPPORT OF DEFENDANTS Upon review of the Motion of the Official Committee of Unsecured Creditors (“Statutory Committee”) for Leave to File an Amicus Curiae Merits Brief in Support of the Defendants in the above-captioned matter, it is hereby: ORDERED that the Motion is GRANTED on the grounds that the Statutory Committee will be able to provide unique information and perspective that can assist the Court in evaluating the merits of this litigation. ___________________________ Colleen Kollar-Kotelly United States District Judge Date: Case 1:13-cv-01236-CKK Document 118-1 Filed 10/29/13 Page 1 of 1 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. Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly ORDER This matter came before the Court on the motion of the Charlotte Chamber of Commerce, the Chicagoland Chamber of Commerce, the Dallas Regional Chamber, the Fort Worth Chamber of Commerce, the Greater Philadelphia Chamber of Commerce, and the Greater Phoenix Chamber of Commerce for leave to file a brief amici curiae in support of Defendants US Airways Group, Inc. and AMR Corporation that addresses the merits of the above-captioned dispute. Upon consideration of the motion and other papers filed in this case, it is hereby ORDERED that the motion is GRANTED, and The Charlotte Chamber of Commerce, the Chicagoland Chamber of Commerce, the Dallas Regional Chamber, the Fort Worth Chamber of Commerce, the Greater Philadelphia Chamber of Commerce, and the Greater Phoenix Chamber of Commerce shall be permitted to file a brief amici curiae addressing the merits of this matter. Signed this _____ day of _____________________, 2013. ___________________________________ HON. COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE Case 1:13-cv-01236-CKK Document 119 Filed 10/29/13 Page 1 of 1 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. § § § § § § § § § § Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly APPEARANCE OF COUNSEL To: The clerk of court and all parties of record I am admitted or otherwise authorized to practice in this court, and I appear in this case as cocounsel for the Charlotte Chamber of Commerce, the Chicagoland Chamber of Commerce, the Dallas Regional Chamber, the Fort Worth Chamber of Commerce, the Greater Philadelphia Chamber of Commerce, and the Greater Phoenix Chamber of Commerce. Date: October 29, 2013 /s/ Michael Deuel Sullivan Michael Deuel Sullivan (DC Bar No. 256842) msullivan@wbklaw.com Wilkinson Barker Knauer 2300 N Street NW, Suite 700 Washington, DC 20037 (202) 783-4141 (202) 783-5851 (facsimile) Case 1:13-cv-01236-CKK Document 121 Filed 10/29/13 Page 1 of 3 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. § § § § § § § § § § Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly MOTION FOR ADMISSION OF JODY S. SANDERS PRO HAC VICE Pursuant to Local Civil Rule 83.2(d), Movant, Michael Deuel Sullivan, an attorney admitted to the bar of this Court and in good standing, respectfully moves for the admission of Jody S. Sanders as co-counsel for Charlotte Chamber of Commerce, the Chicagoland Chamber of Commerce, the Dallas Regional Chamber, the Fort Worth Chamber of Commerce, the Greater Philadelphia Chamber of Commerce, and the Greater Phoenix Chamber of Commerce, who are seeking leave to appear as amicus curiae in the above-captioned matter. As grounds, Movant states: 1. Movant is a member in good standing of the Bar of this Court and licensed to practice law in the District of Columbia (D.C. Bar Number 256842). 2. Mr. Sanders is a member in good standing of the State Bar of Texas, as well as the Bars of the U.S. District Court, Northern District of Texas; U.S. District Court, Eastern District of Texas; U.S. District Court, Western District of Texas; U.S. Court of Appeals, Fifth Circuit; and U.S. Court of Appeals, Tenth Circuit. 3. Mr. Sanders is not currently and never has been the subject of any disciplinary action by any bar. MOTION FOR ADMISSION OF JODY S. SANDERS PRO HAC VICE PAGE 1 Case 1:13-cv-01236-CKK Document 121 Filed 10/29/13 Page 2 of 3 4. The Declaration of Jody S. Sanders in support of this Motion is being filed as Exhibit 1 to this Motion in compliance with Local Civil Rule 83.2(d). 5. Pursuant to Local Civil Rule 7(m), counsel for amici curiae has conferred with counsel for the Plaintiff United States of America, Plaintiff States, and for Defendants regarding the filing of this Motion. The Plaintiff United States of America and Defendants do not oppose, and the Plaintiff States either take no position or did not return telephone calls prior to the filing of the Motion. WHEREFORE, Movant requests admission of Jody S. Sanders pro hac vice as counsel for Charlotte Chamber of Commerce, the Chicagoland Chamber of Commerce, the Dallas Regional Chamber, the Fort Worth Chamber of Commerce, the Greater Philadelphia Chamber of Commerce, and the Greater Phoenix Chamber of Commerce. Dated: October 29, 2013 MOTION FOR ADMISSION OF JODY S. SANDERS PRO HAC VICE PAGE 2 Case 1:13-cv-01236-CKK Document 121 Filed 10/29/13 Page 3 of 3 Respectfully submitted, /s/ Michael Deuel Sullivan Michael Deuel Sullivan DC Bar No. 256842 msullivan@wbklaw.com Scott Blake Harris DC Bar No. 940205 sbharris@wbklaw.com Wilkinson Barker Knauer 2300 N Street NW, Suite 700 Washington, DC 20037 (202) 783-4141 (202) 783-5851 (facsimile) David E. Keltner (pro hac vice pending) State Bar No. 11249500 david.keltner@kellyhart.com Marianne M. Auld (pro hac vice pending) State Bar No. 01429910 marianne.auld@kellyhart.com Jody S. Sanders (pro hac vice pending) State Bar No. 24051287 jody.sanders@kellyhart.com Kelly Hart & Hallman LLP 201 Main Street, Suite 2500 Fort Worth, Texas 76102 (817) 332-2500 (817) 878-9280 (facsimile) Attorneys for the Charlotte Chamber of Commerce, the Chicagoland Chamber of Commerce, the Dallas Regional Chamber, the Fort Worth Chamber of Commerce, the Greater Philadelphia Chamber of Commerce, and the Greater Phoenix Chamber of Commerce MOTION FOR ADMISSION OF JODY S. SANDERS PRO HAC VICE PAGE 3 Case Document 120-1 Filed 10/29/13 Page 1 of 2 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et 211., Plaintiffs, v. Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar?Kotelly US AIRWAYS GROUP, INC. AND AMR CORPORATION, Defendants. DECLARATION OF DAVID KELTNER IN SUPPORT OF MOTION FOR ADMISSION PRO HAC VICE 1, David E. Keltner, hereby declare: 1. My full name is David Evans Keltner, counsel for Charlotte Chamber of Commerce, the Chicagoland Chamber of Commerce, the Dallas Regional Chamber, the Fort Worth Chamber of Commerce, the Greater Philadelphia Chamber of Commerce, and the Greater Phoenix Chamber of Commerce, appearing as amicus curiae in the above-captioned matter. I am a partner with the law ?rm of Kelly Hart Hallman LLP. 2. My of?ce is 201 Main Street, Suite 2500, Fort Worth, Texas 76102. My of?ce telephone number is 817-878-3560. 3. I am a member in good standing of the State Bar of Texas and have been admitted to US. Supreme Court, US. Court of Appeals, Fifth Circuit, US. Court of Appeals, Tenth Circuit, US Court of Appeals, Eleventh Circuit, US. District Court, Northern District of Texas, US. District Court, Eastern District of Texas, US. District Court, Western District of Texas, and US. District Court, Southern District of Texas. DECLARATION OF DAVID KELTNER IN SUPPORT OF MOTION FOR ADMISSION PRO HAC VICE PAGE I 1553037V1 Case Document 120-1 Filed 10/29/13 Page 2 of 2 4. I certify that there are no pending disciplinary proceedings against me before any bar, and that I have not been disciplined by any bar in the past. 5. I have not been admitted pro hac vice in this Court within the last two years. 6. I do not engage in the practice of law from an of?ce located in the District of Columbia. I am not currently a member of the District of Columbia Bar, and I do not have an application for membership pending. 8. I certify that I am familiar with the Local Rules of this Court. I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. David E. Keltner DECLARATION OF DAVID KELTNER IN SUPPORT OF MOTION FOR ADMISSION PRO HAC VICE PAGE 2 Case 1:13-cv-01236-CKK Document 121-2 Filed 10/29/13 Page 1 of 1 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. § § § § § § § § § § Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly [PROPOSED] ORDER GRANTING MOTION FOR ADMISSION OF JODY S. SANDERS PRO HAC VICE UPON CONSIDERATION of the Motion for Admission of Jody S. Sanders Pro Hac Vice in the above-captioned matter and the Declaration of Jody S. Sanders, it is hereby: ORDERED that the Motion for Admission of Jody S. Sanders Pro Hac Vice is GRANTED; IT IS FURTHER ORDERED that Jody S. Sanders be allowed to appear pro hac vice in court proceedings in the above-captioned matter. Dated: _______________, 2013 Colleen Kollar-Kotelly United States District Judge [PROPOSED] ORDER GRANTING MOTION FOR ADMISSION OF JODY S. SANDERS PRO HAC VICE Solo Page Case 1:13-cv-01236-CKK Document 122 Filed 10/29/13 Page 1 of 3 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. § § § § § § § § § § Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly MOTION FOR ADMISSION OF MARIANNE M. AULD PRO HAC VICE Pursuant to Local Civil Rule 83.2(d), Movant, Michael Deuel Sullivan, an attorney admitted to the bar of this Court and in good standing, respectfully moves for the admission of Marianne M. Auld as co-counsel for Charlotte Chamber of Commerce, the Chicagoland Chamber of Commerce, the Dallas Regional Chamber, the Fort Worth Chamber of Commerce, the Greater Philadelphia Chamber of Commerce, and the Greater Phoenix Chamber of Commerce, who are seeking leave to appear as amicus curiae in the above-captioned matter. As grounds, Movant states: 1. Movant is a member in good standing of the Bar of this Court and licensed to practice law in the District of Columbia (D.C. Bar Number 256842). 2. Ms. Auld is a member in good standing of the State Bar of Texas, as well as the Bars of the U.S. Court of Appeals, Fifth Circuit; U.S. Court of Appeals, Tenth Circuit; U.S. District Court, Northern District of Texas; U.S. District Court, Southern District of Texas; and U.S. District Court, Eastern District of Texas. 3. Ms. Auld is not currently and never has been the subject of any disciplinary action by any bar. MOTION FOR ADMISSION OF MARIANNE M. AULD PRO HAC VICE PAGE 1 Case 1:13-cv-01236-CKK Document 122 Filed 10/29/13 Page 2 of 3 4. The Declaration of Marianne M. Auld in support of this Motion is being filed as Exhibit 1 to this Motion in compliance with Local Civil Rule 83.2(d). 5. Pursuant to Local Civil Rule 7(m), counsel for amici curiae has conferred with counsel for the Plaintiff United States of America, Plaintiff States, and for Defendants regarding the filing of this Motion. The Plaintiff United States of America and Defendants do not oppose, and the Plaintiff States either take no position or did not return telephone calls prior to the filing of the Motion. WHEREFORE, Movant requests admission of Marianne M. Auld pro hac vice as counsel for Charlotte Chamber of Commerce, the Chicagoland Chamber of Commerce, the Dallas Regional Chamber, the Fort Worth Chamber of Commerce, the Greater Philadelphia Chamber of Commerce, and the Greater Phoenix Chamber of Commerce. Dated: October 29, 2013 MOTION FOR ADMISSION OF MARIANNE M. AULD PRO HAC VICE PAGE 2 Case 1:13-cv-01236-CKK Document 122 Filed 10/29/13 Page 3 of 3 Respectfully submitted, /s/ Michael Deuel Sullivan Michael Deuel Sullivan DC Bar No. 256842 msullivan@wbklaw.com Scott Blake Harris DC Bar No. 940205 sbharris@wbklaw.com Wilkinson Barker Knauer 2300 N Street NW, Suite 700 Washington, DC 20037 (202) 783-4141 (202) 783-5851 (facsimile) David E. Keltner (pro hac vice pending) State Bar No. 11249500 david.keltner@kellyhart.com Marianne M. Auld (pro hac vice pending) State Bar No. 01429910 marianne.auld@kellyhart.com Jody S. Sanders (pro hac vice pending) State Bar No. 24051287 jody.sanders@kellyhart.com Kelly Hart & Hallman LLP 201 Main Street, Suite 2500 Fort Worth, Texas 76102 (817) 332-2500 (817) 878-9280 (facsimile) Attorneys for the Charlotte Chamber of Commerce, the Chicagoland Chamber of Commerce, the Dallas Regional Chamber, the Fort Worth Chamber of Commerce, the Greater Philadelphia Chamber of Commerce, and the Greater Phoenix Chamber of Commerce MOTION FOR ADMISSION OF MARIANNE M. AULD PRO HAC VICE PAGE 3 Case Document 122-1 Filed 10/29/13 Page 1 of 2 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et 211., Plaintiffs, v. Civil Action No. 1:13~cv~01236 (CKK) Judge Colleen Kollar-Kotelly US AIRWAYS GROUP, INC. AND AMR CORPORATION, Defendants. DECLARATION OF MARIANNE M. AULD IN SUPPORT OF MOTION FOR ADMISSION PRO HAC VICE I, Marianne M. Auld, hereby declare: 1. My name is Marianne Marsh Auld, counsel for Charlotte Chamber of Commerce, the Chicagoland Chamber of Commerce, the Dallas Regional Chamber, the Fort Worth Chamber of Commerce, the Greater Philadelphia Chamber of Commerce, and the Greater Phoenix Chamber of Commerce, who are seeking leave to appear as amicus curiae in the above- captioned matter. I am a partner with the law firm of Kelly Hart Hallman LLP. 2. My of?ce is 201 Main Street, Suite 2500, Fort Worth, Texas 76102. My of?ce telephone number is 817-878-3543. 3. I am a member in good standing of the State Bar of Texas and have been admitted to the US. Court of Appeals, Fifth Circuit; US. Court of Appeals, Tenth Circuit; US. District Court, Northern District of Texas; US. District Court, Southern District of Texas; and US District Court, Eastern District of Texas. 4. I certify that there are no pending disciplinary proceedings against me before any bar, and that I have not been disciplined by any bar in the past. DECLARATION OF MARIANNE AULD IN SUPPORT OF MOTION FOR ADMISSION PRO HAC VICE PAGE I 1553128Vl Case Document 122-1 Filed 10/29/13 Page 2 of 2 5. I have not been admitted pro hac vice in this Court within the last two years. 6. I do not engage in the practice of law from an office located in the District of Columbia. 7. I am not currently a member of the District of Columbia Bar, and I do not have an application for membership pending. 8. I certify that I am familiar with the Local Rules of this Court. I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Ill/[dueling Wu. [Mid] Marianne M. Auld DECLARATION OF MARIANNE AULD IN SUPPORT OF FOR ADMISSION PRU HAC VICE PAGE 2 1553 28Vl Case 1:13-cv-01236-CKK Document 122-2 Filed 10/29/13 Page 1 of 1 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. § § § § § § § § § § Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly [PROPOSED] ORDER GRANTING MOTION FOR ADMISSION OF MARIANNE M. AULD PRO HAC VICE UPON CONSIDERATION of the Motion for Admission of Marianne M. Auld Pro Hac Vice in the above-captioned matter and the Declaration of Marianne M. Auld, it is hereby: ORDERED that the Motion for Admission of Marianne M. Auld Pro Hac Vice is Granted; IT IS FURTHER ORDERED that Marianne M. Auld be allowed to appear pro hac vice in court proceedings in the above-captioned matter. Dated: _______________, 2013 Colleen Kollar-Kotelly United States District Judge [PROPOSED] ORDER GRANTING MOTION FOR ADMISSION OF MARIANNE M. AULD PRO HAC VICE Solo Page Case 1:13-cv-01236-CKK Document 123-2 Filed 10/29/13 Page 1 of 1 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. Civil Action No. 1:13-cv-01236 (CKK) Judge Colleen Kollar-Kotelly ORDER This matter came before the Court on the motion of the Charlotte Chamber of Commerce, the Chicagoland Chamber of Commerce, the Dallas Regional Chamber, the Fort Worth Chamber of Commerce, the Greater Philadelphia Chamber of Commerce, and the Greater Phoenix Chamber of Commerce for leave to file a brief amici curiae in support of Defendants US Airways Group, Inc. and AMR Corporation that addresses the merits of the above-captioned dispute. Upon consideration of the motion and other papers filed in this case, it is hereby ORDERED that the motion is GRANTED, and The Charlotte Chamber of Commerce, the Chicagoland Chamber of Commerce, the Dallas Regional Chamber, the Fort Worth Chamber of Commerce, the Greater Philadelphia Chamber of Commerce, and the Greater Phoenix Chamber of Commerce shall be permitted to file a brief amici curiae addressing the merits of this matter. Signed this _____ day of _____________________, 2013. ___________________________________ HON. COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE Case 1:13-cv-01236-CKK Document 124-1 Filed 10/30/13 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Case No.: 1:13-cv-01236-CKK Plaintiffs, v. US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants. [PROPOSED] ORDER This matter came before the Court on the motion of Oneworld Alliance, LLC for leave to file a brief amicus curiae in support of Defendants US Airways Group, Inc. and AMR Corporation that addresses the merits of the above-captioned matter. Upon consideration of the motion and other papers filed in this case, IT IS HEREBY ORDERED that the motion is GRANTED. Oneworld Alliance, LLC shall be permitted to file a brief amicus curiae addressing the merits. ENTERED this _____ day of ________________, 2013 BY THE COURT: ______________________________ Honorable Colleen Kollar-Kotelly United States District Judge 9160269 Case 1:13-cv-01236-CKK Document 125 Filed 10/30/13 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, Case No.: 1:13-cv-01236-CKK v. US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants. APPEARANCE OF COUNSEL To: The clerk of court and all parties of record. I am admitted to practice in this Court, and I appear in this case as counsel for Oneworld Alliance, LLC. Dated: October 30, 2013 Respectfully submitted, /s/ Douglas W. Baruch Douglas W. Baruch (D.C. Bar No. 414354) FRIED FRANK HARRIS SHRIVER & JACOBSON LLP 801 17th Street, NW Washington, D.C. 20006 Tel: (202) 639-7000 Fax: (202) 639-7003 E-mail: douglas.baruch@friedfrank.com Attorneys for Amicus Curiae Oneworld Alliance, LLC Case 1:13-cv-01236-CKK Document 126 Filed 10/30/13 Page 1 of 2 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, Case No.: 1:13-cv-01236-CKK v. US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants. MOTION TO ADMIT PETER S. GURYAN PRO HAC VICE NOW COMES Douglas Baruch, an attorney admitted to the Bar of this Court and in good standing, and respectfully moves for the admission of Peter S. Guryan, pro hac vice, pursuant to Local Rule 83.2(d) of the Local Rules of the United States District Court for the District of Columbia, as counsel for Oneworld Alliance, LLC as amicus curiae in this proceeding. As grounds therefore, Movant states: 1. Mr. Guryan is a member in good standing of the Bar of the State of New York. He is also admitted to practice before the U.S. District Court for the Southern District of New York. 2. Mr. Guryan is not currently and has never previously been the subject of any disciplinary action by any state or federal bar association or administrative agency. 3. Movant is satisfied that Mr. Guryan possesses the character and skills required of a member of the Bar of this Court. WHEREFORE, Movant requests admission of Peter S. Guryan pro hac vice as counsel and representative of Oneworld Alliance, LLC as amicus curiae. Case 1:13-cv-01236-CKK Document 126 Filed 10/30/13 Page 2 of 2 Dated: October 30, 2013 Respectfully submitted, /s/ Douglas W. Baruch Douglas W. Baruch (D.C. Bar No. 414354) FRIED FRANK HARRIS SHRIVER & JACOBSON LLP 801 17th Street, NW Washington, D.C. 20006 Tel: (202) 639-7000 Fax: (202) 639-7003 E-mail: douglas.baruch@friedfrank.com Attorneys for Amicus Curiae Oneworld Alliance, LLC 2 9160473 Case Document 126-1 Filed 10/30/13 Page 1 of 2 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, er al., Plaint?s.? Case No.: V. US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants. DECLARATION OF PETER S. GURYAN IN SUPPORT OF MOTION FOR PRO VICE APPEARANCE Peter S. Guryan, pursuant to 28 U.S.C 1746, hereby declares as follows: 1. My name is Peter S. Guryan. I am a partner at Fried, Frank, Harris, Shriver Jacobson LLP, and I am seeking to appear pro hac vice representing Oneworld Alliance, LLC as amicus curiae in the above-captioned matter. 2. My of?ce address is Fried, Frank, Harris, Shriver Jacobson LLP, One New York Plaza, New York, NY 10004 and my of?ce telephone number is 212-859-8477. 3. I have been admitted to and am a member in good standing of the bar of the State of New York. In addition to the New York state courts, I am admitted to practice and am in good standing in the US. District Court for the Southern District of New York. 4. I certify that I have not been subject to disciplinary proceedings as a member of the bar in any jurisdiction, nor are any disciplinary proceedings currently pending against me. 5. I have not sought pro hac vice admission to this Court in the last two years. Case Document 126-1 Filed 10/30/13 Page 2 of 2 6. I do not engage in the practice of law from an of?ce located in the District of Columbia, am not currently a member of the District of Columbia bar, and do not have. an application for membership pending. 7. I certify that I am personally familiar with the Local Rules of this Court. I declare under penalty of perjury that the foregoing is true and correct. Dated: October 3:7, 2013 New York, New York ll/ PETER s. GURYAN peter. 9160475 Case 1:13-cv-01236-CKK Document 126-2 Filed 10/30/13 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Case No.: 1:13-cv-01236-CKK Plaintiffs, v. US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants. [PROPOSED] ORDER ADMITTING PETER S. GURYAN PRO HAC VICE Upon consideration of the Motion of Douglas Baruch, a member in good standing of the Bar of this Court, for the admission pro hac vice of Peter S. Guryan, and the Declaration of Peter S. Guryan in support thereof, it is hereby ORDERED, that the Motion for Admission Pro Hac Vice of Peter S. Guryan is GRANTED. Mr. Guryan is hereby admitted to the Bar of this Court pro hac vice as counsel and representative of Oneworld Alliance, LLC in this case. ENTERED this _____ day of ________________, 2013 BY THE COURT: ______________________________ Honorable Colleen Kollar-Kotelly United States District Judge 9160269 Case 1:13-cv-01236-CKK Document 127 Filed 10/30/13 Page 1 of 2 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, Case No.: 1:13-cv-01236-CKK v. US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants. MOTION TO ADMIT PETER L. SIMMONS PRO HAC VICE NOW COMES Douglas Baruch, an attorney admitted to the Bar of this Court and in good standing, and respectfully moves for the admission of Peter L. Simmons, pro hac vice, pursuant to Local Rule 83.2(d) of the Local Rules of the United States District Court for the District of Columbia, as counsel for Oneworld Alliance, LLC as amicus curiae in this proceeding. As grounds therefore, Movant states: 1. Mr. Simmons is a member in good standing of the Bar of the State of New York. He is also admitted to practice before the U.S. Supreme Court; the U.S. Courts of Appeals for the First, Second, Sixth, Ninth, and Tenth Circuits; the U.S. District Courts for the Southern District of New York, Eastern District of New York, Western District of New York, Eastern District of Wisconsin, Eastern District of Michigan, and Western District of Pennsylvania; and the U.S. Court of International Trade. 2. Mr. Simmons is not currently and has never previously been the subject of any disciplinary action by any state or federal bar association or administrative agency. Case 1:13-cv-01236-CKK Document 127 Filed 10/30/13 Page 2 of 2 3. Movant is satisfied that Mr. Simmons possesses the character and skills required of a member of the Bar of this Court. WHEREFORE, Movant requests admission of Peter L. Simmons pro hac vice as counsel and representative of Oneworld Alliance, LLC as amicus curiae. Dated: October 30, 2013 Respectfully submitted, /s/ Douglas W. Baruch__________ Douglas W. Baruch (D.C. Bar No. 414354) FRIED FRANK HARRIS SHRIVER & JACOBSON LLP 801 17th Street, NW Washington, D.C. 20006 Tel: (202) 639-7000 Fax: (202) 639-7003 E-mail: douglas.baruch@friedfrank.com Attorneys for Amicus Curiae Oneworld Alliance, LLC 2 Case Document 127-1 Filed 10/30/13 Page 1 of 2 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, er al., Plaintw?fs.? Case N0.: V. US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants. DECLARATION OF PETER L. SIMMONS IN SUPPORT OF MOTION FOR PRO HAC VICE APPEARANCE Peter L. Simmons, pursuant to 28 U.S.C 1746, hereby declares as follows: 1. My full name is Peter Lawrence Simmons. I am a partner at Fried, Frank, Harris, Shriver Jacobson LLP, and I am seeking to appear pro hac vice representing Oneworld Alliance, LLC as amicus curiae in the above-captioned matter. 2. My of?ce address is Fried, Frank, Harris, Shriver Jacobson LLP, One New York Plaza, New York, NY 10004 and my of?ce telephone number is 212?859-8455. 3. I have been admitted to and am a member in good standing of the bar of the State of New York. In addition to the New York state courts, I am admitted to practice and am in good standing in the US. Supreme Court; the US Courts of Appeals for the First, Second, Sixth, Ninth, and Tenth Circuits; the US. District Courts for the Southern District of New York, Eastern District of New York, Western District of New York, Eastern District of Wisconsin, Eastern District of Michigan, and Western District of and the US. Court of International Trade. Case Document 127-1 Filed 10/30/13 Page 2 of 2 4. I certify that I have not been subject to disciplinary proceedings as a member of the bar in any jurisdiction, nor are any disciplinary proceedings currently pending against me. I 5. I have not sought pro hac vice admission to this Court in the last two years. 6. I do not engage in the practice of law from an of?ce located in the District of Columbia, am not currently a member of the District of Columbia bar, and do not have an application for membership pending. 7. I certify that I am personally familiar with the Local Rules of this Court. I declare under penalty of perjury that the foregoing is true and correct. Dated: October 30, 2013 New York, New York SIMMONS peter.Simmons@friedfrank.com 9160222 Case 1:13-cv-01236-CKK Document 127-2 Filed 10/30/13 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Case No.: 1:13-cv-01236-CKK Plaintiffs, v. US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants. [PROPOSED] ORDER ADMITTING PETER L. SIMMONS PRO HAC VICE Upon consideration of the Motion of Douglas Baruch, a member in good standing of the Bar of this Court, for the admission pro hac vice of Peter L. Simmons, and the Declaration of Peter L. Simmons in support thereof, it is hereby ORDERED, that the Motion for Admission Pro Hac Vice of Peter L. Simmons is GRANTED. Mr. Simmons is hereby admitted to the Bar of this Court pro hac vice as counsel and representative of Oneworld Alliance, LLC in this case. ENTERED this _____ day of ________________, 2013 BY THE COURT: ______________________________ Honorable Colleen Kollar-Kotelly United States District Judge Case 1:13-cv-01236-CKK Document 128 Filed 10/30/13 Page 1 of 10 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, v. Case No. 1:13-cv-01236-CKK Trial Commences: November 25, 2013 US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants, TRIAL PROCEDURES ORDER In order to administer this civil action in a manner fair to the litigants and consistent with the Parties’ interest in completing this litigation in the shortest possible time and at the least possible cost, it is hereby ORDERED that the Parties 1 shall comply with each of the directives set forth in this Order. 1 The Parties are Plaintiffs the United States of America, the State of Arizona, the District of Columbia, the State of Florida, the State of Michigan, the Commonwealth of Pennsylvania, the State of Tennessee, and the Commonwealth of Virginia (collectively, the “Plaintiffs”), and Defendants US Airways Group, Inc. and AMR Corporation (collectively, the “Defendants”). Case Document 128 Filed 10/30/13 Page 2 of 10 SCHEDULE OF EVENTS AND DEADLINES Date (2013) Event Deadline November 8 Parties exchange ?nal witness lists November 12 Parties exchange ?nal exhibit lists Parties exchange deposition designations and designation summaries Parties exchange proposed stipulations November 15 Parties exchange amendments to fmal witness lists Parties exchange amendments to ?nal exhibit lists Parties exchange objections and cormter-designations for depositions Parties ?le trial briefs Amici ?le briefs Parties ?le non-Daubert motions in limine Parties exchange supplemental and/or rebuttal expert reports (per prior order) November 17 Parties exchange objections to exhibit lists November 18 Parties meet and confer re: objections to exhibit lists Parties exchange objections to cormter-designations for depositions Parties ?le oppositions to non-Daubert motions in limine November 20 Parties ?le ?nal Witness lists as amended Parties ?le replies in support of non-Daubert motions in linrine Parties ?le ?nal exhibit lists as amended Parties ?le stipulations Close of expert discovery (per prior order) November 21 Pretrial conference at 10:30 a.m. (per prior order) Parties lodge joint compilation of all deposition designations (noting outstanding objections and re?ecting agreed con?dentiality redactions) with Chambers Parties lodge electronic copies of trial exhibits (re?ecting agreed con?dentiality redactions) with Chambers November 22 Parties ?le responses to trial briefs and/or amicus briefs by no later than 10:00 AM November 25 First day of trial (per prior order) Case Document 128 Filed 10/30/13 Page 3 of 10 December 16 or 17 Estimated last day of trial December 21 (est.) Parties ?le proposed ?ndings of fact and conclusions of law ?ve days after the last day of trial (but if the ?fth day is a federal holiday, then six days after the conclusion of trial) December 30 (est.) Parties ?le post-trial briefs, including oppositions to proposed ?ndings of fact and conclusions of law fourteen days after the last day of trial (but if the fourteenth day is a federal holiday, then ?fteen days a?er the conclusion of trial) [If the Court is amenable, Parties waive the ?ling of replies to proposed ?ndings of fact and conclusions of law.] January 6, 2014 Closing arguments Case 1:13-cv-01236-CKK Document 128 Filed 10/30/13 Page 4 of 10 OTHER PROVISIONS 1. Calculation of Time a) 2. The term “day(s),” as used in this Order, refers to calendar days. Trial Briefs and Pretrial Conference a) By the date listed in the Schedule of Events and Deadlines (“Schedule”), each side shall file a trial brief. These briefs shall be in lieu of the pretrial statements contemplated in Local Civil Rule 16.5. Each side’s brief shall not exceed 50 pages of text. Each side may file one 10-page brief responding to the opposing side’s brief and/or any briefs filed by amici by the date listed in the Schedule. b) A final Pretrial Conference will be held on the date and at the time listed in the Schedule. 3. Post-Trial Briefing a) On the dates listed in the Schedule, each side (or each Party) shall file proposed findings of fact and conclusions of law. Within 24 hours of filing, each side (or each Party) shall deliver to Chambers a CD or DVD containing an electronic copy of their proposed findings of fact and conclusions of law hyperlinked to the authorities relied upon and, to the extent feasible, admitted exhibits and trial testimony. b) The findings of fact shall set forth in paragraph form, separately numbered, all factual contentions relied upon by each Party in support of its claims or defenses and shall be free of pejorative language or argument. c) Conclusions of law shall be supported by appropriate citation to legal authority. d) On the date specified in the Schedule, each side (or each Party) shall file a document incorporating (1) a post-trial brief and (2) an opposition to the opposing side’s (or 4 Case 1:13-cv-01236-CKK Document 128 Filed 10/30/13 Page 5 of 10 opposing Parties’) findings of fact and conclusions of law. The brief component of this document shall not exceed 25 pages of text. 4. Motions in Limine a) The timing of motions in limine shall be governed by the Schedule. b) Motions in limine and oppositions thereto shall not exceed ten pages of text, and replies shall not exceed five pages of text. 5. Daubert Motions and Experts a) Daubert motions, if any, shall be filed not later than 72 hours after the filing of the written direct testimony of the expert(s) to which they pertain, and any opposition shall be filed not later than 72 hours of the filing of the motion. b) Daubert motions and oppositions thereto shall not exceed fifteen pages of text, and replies shall not exceed seven pages of text. c) Experts designed by a Party shall be entitled to keep one copy of their expert report(s), deposition testimony, and trial testimony following the conclusion of this matter. 6. Exhibits a) On the date listed in the Schedule, the Parties shall exchange final lists of exhibits to be offered at trial (subject to amendment as described in the following subsection), other than solely for impeachment or rebuttal. b) On the date listed in the Schedule, the Parties shall exchange amendments to their final lists of exhibits to be offered at trial, other than solely for impeachment or rebuttal. Upon request, a Party shall provide a copy of any exhibit on its exhibit list to another Party. 5 Case 1:13-cv-01236-CKK Document 128 Filed 10/30/13 Page 6 of 10 c) On the date listed in the Schedule, the Parties shall exchange any objections to the opposing side’s exhibits. On the date listed in the Schedule, the Parties shall meet and confer about these objections. d) On the date listed in the Schedule, the Parties shall file a list of all exhibits to be used at trial, other than solely for impeachment or rebuttal, as amended. e) No Party shall be permitted to offer any exhibit at trial that is not disclosed on its final exhibit list as amended without leave of Court for good cause, unless it is offered solely for impeachment or rebuttal. f) Procedures to Provide Exhibits i. On the date listed in the Schedule, each Party shall deliver to Chambers one or more CDs/DVDs containing electronic copies of the exhibits listed by that Party. Submitted exhibits shall include all agreed confidentiality redactions. ii. For any witness being called for live testimony, the calling Party must provide, at the time the witness takes the stand to testify, binders of the exhibits the calling Party intends to use during the witness’s direct examination during that day of trial. Two copies shall be provided to the Court, one copy shall be provided for use by the witness, and three copies shall be provided to the opposing Parties. iii. Five days following the last day of testimony, Parties shall jointly deliver to Chambers one or more CDs/DVDs containing electronic copies of all non-sealed exhibits admitted into evidence, and, separately, one or more CDs/DVDs containing electronic copies of all sealed exhibits admitted into evidence. 6 Case 1:13-cv-01236-CKK Document 128 Filed 10/30/13 Page 7 of 10 7. Deposition Designations and Counter-Designations a) On the date listed in the Schedule, the Parties shall exchange designations of deposition testimony to be offered at trial, other than solely for impeachment or rebuttal, and a one-page summary of each deposition designated. b) On the date listed in the Schedule, the Parties shall exchange counter-designations of deposition testimony and any objections to the opposing side’s deposition designations. c) On the date listed in the Schedule, the Parties shall exchange objections to the opposing side’s counter-designations. d) On the date listed in the Schedule, the offering Party shall file the combined deposition designations and counter-designations and objections thereto. Only the portions of the transcript that have been designated or counter-designated shall be filed. To accompany the designations, the offering Party shall file one or more CDs or DVDs containing copies of all exhibits cited in the designated portions of the deposition testimony but no other exhibits. All designated transcripts, along with their exhibits, shall include all agreed confidentiality redactions. e) No Party shall be permitted to offer any deposition testimony at trial that was not disclosed before commencement of trial without leave of Court for good cause, unless it is offered solely for impeachment or rebuttal. 8. Witness Lists and Testimony a) On the date listed in the Schedule, the Parties shall exchange final witness lists (subject to amendment as described in the following subsection). If a listed witness has not previously been deposed by the opposing side in this litigation, the opposing side is entitled to take that witness’s deposition before he or she testifies. 7 Case 1:13-cv-01236-CKK Document 128 Filed 10/30/13 Page 8 of 10 b) On the date listed in the Schedule, the Parties shall exchange amendments to their final witness lists. c) On the date listed in the Schedule, the Parties shall file final witness lists as amended. These witness lists shall note the names of the Parties’ witnesses and their affiliation/title. d) Direct testimony shall be submitted by written declaration or affidavit, in a question and answer format, unless the witness is an “adverse” witness or a non-party who did not cooperate in the drafting of his/her written direct testimony, in which case the witness shall appear live. e) A witness submitting written direct testimony must appear live for cross- examination, unless the opposing side declines to examine the witness, in which case the witness need not appear at all. f) Written direct testimony must be exchanged between Parties by 8:00 a.m. three days before the witness appears for cross examination, and a copy of such testimony, reflecting unresolved objections, will be filed with the Court by 5:00 p.m. two days before the witness appears for cross examination. g) For live witnesses, a Party must notify the other side of the witnesses it will call to testify and, to the extent practical, the length of the witnesses’ expected testimony three days before that testimony is expected. h) Within 24 hours of receiving notice from an opposing Party that the opposing Party intends to call that Party’s witness adversely, the recipient Party shall provide the noticing Party a list of the general subjects about which the witness is expected to testify during live testimony. After that witness’s adverse examination is complete, the witness shall be tendered 8 Case 1:13-cv-01236-CKK Document 128 Filed 10/30/13 Page 9 of 10 for examination by the opposing Party. Consistent with Federal Rule of Evidence 611(c), such examination shall be without “scope” limitations, so that the witness need appear at trial on only one occasion. i) No Party shall be permitted to call any witness who was not disclosed on its final witness list as amended without leave of the Court for good cause, unless he or she is called solely for impeachment or rebuttal. 9. Demonstrative Exhibits a) Pursuant to the Scheduling and Case Management Order, demonstrative exhibits, other than those to be used by experts, do not need to be included on exhibit lists, but unless otherwise agreed or ordered, need to be provided to trial counsel for the Parties at least 24 hours before any such exhibit may be introduced, or otherwise used, at trial. b) Demonstratives must be marked for identification as trial exhibits even if not moved into evidence. 10. Trial Time a) Trial is expected to last approximately 10-12 court days. Trial will be held from 9:00 a.m. to 5:00 p.m. on November 25-27, December 2-6, December 9, part of December 10, and, if necessary, December 16-20 or such other dates and times as the Court shall determine. b) Openings and closings: The Parties shall have 90 minutes per side to present their opening statements, with this time split between the various Parties per side as they see fit. The date and time of closing arguments shall be determined by the Court. Notwithstanding Section 9(a) (Demonstrative Exhibits), the Parties are not required to exchange demonstratives to be used in opening statements or closing arguments. 9 Case 1:13-cv-01236-CKK Document 128 Filed 10/30/13 Page 10 of 10 11. Courtesy Copies a) The parties shall deliver one (1) courtesy copy of any submission that is over twenty-five (25) pages in length or that includes more than one (1) exhibit to the Court Security Officer at the loading dock located at Third and C Streets (not the Clerk’s Office or Chambers). Courtesy copies shall be appropriately bound and tabbed for ease of reference. Dated: October 30, 2013 ______/s/___________________________ HON. COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE 10 Case 1:13-cv-01236-CKK Document 132-1 Filed 10/31/13 Page 1 of 1 IN THE 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-01236-CKK ) ) [PROPOSED] ORDER GRANTING MOTION OF US AIRLINE PILOTS ASSOCIATION FOR LEAVE TO PARTICIPATE AS AMICUS CURIAE This matter came before the Court on the Motion of the US Airline Pilots Association (“USAPA”) for Leave to Participate as Amicus Curiae (the “Motion”). On consideration of the motion, any opposition thereto, and other papers filed in this case, IT IS HEREBY ORDERED that: 1. The Motion is GRANTED; and 2. USAPA is permitted to participate as amicus curiae and file an amicus curiae brief. IT IS SO ORDERED Dated: _________________________ 901461 _____________________________ Hon. Colleen Kollar-Kotelly United States District Court Judge Case 1:13-cv-01236-CKK Document 133 Filed 11/01/13 Page 1 of 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, v. Civil Action No. 1:13-cv-01236-CKK US AIRWAYS GROUP, INC. 111 W. Rio Salado Parkway Tempe, AZ 85281 and AMR CORPORATION 4333 Amon Carter Boulevard Forth Worth, TX 76155 Defendants. NOTICE OF APPEARANCE BY J. BRUCE MCDONALD PLEASE TAKE NOTICE that J. Bruce McDonald of Jones Day hereby enters his appearance as counsel on behalf of Defendant AMR Corporation in the above-captioned case. Respectfully submitted, this the 1st day of November, 2013. /s/ J. Bruce McDonald J. Bruce McDonald (D.C. Bar # 421763) Email: bmcdonald@jonesday.com JONES DAY 51 Louisiana Avenue, N.W. Washington, DC 20001 Tel. (202) 879-3939 Fax (202) 626-1700 Attorney for Defendant AMR Corporation Case 1:13-cv-01236-CKK Document 142-1 Filed 11/07/13 Page 1 of 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ____________________________________ ) UNITED STATES OF AMERICA, et al. ) ) Plaintiffs, ) ) v. ) ) ) US AIRWAYS GROUP, INC., et al., ) ) Defendants. ) ____________________________________) Case No. 1:13-cv-01236-CKK [PROPOSED ORDER] This matter came before the Court on the Motion for Leave to File Amicus Curiae Brief by Southwest Airlines Co. (“Southwest”) (the “Motion”). On consideration of the Motion, any opposition thereto, and other papers filed in this case, IT IS HEREBY ORDERED that: 1. The Motion is GRANTED; and 2. Southwest is permitted to participate as amicus curiae and file an amicus curiae brief. IT IS SO ORDERED. Dated: ______________________ ___________________________________ HON. COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT COURT JUDGE 1 Case Document 144-1 Filed 11/11/13 Page 1 of 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et a1. Plaintiffs, v. Case No. US AIRWAYS GROUP, INC, et al., Defendants. IPROPOSEDI ORDER The Motion for Leave to File Amicus Curiae Brief by Virgin America is GRANTED. The movant shall be permitted to file a brief amicus curiae addressing the merits of this case subject to the following limitations. First, the brief must be ?led by no later than November 15, 2013. Second, the brief must not exceed twenty-?ve (25) pages in length. Third, the Court requests that amicus not include factual materials that will not be presented by the parties as part of the trial record. Instead, amicus should, where possible, focus its brief on legal arguments in support of its position. To the extent amicus incorporates factual information not introduced and subject to cross-examination by the parties, this information will be disregarded by the Court. Finally, the Court requests that amicus coordinate, and, to the extent possible, combine its brief with those of the other amici in this matter. Dated: November 2013 HON. COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE Case 1:13-cv-01236-CKK Document 146 Filed 11/12/13 Page 1 of 1 AO 458 (Rev. 06/09) Appearance of Counsel UNITED STATES DISTRICT COURT for the District of Columbia United States of America, et al. Plaintiff v. US Airways Group, Inc. and AMR Corporation Defendant ) ) ) ) ) Case No. 13-cv-01236 APPEARANCE OF COUNSEL To: The clerk of court and all parties of record I am admitted or otherwise authorized to practice in this court, and I appear in this case as counsel for: . United States Date: 11/12/2013 /s Attorney’s signature Michael D. Billiel, DC Bar #394377 Printed name and bar number 450 Fifth Street Northwest Suite 8000 Washington, DC 20530 Address michael.billiel@usdoj.gov E mail address (202) 307-6666 Telephone number (202) 307-2784 FAX number Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 1 of 28 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, v. Case No. 1:13-cv-01236 (CKK) US AIRWAYS GROUP, INC. and AMR CORPORATION Defendants. PROPOSED FINAL JUDGMENT WHEREAS, Plaintiffs United States of America (“United States”) and the States of Arizona, Florida, Tennessee and Michigan, the Commonwealths of Pennsylvania and Virginia, and the District of Columbia (“Plaintiff States”) filed their Complaint against Defendants US Airways Group, Inc. (“US Airways”) and AMR Corporation (“American”) on August 13, 2013, as amended on September 5, 2013; AND WHEREAS, the United States and the Plaintiff States and Defendants, by their respective attorneys, have consented to the entry of this Final Judgment without trial or adjudication of any issue of fact or law, and without this Final Judgment constituting any evidence against or admission by any party regarding any issue of fact or law; AND WHEREAS, Defendants agree to be bound by the provisions of the Final Judgment pending its approval by the Court; 1 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 2 of 28 AND WHEREAS, the essence of this Final Judgment is the prompt and certain divestiture of certain rights or assets by the Defendants to assure that competition is not substantially lessened; AND WHEREAS, the Final Judgment requires Defendants to make certain divestitures for the purposes of remedying the loss of competition alleged in the Complaint; AND WHEREAS, Defendants have represented to the United States and the Plaintiff States that the divestitures required below can and will be made, and that the Defendants will later raise no claim of hardship or difficulty as grounds for asking the Court to modify any of the provisions below; NOW THEREFORE, before any testimony is taken, without trial or adjudication of any issue of fact or law, and upon consent of the parties, it is ORDERED, ADJUDGED, AND DECREED: I. JURSIDICTION This Court has jurisdiction over the subject matter of and each of the parties to this action. The Complaint states a claim upon which relief can be granted against Defendants US Airways and American under Section 7 of the Clayton Act as amended (15 U.S.C. § 18). II. DEFINITIONS As used in the Final Judgment: A. “Acquirer” or “Acquirers” means the entity or entities, approved by the United States in its sole discretion in consultation with the Plaintiff States, to which Defendants may divest all or specified parts of the Divestiture Assets. 2 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 3 of 28 B. “American” means Defendant AMR Corporation, its parents, successors and assigns, divisions, subsidiaries, affiliates, partnerships and joint ventures; and all directors, officers, employees, agents, and representatives of the foregoing. As used in this definition, the terms “parent,” “subsidiary,” “affiliate,” and “joint venture” refer to any person or entity in which American holds, directly or indirectly, a majority (greater than 50 percent) or total ownership or control or which holds, directly or indirectly a majority (greater than 50 percent) or total ownership or control in American. C. “Associated Ground Facilities” means the facilities owned or operated by Defendants and reasonably necessary for Acquirer(s) to operate the Divested Assets at the relevant airport, including, but not limited to, ticket counters, hold-rooms, leased jet bridges, and operations space. D. “DCA Gates and Facilities” means all rights and interests held by Defendants in the gates at Washington Reagan National Airport (“DCA”) described in Exhibit A and in the Associated Ground Facilities, up to the extent such gates and Associated Ground Facilities were used by Defendants to support the use of the DCA Slots. E. “DCA Slots” means all rights and interests held by Defendants in the 104 slots at DCA listed in Exhibit A, consisting of two air carrier slots held by US Airways at DCA and 102 air carrier slots held by American at DCA, including the JetBlue Slots. F. “Divestiture Assets” means (1) the DCA Slots, (2) the DCA Gates and Facilities, (3) the LGA Slots, (4) the LGA Gates and Facilities, and (5) the Key Airport Gates and Facilities. 3 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 4 of 28 G. “JetBlue Slots” means all rights and interests held by Defendants in the 16 slots at DCA currently leased by American to JetBlue Airways, Inc., listed in Exhibit A. H. “Key Airport” means each of the following airports: (1) Boston Logan International Airport; (2) Chicago O’Hare International Airport; (3) Dallas Love Field; (4) Los Angeles International Airport; and (5) Miami International Airport. I. “Key Airport Gates and Facilities” means all rights and interests held by Defendants in two gates at each Key Airport as described in Exhibit C. The term “Key Airport Gates and Facilities” includes Associated Ground Facilities, up to the extent such facilities were used by Defendants to support the gates described in Exhibit C. J. “LGA Gates and Facilities” means all rights and interests held by Defendants in the gates at New York LaGuardia Airport (“LGA”) described in Exhibit B and Associated Ground Facilities up to the extent of such gates and Associated Ground Facilities were used by Defendants to support the use of the LGA Slots. K. “LGA Slots” means the 34 slots at New York LaGuardia Airport (“LGA”) listed in Exhibit B, consisting of the Southwest Slots and 24 additional slots held by American or US Airways. L. “Slot Bundles” means groupings of DCA Slots and LGA Slots, as determined by the United States in its sole discretion in consultation with the Plaintiff States. M. “Southwest Slots” means the 10 slots at LGA currently leased by American to Southwest Airlines, Inc. listed in Exhibit B. 4 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 5 of 28 N. “Transaction” means the transaction referred to in the Agreement and Plan of Merger among AMR Corporation, AMR Merger Sub, Inc., and US Airways Group, Inc., dated as of February 13, 2013. O. “US Airways” means Defendant US Airways Group, Inc., its parents, successors and assigns, divisions, subsidiaries, affiliates, partnerships and joint ventures; and all directors, officers, employees, agents, and representatives of the foregoing. For purposes of this definition, the terms “parent,” “subsidiary,” “affiliate,” and “joint venture” refer to any person or entity in which US Airways holds, directly or indirectly, a majority (greater than 50 percent) or total ownership or control or which holds, directly or indirectly, a majority (greater than 50 percent) or total ownership or control in US Airways. III. A. APPLICABILITY This Final Judgment applies to Defendants and all other persons in active concert or participation with any of them who receive actual notice of this Final Judgment by personal service or otherwise. B. If, prior to complying with Section IV and V of this Final Judgment, a Defendant directly or indirectly sells or otherwise disposes of any of the Divestiture Assets, it shall require the purchaser of the Divestiture Assets to be bound by the provisions of this Final Judgment. Defendants need not obtain such an agreement from the Acquirer(s) of the assets divested pursuant to this Final Judgment. IV. A. DIVESTITURES Subject to any necessary approval of the Federal Aviation Administration, Defendants are ordered and directed to divest the DCA Slots and LGA Slots to Acquirers 5 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 6 of 28 in a manner consistent with this Final Judgment within ninety (90) calendar days after the later of (1) completion of the Transaction or (2) the United States providing Defendants a list of the Acquirers and Slot Bundles. B. Subject to any necessary approval of the relevant airport operator, Defendants are ordered and directed to transfer the DCA Gates and Facilities as necessary to Acquirers of the DCA Slots within ninety (90) days after completion of the divestiture of the DCA Slots. C. Subject to any necessary approval of the relevant airport operator, Defendants are ordered and directed to transfer the LGA Gates and Facilities as necessary to Acquirer(s) of the LGA Slots within ninety (90) days after completion of the divestiture of the LGA Slots. D. Subject to any necessary approval of the relevant airport operator, Defendants are ordered and directed to divest the Key Airport Gates and Facilities to Acquirer(s) in a manner consistent with this Final Judgment within 180 calendar days after the later of (1) completion of the Transaction or (2) the United States providing Defendants a list of the Acquirers. E. All proceeds from the transfer of the DCA Slots and the LGA Slots are for the account of Defendants. Defendants agree to use their best efforts to divest the Divestiture Assets as expeditiously as possible. The United States in its sole discretion, may agree to one or more extensions of each of the time periods specified in Sections IV.A. – IV.D., not to exceed sixty (60) calendar days in total for each such time period, and shall extend any time period by the number of days during which there is pending any objection under 6 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 7 of 28 Section VI of this Final Judgment. The United States shall notify the Court of any extensions of the time periods. F. The Court orders the divestiture of the DCA Slots and DCA Gates and Facilities to proceed as follows: 1. Defendants shall offer to divest the 16 JetBlue Slots to JetBlue Airways, Inc., by making permanent the current agreement between JetBlue and American to exchange the JetBlue Slots for slots at John F. Kennedy International Airport; 2. Defendants shall divest in Slot Bundles to at least two Acquirers the other 88 DCA slots listed in Exhibit A, together with any of the JetBlue Slots not sold to JetBlue pursuant to paragraph IV.F.1. above; 3. Defendants shall either (a) sublease to Acquirers of the DCA Slots, the DCA Gates and Facilities on the same terms and conditions pursuant to which the Defendants currently lease the DCA Gates and Facilities or, (b) with the consent of the United States, pursuant to an agreement with the airport operator, relinquish the DCA Gates and Facilities to the airport operator to enable the Acquirer to lease them from the airport operator on terms and conditions determined by the airport operator, and shall make best efforts to obtain any consent or approval from the relevant airport operator for the divestitures required by this paragraph; 4. Following the divestiture of the DCA Slots, if requested by an Acquirer, Defendants shall lease the DCA Slots from the Acquirer for no consideration for a period not to exceed 180 calendar days. Defendants shall 7 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 8 of 28 continue to operate the DCA Slots during this lease-back period at a level sufficient to prevent the DCA Slots from reverting to the Federal Aviation Administration pursuant to 14 C.F.R. § 93.227. The lease-back period may be extended at the sole discretion of the Acquirer(s), with the approval of the United States, in consultation with the Plaintiff States. G. The Court orders the divestiture of the LGA Slots and LGA Gates and Facilities to proceed as follows: 1. Defendants shall offer to divest the ten Southwest Slots to Southwest Airlines, Inc.; 2. Defendants shall divest in Slot Bundles to Acquirer(s) the other 24 LGA slots listed in Exhibit B, together with any of the Southwest Slots not sold to Southwest pursuant to Paragraph IV.G.1. above; 3. Defendants shall either (a) sublease to the Acquirer(s) of the LGA Slots, the LGA Gates and Facilities on the same terms and conditions pursuant to which the Defendants currently lease the LGA Gates and Facilities or, (b) with the consent of the United States, pursuant to an agreement with the airport operator, relinquish the LGA Gates and Facilities to the airport operator to enable the Acquirer to lease them from the airport operator on terms and conditions determined by the airport operator, and shall make best efforts to obtain any consent or approval from the relevant airport operator for the divestitures required by this paragraph; 4. Defendants shall make reasonable best efforts to facilitate any re- locations necessary to ensure that the Acquirer(s) can operate from contiguous 8 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 9 of 28 gates at LGA to the extent such relocation does not unduly disrupt Defendants’ operations. 5. Following the divestiture of the LGA Slots, if requested by the Acquirer(s), Defendants shall lease the LGA Slots from the Acquirer for no consideration for a period not to exceed 180 calendar days. Defendants shall continue to operate the LGA Slots during this lease-back period at a level sufficient to prevent the LGA Slots from reverting to the Federal Aviation Administration pursuant to 71 Fed. Reg. 77,854 (Dec. 27, 2006), as extended by 78 Fed. Reg. 28, 279 (Oct. 24, 2013). The lease-back period may be extended at the sole discretion of the Acquirer(s), with the approval of the United States, in consultation with the Plaintiff States. H. The Court orders the divestiture of the Key Airport Gates and Facilities, to proceed as follows: 1. Defendants shall either (a) lease to the Acquirers the Key Airport Gates and Facilities on the same terms and conditions pursuant to which the Defendants currently lease the Key Airport Gates and Facilities, or (b) with the consent of the United States, pursuant to an agreement with the airport operator, relinquish the Key Airport Gates and Facilities to the airport operator to enable the Acquirer to lease them from the airport operator on terms and conditions determined by the airport operator; 2. Defendants shall make best efforts to obtain any consent or approval from the relevant airport operator for the transfer(s) required by this Section; 9 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 10 of 28 3. With respect to the Divestiture Assets at Boston Logan International Airport, Defendants shall make reasonable best efforts to facilitate any re-locations necessary to ensure that the Acquirer(s) can operate from contiguous gates at the Key Airport, to the extent such relocation does not unduly disrupt Defendants’ operations. I. In accomplishing the divestiture ordered by this Final Judgment, Defendants promptly shall make known, by usual and customary means, the availability of the Divestiture Assets to Acquirer(s). Defendants shall inform any such person contacted regarding a possible purchase of the Divestiture Assets that they are being divested pursuant to this Final Judgment and provide that person with a copy of this Final Judgment. Defendants shall offer to furnish to all prospective Acquirers, subject to customary confidentiality assurances, all information and documents relating to the Divestiture Assets customarily provided in a due diligence process except such information or documents subject to the attorney-client privileges or work-product doctrine. Defendants shall make available such information to the United States at the same time that such information is made available to any other person. J. As part of their obligations under paragraph IV.I. above, Defendants shall permit prospective Acquirers of the Divestiture Assets to have reasonable access to: (i) personnel; (ii) the physical facilities of the Divestiture Assets to make reasonable inspections; (iii) all environmental, zoning, and other permit documents and information; and (iv) all financial, operational, or other documents and information customarily provided as part of a due diligence process. 10 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 11 of 28 K. Defendants shall warrant to the Acquirer(s) that each asset will be operational on the date of transfer. L. Defendants shall not take any action that will impede in any way the permitting, operation, or divestiture of the Divestiture Assets. M. Defendants shall warrant to the Acquirer(s) that there are no material defects in any environmental, zoning or other permits obtained or controlled by Defendants pertaining to the operation of the Divestiture Assets, and that following the sale of the Divestiture Assets, Defendants will not undertake, directly or indirectly, any challenges to the environmental, zoning, or other permits relating to the operation of the Divestiture Assets. N. Unless the United States otherwise consents in writing, the divestiture pursuant to Section IV or V shall include the entire Divestiture Assets, and shall be accomplished in such a way as to satisfy the United States, in its sole discretion, in consultation with the Plaintiff States, that the Divestiture Assets can and will be used by the Acquirer(s) as part of a viable, ongoing business, engaged in providing scheduled air passenger service in the United States. Divestiture of the Divestiture Assets may be made to Acquirers, provided that in each instance it is demonstrated to the sole satisfaction of the United States, in consultation with the Plaintiff States, that the Divestiture Assets will remain viable and the divestiture of such assets will remedy the competitive harm alleged in the Complaint. The divestiture, whether pursuant to Section IV or Section V of this Final Judgment, shall be: 1. made to an Acquirer(s) that, in the United States’ sole judgment, in consultation with the Plaintiff States, has the intent and capability (including the 11 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 12 of 28 necessary managerial, operational, technical and financial capability) to compete effectively in the business of providing scheduled airline passenger service; and 2. accomplished so as to satisfy the United States in its sole discretion, in consultation with the Plaintiff States, that none of the terms of any agreement between an Acquirer(s) and Defendants gives Defendants the ability unreasonably to raise the Acquirer’s costs, to lower the Acquirer’s efficiency, or otherwise to interfere in the ability of the Acquirer(s) to effectively compete. V. APPOINTMENT OF TRUSTEE TO EFFECT DIVESTITURE A. If Defendants have not divested the Divestiture Assets within the time periods specified in Sections IV.A. – IV.D., Defendants shall notify the United States and the Plaintiff States of that fact in writing. Upon application of the United States, the Court shall appoint a Divestiture Trustee selected by the United States, in consultation with the Plaintiff States, and approved by the Court to divest the Divestiture Assets in a manner consistent with this Final Judgment. B. After the appointment of a Divestiture Trustee becomes effective, only the Divestiture Trustee shall have the right to sell the Divestiture Assets, including any arrangements related to Associated Ground Facilities. The Divestiture Trustee shall have the power and authority to accomplish the divestiture to an Acquirer(s) acceptable to the United States in its sole discretion, in consultation with the Plaintiff States, at such price and on such terms as are then obtainable upon reasonable effort by the Divestiture Trustee, subject to the provisions of Section IV, V, and VI of this Final Judgment, and shall have such other powers as this Court deems appropriate. 12 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 13 of 28 C. Subject to Section V.E. of this Final Judgment, the Divestiture Trustee may hire at the reasonable cost and expense of Defendants any investment bankers, attorneys, or other agents, who shall be solely accountable to the Divestiture Trustee, reasonably necessary in the Divestiture Trustee’s judgment to assist in the divestiture. D. Defendants shall not object to a sale by the Divestiture Trustee on any ground other than the Divestiture Trustee’s malfeasance. Any such objections by Defendants must be conveyed in writing to the United States, the Plaintiff States and the Divestiture Trustee within ten (10) calendar days after the Divestiture Trustee has provided the notice required under Section VI.A. E. The Divestiture Trustee shall serve at the cost and expense of Defendants, pursuant to a written agreement with Defendants on such terms and conditions as the United States approves, in consultation with the Plaintiff States, and shall account for all monies derived from the sale of the assets sold by the Divestiture Trustee and all costs and expenses so incurred. After approval by the Court of the Divestiture Trustee’s accounting, including fees for its services and those of any professionals and agents retained by the Divestiture Trustee, all remaining money shall be paid to Defendants and the trust shall then be terminated. The compensation of the Divestiture Trustee and any professionals and agents retained by the Divestiture Trustee shall be reasonable in light of the value of the Divestiture Assets and based on a fee arrangement providing the Divestiture Trustee with an incentive based on the price and terms of the divestiture and the speed with which it is accomplished, but timeliness is paramount. F. Defendants shall use their best efforts to assist the Divestiture Trustee in accomplishing the required divestiture. The Divestiture Trustee and any consultants, 13 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 14 of 28 accountants, attorneys, and other persons retained by the Divestiture Trustee shall have full and complete access to the personnel, books, records, and facilities of the business to be divested, and Defendants shall develop financial and other information relevant to such business as the Divestiture Trustee may reasonably request, subject to reasonable protection for trade secret or other confidential research, development, or commercial information. Defendants shall take no action to interfere with or to impede the Divestiture Trustee’s accomplishment of the divestiture. G. After its appointment, the Divestiture Trustee shall file monthly reports with the United States, the Plaintiff States, and the Court setting forth the Divestiture Trustee’s efforts to accomplish the divestiture ordered under this Final Judgment. To the extent such reports contain information that the Divestiture Trustee or Defendants deem confidential, such reports shall not be filed in the public docket of the Court. Such reports shall include the name, address, and telephone number of each person who, during the preceding month, made an offer to acquire, expressed an interest in acquiring, entered into negotiations to acquire, or was contacted or made an inquiry about acquiring any interest in the Divestiture Assets, and shall describe in detail each contact with any such person. The Divestiture Trustee shall maintain full records of all efforts made to divest the Divestiture Assets. H. If the Divestiture Trustee has not accomplished the divestiture ordered under this Final Judgment within six (6) months after its appointment, the Divestiture Trustee shall promptly file with the Court a report setting forth (1) the Divestiture Trustee’s efforts to accomplish the required divestiture, (2) the reasons, in the Divestiture Trustee’s judgment, why the required divestiture has not been accomplished, and (3) the 14 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 15 of 28 Divestiture Trustee’s recommendations. To the extent such reports contain information that the Divestiture Trustee deems confidential, such reports shall not be filed in the public docket of the Court. The Divestiture Trustee shall at the same time furnish such report to the Defendants and to the United States, which shall have the right to make additional recommendations consistent with the purpose of the trust. The Court thereafter shall enter such orders as it shall deem appropriate to carry out the purpose of the Final Judgment, which may, if necessary, include extending the trust and the term of the Divestiture Trustee’s appointment by a period requested by the United States. VI. A. NOTICE OF PROPOSED DIVESTITURES Within two (2) business days following execution of a definitive divestiture agreement, Defendants or the Divestiture Trustee, whichever is then responsible for effecting the divestitures required herein, shall notify the United States and the Plaintiff States, of any proposed divestitures required by Section IV or V of this Final Judgment. If the trustee is responsible, it shall similarly notify Defendants. The notice shall set forth the details of the proposed divestitures and list the name, address, and telephone number of each person not previously identified who offered or expressed an interest in or desire to acquire any ownership interest in the Divestiture Assets, together with full details of the same. B. Within fifteen (15) calendar days of receipt by the United States of such notice, the United States, in its sole discretion, in consultation with the Plaintiff States, may request from Defendants, the proposed Acquirer(s), any other third party, or the Divestiture Trustee, if applicable, additional information concerning the proposed divestitures, the proposed Acquirer(s), and any other potential Acquirer(s). Defendants 15 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 16 of 28 and the Divestiture Trustee shall furnish any additional information requested to the United States within fifteen (15) calendar days of receipt of the request, unless the parties otherwise agree. C. Within thirty (30) calendar days after receipt of the notice, or within twenty (20) calendar days after the United States has been provided the additional information requested from Defendants, the proposed Acquirer(s), any third party, and the trustee, whichever is later, the United States, in consultation with the Plaintiff States, shall provide written notice to Defendants and/or the Divestiture Trustee, stating whether it objects to the proposed divestitures. If the United States provides written notice that it does not object, the divestitures may be consummated, subject only to the Defendants’ limited right to object to the sale under Section V.D. of this Final Judgment. Absent written notice that the United States does not object to the proposed Acquirer(s) or upon objection by the United States, a divestiture proposed under Section IV or Section V shall not be consummated. Upon objection by Defendants under Section V.D., a divestiture proposed under Section V shall not be consummated unless approved by the Court. VII. A. MONITORING TRUSTEE Upon the filing of this Final Judgment, the United States may, in its sole discretion, in consultation with the Plaintiff States, appoint a Monitoring Trustee, subject to approval by the Court. B. The Monitoring Trustee shall have the power and authority to monitor Defendants’ compliance with the terms of this Final Judgment, and shall have such powers as this Court deems appropriate. The Monitoring Trustee shall be required to 16 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 17 of 28 investigate and report on the Defendants’ compliance with this Final Judgment and the Defendants’ progress toward effectuating the purposes of this Final Judgment. C. Subject to Section VII.E of this Final Judgment, the Monitoring Trustee may hire at the cost and expense of Defendants, any consultants, accountants, attorneys, or other persons, who shall be solely accountable to the Monitoring Trustee, reasonably necessary in the Monitoring Trustee’s judgment. D. Defendants shall not object to actions taken by the Monitoring Trustee in fulfillment of the Monitoring Trustee’s responsibilities under this Final Judgment or any other Order of this Court on any ground other than the Monitoring Trustee’s malfeasance. Any such objections by Defendants must be conveyed in writing to the United States, the Plaintiff States, and the Monitoring Trustee within ten (10) calendar days after the action taken by the Monitoring Trustee giving rise to the Defendants’ objection. E. The Monitoring Trustee shall serve at the cost and expense of Defendants, pursuant to a written agreement with Defendants on such terms and conditions as the United States, in consultation with the Plaintiff States, approves. The compensation of the Monitoring Trustee and any consultants, accountants, attorneys, and other persons retained by the Monitoring Trustee shall be on reasonable and customary terms commensurate with the individuals’ experience and responsibilities. The Monitoring Trustee shall, within three (3) business days of hiring any consultants, accountants, attorneys, or other persons, provide written notice of such hiring and the rate of compensation to Defendants. F. The Monitoring Trustee shall have no responsibility or obligation for the operation of Defendants’ businesses. 17 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 18 of 28 G. Defendants shall use their best efforts to assist the Monitoring Trustee in monitoring Defendants’ compliance with their individual obligations under this Final Judgment. The Monitoring Trustee and any consultants, accountants, attorneys, and other persons retained by the Monitoring Trustee shall have full and complete access to the personnel, books, records, and facilities relating to compliance with this Final Judgment, subject to reasonable protection for trade secret or confidential research, development, or commercial information or any applicable privileges. Defendants shall take no action to interfere with or to impede the Monitoring Trustee’s accomplishment of its other responsibilities. The Monitoring Trustee shall, within three (3) business days of hiring any consultants, accountants, attorneys, or other persons, provide written notice of such hiring and the rate of compensation to Defendants. H. After its appointment, the Monitoring Trustee shall file reports every ninety (90) days, or more frequently as needed, with the United States, the Plaintiff States, the Defendants and the Court setting forth the Defendants’ efforts to comply with their individual obligations under this Final Judgment. To the extent such reports contain information that the trustee deems confidential, such reports shall not be filed in the public docket of the Court. I. The Monitoring Trustee shall serve until the completion of the divestitures required by Sections IV and V of this Final Judgment, including any lease back period pursuant to Section IV.F.5. or IV.G.5. 18 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 19 of 28 VIII. FINANCING Defendants shall not finance all or any part of any purchase made pursuant to Section IV or V of this Final Judgment. For purposes of this Section VIII, subleasing shall not be regarded as financing. IX. ASSET PRESERVATION Until the divestiture required by this Final Judgment has been accomplished, Defendants shall take all steps necessary to comply with the Asset Preservation Stipulation and Order entered by this Court. Defendants shall take no action that would jeopardize the divestiture ordered by this Court. X. A. AFFIDAVITS Within twenty (20) calendar days of entry of the Court entering the Asset Preservation Order and Stipulation in this matter, and every thirty (30) calendar days thereafter until the divestiture has been completed under Section IV or V, Defendants shall deliver to the United States and the Plaintiff States an affidavit as to the fact and manner of its compliance with Section IV or V of this Final Judgment. Each such affidavit shall include the name, address, and telephone number of each person who, during the that first twenty (20) calendar days or, thereafter, the preceding thirty (30) calendar days, made an offer to acquire, expressed an interest in acquiring, entered into negotiations to acquire, or was contacted or made an inquiry about acquiring, any interest in the Divestiture Assets, and shall describe in detail each contact with any such person during that period. Each such affidavit shall also include a description of the efforts defendants have taken to solicit buyers for the Divestiture Assets, and to provide required information to prospective Acquirers, including the limitations, if any, on such 19 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 20 of 28 information. Assuming the information set forth in the affidavit is true and complete, any objection by the United States to information provided by Defendants, including limitation on information, shall be made within fourteen (14) calendar days of receipt of such affidavit. B. Within twenty (20) calendar days of the Court entering the Asset Preservation Order and Stipulation in this matter, Defendants shall deliver to the United States an affidavit that describes in reasonable detail all actions defendants have taken and all steps Defendants have implemented on an ongoing basis to comply with Section IX of this Final Judgment. Defendants shall deliver to the United States an affidavit describing any changes to the efforts and actions outlined in Defendants’ earlier affidavits filed pursuant to this section within fifteen (15) calendar days after the change is implemented. C. Defendants shall keep all records of all efforts made to preserve and divest the Divestiture Assets until one year after such divestiture has been completed. XI. A. COMPLIANCE INSPECTION For the purposes of determining or securing compliance with this Final Judgment, or of any related orders such as any Asset Preservation Order, or of determining whether the Final Judgment should be modified or vacated, and subject to any legally recognized privilege, from time to time authorized representatives of the United States Department of Justice, including consultants and other persons retained by the United States, shall, upon written request of an authorized representative of the Assistant Attorney General in charge of the Antitrust Division, and on reasonable notice to Defendants, be permitted: 20 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 21 of 28 (1) access during Defendants’ office hours to inspect and copy, or at the option of the United States, to require Defendants to provide hard copy or electronic copies of, all books, ledgers, accounts, records, data, and documents in the possession, custody, or control of Defendants, relating to any matters contained in this Final Judgment; and (2) to interview, either informally or on the record, Defendants’ officers, employees, or agents, who may have their individual counsel present, regarding such matters. The interviews shall be subject to the reasonable convenience of the interviewee and without restraint or interference by Defendants. B. Upon the written request of an authorized representative of the Assistant Attorney General in charge of the Antitrust Division, Defendants shall submit written reports or response to written interrogatories, under oath if requested, relating to any of the matters contained in this Final Judgment as may be requested. C. No information or documents obtained by the means provided in this section shall be divulged by the United States to any person other than an authorized representative of the executive branch of the United States, except in the course of legal proceedings to which the United States is a party (including grand jury proceedings), or for the purpose of securing compliance with this Final Judgment, or as otherwise required by law. D. If at the time information or documents are furnished by Defendants to the United States, Defendants represent and identify in writing the material in any such information or documents to which a claim of protection may be asserted under Rule 26(c)(7) of the Federal Rules of Civil Procedure, and Defendants mark each pertinent 21 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 22 of 28 page of such material, “Subject to claim of protection under Rule 26(c)(7) of the Federal Rules of Civil Procedure,” then the United States shall give Defendants ten (10) calendar days notice prior to divulging such material in any legal proceeding (other than a grand jury proceeding). XII. NO REACQUISITION Defendants shall not reacquire any interest in any part of the Divestiture Assets divested under this Final Judgment during the term of this Final Judgment. Nothing in this Final Judgment shall prevent Defendants from engaging in trades, exchanges, or swaps involving Divestiture Assets with an Acquirer, provided such arrangements do not increase Defendants’ percentage of slots operated or held or gates operated or held at the airport in question, except that, consistent with industry practice, Defendants may temporarily operate slots for periods of no more than two consecutive months at the request of the Acquirer. Nothing in this Section XII shall prevent Defendants from acquiring additional slots, gates or facilities, other than the Divestiture Assets, at DCA, LGA or the Key Airports subject to the notification requirement in Section XIII.A. Nothing in this Section shall prevent Defendants from cooperating in gate or facility relocations in the ordinary course of the airport operator’s business, including re-locating to the Divestiture Assets, provided the Acquirer of those gates is offered alternative gates and Associated Ground Facilities from the airport operator. XIII. NOTIFICATION OF FUTURE TRANSACTIONS A. Unless such transaction is otherwise subject to the reporting and waiting period requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C. § 18a (the “HSR Act”), Defendants shall not acquire any interest in 22 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 23 of 28 any slot at DCA that was in use at the completion of the Transaction without providing notice to the United States at least thirty (30) calendar days prior to the acquisition, provided however that this reporting requirement shall not apply to transactions that do not result in an increase in Defendants’ percentage of slots operated or held at DCA. Defendants shall maintain a record of any non-reportable transactions and shall provide such record to the United States promptly upon request. B. Any notification provided pursuant to Section XIII.A. above shall be provided in the same format as required by the HSR Act, and shall include the names of the principal representatives of the parties to the transaction who negotiated the agreement and any management or strategic plans discussing the proposed transaction. If within the 30-day period after notification the United States makes a written request for additional information regarding the transaction, Defendants shall not consummate the proposed transaction or agreement until thirty (30) calendar days after submitting all such additional information. Early termination of the waiting periods in this paragraph may be requested and, where appropriate, granted in a similar manner as applicable under the requirements and provisions of the HSR Act and rules promulgated thereunder. C. All references to the HSR Act in this Final Judgment refer to the HSR Act as it exists at the time of the transaction or agreement and incorporate any subsequent amendments to the HSR Act. XIV. BANKRUPTCY For purposes of Section 365 of the Bankruptcy Reform Act of I978, as amended, and codified as 11 U.S.C. §§ 101 et. seq. (the “Bankruptcy Code”) or any analogous provision under any law of any foreign or domestic, federal, state, provincial, local, 23 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 24 of 28 municipal or other governmental jurisdiction relating to bankruptcy, insolvency or reorganization (“Foreign Bankruptcy Law”), (a) no sublease or other agreement related to the Divesture Assets will be deemed to be an executory contract, and (b) if for any reason a sublease or other agreement related to the Divesture Assets is deemed to be an executory contract, the Defendants shall take all necessary steps to ensure that the Acquirer(s) shall be protected in the continued enjoyment of its right under any such agreement including, acceptance of such agreement or any underlying lease or other agreement in proceedings under the Bankruptcy Code or any analogous provision of Foreign Bankruptcy Law. XV. RETENTION OF JURISDICTION This Court retains jurisdiction to enable any party to this Final Judgment to apply to this Court at any time for further orders and directions as may be necessary or appropriate to carry out or construe this Final Judgment, to modify any of its provisions, to ensure and enforce compliance, and to punish violations of its provisions. XVI. EXPIRATION OF FINAL JUDGMENT Unless this Court grants an extension, this Final Judgment shall expire ten (10) years from the date of its entry. XVII. PUBLIC INTEREST DETERMINATION Entry of this Final Judgment is in the public interest. The parties have complied with the requirements of the Antitrust Procedures and Penalties Act, 15 U.S.C. § 16, including making copies available to the public of this Final Judgment, the Competitive Impact Statement, and any comments thereon and the United States’ responses to comments. Based upon the record before the Court, which includes the Competitive 24 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 25 of 28 Impact Statement and any comments and response to comments filed with the Court, entry of this Final Judgment is in the public interest. Date: __________________ Court approval subject to procedures of the Antitrust Procedures and Penalties Act, 15 U.S.C. § 16 The Honorable Colleen Kollar-Kotelly United States District Judge 25 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 26 of 28 EXHIBIT A DCA SLOTS JetBlue Slots (currently held by American) 1284 1034 1014 1040 1334 1217 1018 1013 1097 1012 1058 1174 1025 1172 1200 1221 1321 1159 1051 1138 1272 1381 1342 1345 1167 1628 1100 1292 1492 1606 1425 1274 1667 1139 1351 1420 1543 1388 1312 1364 1202 1353 1503 1575 1445 1296 1233 1271 1481 1480 1666 1422 1460 1411 1380 1396 1559 1642 Additional American Air Carrier Slots 1090 1521 1493 1322 1430 1506 1641 1208 1620 1473 1561 1405 1634 1587 1122 1144 1585 1496 1341 1464 1525 1662 1286 1117 1624 1646 1499 1441 1623 1216 1570 1092 1044 1616 1547 1611 1104 1299 1121 1625 1074 1276 1475 1008 US Airways Air Carrier Slots 1070 1066 DCA Gates Up to five (5) gates from among Gates 24, 26, 28, 30 and 32, if necessary. 26 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 27 of 28 EXHIBIT B LGA SLOTS Southwest Slots (currently held by American) 3351 2215 2101 3045 3335 2120 3422 3312 3665 3314 2139 3784 3380 3013 2147 2033 3258 2166 3236 3841 3282 2111 2222 2008 3080 3826 American LGA Slots 3189 2096 3594 2032 3068 2075 3671 2230 LGA Gates Up to two contiguous gates on Concourse C currently leased by American at LGA. 27 Case 1:13-cv-01236-CKK Document 147-2 Filed 11/12/13 Page 28 of 28 EXHIBIT C KEY AIRPORT GATES Boston Logan International Airport Two gates that Defendants currently lease or two gates that Defendants would be entitled to occupy following any relocation of gates and facilities at the direction of Massport. Chicago O’Hare International Airport Gates L1 and L2. Defendants, at their own expense, will reconfigure Gate L2A, L2B, and L2C, as follows: Gate L2A will be restored to a mainline gate by (a) removing the gate at L2B, (b) moving the gate podium that currently serves Gate L2C south, creating one additional bay for gate L2A, and restriping the tarmac. Defendants will retain their interest in Gate L2C. Dallas Love Field Gates currently leased by American at Dallas Love Field, or which American will be entitled to occupy following completion of construction of the Love Field Modernization Program. Los Angeles International Airport Gates 31A and 31B in Terminal 3. Miami International Airport Two gates currently leased by US Airways in Terminal J. 28 Case 1:13-cv-01236-CKK Document 148 Filed 11/12/13 Page 1 of 21 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, v. Case No. 1:13-cv-01236 (CKK) US AIRWAYS GROUP, INC. and AMR CORPORATION Defendants. COMPETITIVE IMPACT STATEMENT Pursuant to Section 2(b) of the Antitrust Procedures and Penalties Act (“APPA” or “Tunney Act”), 15 U.S.C. § 16(b)-(h), Plaintiffs United States of America (“United States”) files this Competitive Impact Statement relating to the proposed Final Judgment submitted on November 12, 2013, for entry in this civil antitrust matter. I. NATURE AND PURPOSE OF THE PROCEEDING On August 13, 2013, the United States and the States of Arizona, Florida, Tennessee, Texas, the Commonwealths of Pennsylvania and Virginia, and the District of Columbia (“Plaintiff States”) filed a civil antitrust Complaint seeking to enjoin the proposed merger of 1 Case 1:13-cv-01236-CKK Document 148 Filed 11/12/13 Page 2 of 21 Defendants US Airways Group, Inc. (“US Airways”) and AMR Corporation (“American”). 1 The Complaint alleges that the likely effect of this merger would be to lessen competition substantially for 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 Ronald Reagan Washington National Airport (“Reagan National”) in violation of Section 7 of the Clayton Act as amended, 15 U.S.C. § 18. On November 12, 2013, the United States filed a proposed Final Judgment designed to remedy the harm to competition that was likely to result from the proposed merger. The proposed Final Judgment, which is explained more fully below, requires the divestiture of slots, gates, and ground facilities at key airports around the country to permit the entry or expansion of airlines that can provide meaningful competition in numerous markets, eliminate the significant increase in concentration of slots at Reagan National that otherwise would have occurred, and enhance the ability of low-cost carriers to compete with legacy carriers on a system-wide basis. As set forth in the proposed Final Judgment, the Defendants are required to divest or transfer to purchasers approved by the United States, in consultation with the Plaintiff States: • 104 air carrier slots 2 at Reagan National and rights and interests in any associated gates or other ground facilities, up to the extent such gates and ground facilities were used by Defendants to support the use of the divested slots; • 34 slots at New York LaGuardia International Airport (“LaGuardia”) and rights and interests in any associated gates or other ground facilities, up to the extent such gates and ground facilities were used by Defendants to support the use of the divested slots; and • rights and interests to two airport gates and associated ground facilities at each of the following airports: Chicago O’Hare International Airport (“ORD”), Los Angeles 1 Michigan joined the group of Plaintiff States on September 5, 2013; Texas withdrew from the lawsuit on October 1, 2013 after reaching a settlement with the Defendants. References to Plaintiff States include Michigan and exclude Texas. 2 Slots at Reagan National are designated as either “air carrier,” which may be operated with any size aircraft, or “commuter,” which must be operated using aircraft with 76 seats or less. 2 Case 1:13-cv-01236-CKK Document 148 Filed 11/12/13 Page 3 of 21 International Airport (“LAX”), Boston Logan International Airport (“BOS”), Miami International Airport (“MIA”), and Dallas Love Field (“DAL”). The Reagan National and LaGuardia slots will be sold in bundles, under procedures approved by the United States, in consultation with the Plaintiff States. Trial in this matter is scheduled to begin on November 25, 2013. Plaintiffs and Defendants have filed an Asset Preservation Order and Stipulation providing that: (1) Defendants are bound by the terms of the proposed Final Judgment, (2) the litigation will be stayed pending completion of the procedures called for by the APPA, and (3) the proposed Final Judgment may be entered after compliance with the APPA. Entry of the proposed Final Judgment would terminate this action, except that the Court would retain jurisdiction to construe, modify, or enforce the provisions of the proposed Final Judgment and to punish violations thereof. II. DESCRIPTION OF THE EVENTS GIVING RISE TO THE ALLEGED VIOLATION A. The Defendants and the Proposed Transaction US Airways is a Delaware corporation headquartered in Tempe, Arizona. Last year, it flew over fifty million passengers to approximately 200 locations worldwide, taking in more than $13 billion in revenue. US Airways operates hubs in Phoenix, Charlotte, Philadelphia, and Washington, D.C. American is a Delaware corporation headquartered in Fort Worth, Texas. AMR Corporation is the parent company of American Airlines. Last year, American flew over eighty million passengers to approximately 250 locations worldwide, taking in more than $24 billion in revenue. American operates hubs in New York, Los Angeles, Chicago, Dallas, and Miami. In November 2011, American filed for bankruptcy reorganization and is currently under the supervision of the Bankruptcy Court for the Southern District of New York. 3 Case 1:13-cv-01236-CKK Document 148 Filed 11/12/13 Page 4 of 21 US Airways and American agreed to merge on February 13, 2013. US Airways shareholders would own 28 percent of the combined airline, while American shareholders, creditors, labor unions, and employees would own 72 percent. The merged airline would operate under the American brand name, but the new American would be run by US Airways management. B. The Competitive Effects of the Transaction 1. Relevant Markets Domestic scheduled air passenger service is a relevant product market within the meaning of Section 7 of the Clayton Act. Because air travel offers passengers significant time savings and convenience over other forms of travel, few passengers would substitute other modes of transportation (car, bus, or train) for scheduled air passenger service in response to a small but significant industry-wide fare increase. City pairs are relevant geographic markets within the meaning of Section 7 of the Clayton Act. Passengers seek to depart from airports close to where they live and work, and arrive at airports close to their intended destinations. Most airline travel is related to business, family events, and vacations. Thus, most passengers book flights with their origins and destinations predetermined. Few passengers who wish to fly from one city to another would switch to flights between other cities in response to a small but significant and non-transitory fare increase. Passengers traveling within city pairs have different preferences for factors such as nonstop service, the flexibility to purchase tickets or change plans at the last minute and, in cities served by more than one airport, the ability to fly in to or out of the airport most convenient to their home or intended destination. Through a variety of fare restrictions and rules, airlines can profitably raise prices for some of these passengers without raising prices for others. Thus, the 4 Case 1:13-cv-01236-CKK Document 148 Filed 11/12/13 Page 5 of 21 competitive effects of the proposed merger may vary among passengers depending on their preferences for particular types of service or particular airports. Slots at Reagan National Airport also constitute a relevant market within the meaning of Section 7 of the Clayton Act. Reagan National is across the Potomac River from Washington, D.C., and, due to its proximity to the city and direct service via the Metro, airlines actively seek to serve passengers flying into and out of Reagan National. To serve Reagan National, a carrier must have “slots,” which are government-issued rights to take off and land. Reagan National is one of only four airports in the country requiring federally-issued slots. Slots at Reagan National are highly valued, difficult to obtain, and only rarely change hands between airlines. There are no alternatives to slots for airlines seeking to enter or expand their service at Reagan National. 2. Competitive Effects As alleged in the Complaint, this merger would combine two of the four major “legacy” carriers, leaving “New American,” Delta, and United as the remaining major national network carriers. 3 Those three carriers would have extensive national and international networks, connections to hundreds of destinations, established brand names, and strong frequent flyer reward programs. In contrast to the legacy carriers, other carriers (hereinafter referred to as “low-cost carriers” or “LCCs”), such as Southwest Airlines (“Southwest”), JetBlue Airways (“JetBlue”), Virgin America, Frontier Airlines, and Spirit Airlines, have less extensive networks and tend to focus more heavily on lower fares and other value propositions. Southwest carries the most domestic passengers of any airline, however, its route network is limited compared to the four current legacy carriers, especially to significant business-oriented markets. Although the 3 Two carriers—Hawaiian Airlines and Alaska Air—are technically “legacy” carriers, as they have operated interstate service since prior to deregulation and rely on hub-and-spoke networks, but each operates in a narrow geographic region. 5 Case 1:13-cv-01236-CKK Document 148 Filed 11/12/13 Page 6 of 21 LCCs serve fewer destinations than the legacy airlines, they generally offer important competition on the routes that they do serve. This merger would leave three very similar legacy airlines—Delta, United, and the New American. By further reducing the number of legacy airlines and aligning the economic incentives of those that remain, the merger would make it easier for the remaining legacy airlines to cooperate, rather than compete, on price and service. Absent the merger, US Airways and American, as independent competitors, would have unique incentives to disrupt coordination that already occurs to some degree among the legacy carriers. US Airways’ network structure provides the incentive to offer its “Advantage Fares” program, an aggressive discounting strategy aimed at undercutting the other airlines’ nonstop fares with cheaper connecting service. American, having completed a successful reorganization in bankruptcy, would have the incentive, and indeed, it has announced the intention to undertake significant growth at the expense of its competitors. The merger would diminish these important competitive constraints. The merger would also entrench the merged airline as the dominant carrier at Washington Reagan National Airport, where it would control 69 percent of the take-off and landing slots. The merger would eliminate head-to-head competition between American and US Airways on the routes they both serve from the airport and would effectively foreclose entry or expansion by other airlines that might increase competition at Reagan National. Finally, the merger would eliminate head-to-head competition between US Airways and American on numerous non-stop and connecting routes. 3. Entry and Expansion New entry, or expansion by existing competitors, would be unlikely to prevent or remedy the merger’s likely anticompetitive effects absent the proposed divestitures. Operational barriers 6 Case 1:13-cv-01236-CKK Document 148 Filed 11/12/13 Page 7 of 21 limit entry and expansion at a number of important airports. 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 low-cost carriers. Slots at these airports are concentrated in the hands of large legacy airlines that have little incentive to sell or lease slots to those carriers most likely to compete aggressively against them. As a result, slots are expensive, difficult to obtain, and change hands only rarely. Access to gates can also be a substantial barrier to entry or expansion at some airports. At several large airports, a significant portion of the available gates are leased to established airlines under long-term exclusive-use leases. In such cases, a carrier seeking to enter or expand would have to sublease gates from incumbent airlines. In addition to operational constraints, new entrants and those seeking to expand must overcome the effects of corporate discount programs offered by dominant incumbents; loyalty to existing frequent flyer programs; a less well-known brand; and the risk of aggressive responses to new entry by the dominant incumbent carrier. However, especially in large cities, low-cost carriers have demonstrated some ability to overcome those disadvantages with the help of lower costs, when they are able to obtain access to the necessary airport facilities. III. EXPLANATION OF THE PROPOSED FINAL JUDGMENT The Complaint alleges several ways that the elimination of US Airways and American as independent competitors will result in harm to consumers. As things stand today, each carrier places important competitive constraints on the other large network carriers. US Airways undercuts the nonstop fares of legacy carriers through its Advantage Fares program. American 7 Case 1:13-cv-01236-CKK Document 148 Filed 11/12/13 Page 8 of 21 had planned to fly more planes. The Complaint alleges that the merger will diminish New American’s incentives to maintain these strategies and increase its incentives to coordinate with the other legacy carriers rather than compete. The Complaint also alleges harm resulting from increased slot concentration at DCA. The proposed remedy seeks to address both the harm resulting from increased slot concentration at DCA and the broader harms alleged in the Complaint by requiring the divestiture of an unprecedented quantity of valuable facilities at seven of the most important airports in the United States. The access to key airports made possible by the divestitures will create network opportunities for the purchasing carriers that would otherwise have been out of reach for the foreseeable future. Those opportunities will provide increased incentives for those carriers to invest in new capacity and expand into additional markets. The proposed remedy will not create a new independent competitor, nor does it purport to replicate American’s capacity expansion plans or create Advantage Fares where they might otherwise be eliminated. Instead, it promises to impede the industry’s evolution toward a tighter oligopoly by requiring the divestiture of critical facilities to carriers that will likely use them to fly more people to more places at more competitive fares. In this way, the proposed remedy will deliver benefits to consumers that could not be obtained by enjoining the merger. The divestiture of 104 air carrier slots at Reagan National and 34 slots at LaGuardia will not only address the localized competitive concerns at those airports, but will deliver substantial additional benefits. American and US Airways currently compete head-to-head on two routes from Reagan National (Raleigh-Durham and Nashville) and one route from LaGuardia (Charlotte). In addition, JetBlue and Southwest offer service on a limited number of routes at these airports through use of slots leased from American on terms that could be renegotiated or 8 Case 1:13-cv-01236-CKK Document 148 Filed 11/12/13 Page 9 of 21 cancelled by the New American. 4 Through the remedy, Southwest and JetBlue will have the opportunity to obtain permanent access to the slots they are currently leasing from American, and those LCCs and others will have the opportunity to acquire more slots at DCA and at LGA as well. This will allow them to provide greatly expanded service on numerous routes, including new nonstop and connecting service to points throughout the country. Similarly, gate divestitures at O’Hare (ORD), Los Angeles (LAX), Boston (BOS), Dallas Love Field (DAL), and Miami (MIA) would expand the presence of potentially disruptive competitors at these strategically important airports located throughout the country. 5 ORD and LAX, two of 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 to be able to enter or expand service. The divestitures will give competing carriers an expanded foothold at these important airports in the center of the country and the west coast, respectively. Likewise, there is limited ability to enter or expand at BOS; the divestitures will provide relief there. 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. The proposed Final Judgment also includes divestitures at Dallas Love Field, an airport near American’s largest hub at Dallas-Fort Worth International Airport (“DFW”). Gates at DFW are readily available, but Love Field, which is much closer to downtown Dallas, is highly gate- 4 JetBlue and American currently engage in an exchange in which JetBlue trades 24 slots at New York’s JFK International Airport to American in exchange for American trading 16 slots at Reagan National to JetBlue. Southwest currently leases ten slots from American at LaGuardia. 5 We estimate that each gate can support between eight and ten round trips per day and thus, two gates at each of these key airports will provide for commercially viable and competitive patterns of service for the recipients of the divested gates. 9 Case 1:13-cv-01236-CKK Document 148 Filed 11/12/13 Page 10 of 21 constrained. Although today operations at Love Field are severely restricted under current law, 6 those restrictions are due to expire in October 2014, at which point Love Field will have a distinct advantage versus DFW, particularly in serving business customers. The divestitures will position a low-cost carrier to provide vigorous competition to the New American’s nonstop and connecting service out of DFW. Past antitrust enforcement demonstrates that providing LCCs with access to constrained airports results in dramatic consumer benefits. In 2010, in response to the United States’ concerns regarding competitive effects of the proposed United/Continental merger, United and Continental transferred 36 slots, three gates and other facilities at Newark to Southwest. Southwest used those assets to establish service on six nonstop routes from Newark, resulting in substantially lower fares to consumers. For example, average fares for travel between Newark and St. Louis dropped 27% and fares for travel between Newark and Houston dropped 15%. In addition, Southwest established connecting service to approximately 60 additional cities throughout the United States. The proposed remedy will require the divestiture of almost four times as many slots as were divested at the time of the United/Continental merger, plus gates and additional facilities at key airports throughout the country. In total, the divestitures will significantly strengthen the purchasing carriers, provide the incentive and ability for those carriers to invest in new capacity, and position them to provide more meaningful competition system-wide. A. The Divestiture of Slots at Reagan National Section IV.F of the Proposed Final Judgment requires that the New American permanently divest 104 air carrier slots at Reagan National, two of which shall be slots currently 6 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. 10 Case 1:13-cv-01236-CKK Document 148 Filed 11/12/13 Page 11 of 21 held by US Airways and the remainder from American, including 16 slots American currently leases to JetBlue in exchange for slots at John F. Kennedy International Airport. New American will offer to make the slot exchange with JetBlue permanent. The remaining 88 slots (plus any of the 16 traded slots that JetBlue declines) will be divided into bundles, taking into account specific slot times to ensure commercially viable and competitive patterns of service for the recipients of the divested slots. New American will divest these slot bundles to at least two different carriers approved by the United States in its sole discretion, in consultation with the Plaintiff States. In addition, New American will either sublease or transfer to the purchaser of any Reagan National slots, gates and other ground facilities (e.g., ticket counters, hold-rooms, leased jet bridges, and operations space), up to the extent such gates and facilities were used by Defendants to support the use of the divested slots, on the same terms and conditions pursuant to which the New American currently leases those facilities. Following the divestiture of the Reagan National slots, if requested by the purchasers, Defendants shall lease back the slots for no consideration for a period not to exceed 180 calendar days, or as may be extended at the request of the purchaser, with the approval of the United States, in consultation with the Plaintiff States. The value of this rent-free lease back will naturally be reflected in the purchase price of the slots. A transfer of this magnitude will naturally entail a transition period for both the acquirers and the Defendants. The lease-back provisions are designed to allow purchasers sufficient time to institute new service while incentivizing them to establish that service reasonably quickly. 11 Case 1:13-cv-01236-CKK Document 148 Filed 11/12/13 Page 12 of 21 B. The Divestiture of Slots and Facilities at LaGuardia Section IV.G of the Proposed Final Judgment requires that New American permanently divest 34 air carrier slots at LGA. New American will offer to divest to Southwest on commercially reasonable terms the 10 slots Southwest currently leases from American. The United States will identify the remaining 24 slots to be divested taking into account specific slot times to ensure commercially viable and competitive patterns of service for the recipients of the divested slots. The 24 slots (in addition to any of the 10 leased slots that Southwest declines) will be divided into bundles and divested to carriers approved by the United States in its sole discretion, in consultation with the Plaintiff States. In addition, New American will either sublease or transfer to the purchaser of any LaGuardia slots gates and other ground facilities (e.g., ticket counters, hold-rooms, leased jet bridges, and operations space), up to the extent such gates and facilities were used by Defendants to support the use of the divested slots, on the same terms and conditions pursuant to which the New American currently leases those facilities. With respect to gates, New American will make reasonable best efforts to facilitate any gate moves necessary to ensure that the purchasing carrier can operate contiguous gates. Following the divestiture of the LaGuardia slots, if requested by the purchasers, Defendants shall lease back the slots for no consideration for a period not to exceed 180 calendar days, or as may be extended at the request of the purchaser, with the approval of the United States, in consultation with the Plaintiff States. The value of this rent-free lease back will naturally be reflected in the purchase price of the slots. A transfer of this magnitude will naturally entail a transition period for both the acquirers and the Defendants. The lease-back 12 Case 1:13-cv-01236-CKK Document 148 Filed 11/12/13 Page 13 of 21 provisions are designed to allow purchasers sufficient time to institute new service while incentivizing them to establish that service reasonably quickly. C. The Divestiture of Gates at Other Key Airports Section IV.H of the Proposed Final Judgment requires that New American will transfer, consistent with the practices of the relevant airport authority, to another carrier or carriers approved by DOJ in its sole discretion, in consultation with the Plaintiff States, all rights and interests in two gates, to be identified and approved by DOJ in its sole discretion, in consultation with the Plaintiff States, and provide reasonable access to ground facilities (e.g., ticket counters, baggage handling facilities, office space, loading bridges) at each of: ORD, LAX, BOS, MIA, DAL on commercial terms and conditions identical to those pursuant to which the gates and facilities are leased to New American. New American will make reasonable best efforts to facilitate any gate moves necessary to ensure that the transferee can operate contiguous gates. D. Divestiture Trustee In the event the Defendants do not accomplish the divestitures as prescribed by the proposed Final Judgment, Section V of the proposed Final Judgment provides that the Court will appoint a Divestiture Trustee selected by the United States, in consultation with the Plaintiff States, to complete the divestitures. If a Divestiture Trustee is appointed, the proposed Final Judgment provides that the Defendants will pay all costs and expenses of the Divestiture Trustee. After his or her appointment becomes effective, the Divestiture Trustee will file monthly reports with the Court and the United States setting forth his or her efforts to accomplish the divestiture. E. Monitoring Trustee Section VII of the proposed Final Judgment permits the United States, in consultation with the Plaintiff States, to appoint a Monitoring Trustee, subject to approval by the Court. If a 13 Case 1:13-cv-01236-CKK Document 148 Filed 11/12/13 Page 14 of 21 Monitoring Trustee is appointed, the proposed Final Judgment provides that the Defendants will pay all costs and expenses of the Monitoring Trustee. After his or her appointment becomes effective, the Monitoring Trustee will file reports with the Court and the United States every ninety days or more frequently as needed setting forth the Defendants’ efforts to comply with the terms of the Final Judgment. F. Prohibition on Reacquisition Section XII of the proposed Final Judgment prohibits the merged company from reacquiring an ownership interest in the divested slots or gates during the term of the Final Judgment. The proposed Final Judgment will not prevent New American from engaging in short-term trades or exchanges involving the divested slots at Reagan National or LGA for scheduling purposes. G. Future Transactions The proposed Final Judgment requires Defendants to provide advance notification of any future slot acquisition at Reagan National by the merged company, regardless of whether the transaction meets the reporting thresholds set forth in the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C. § 18a (the “HSR Act”). The proposed Final Judgment further provides for waiting periods and opportunities for the United States to obtain additional information analogous to the provisions of the HSR Act. H. Stipulation and Order Provisions Defendants have entered into the Stipulation and Order attached as an exhibit to the Explanation of Consent Decree Procedures, which was filed simultaneously with the Court, to ensure that, pending the divestitures, the Divestiture Assets are maintained. The Stipulation and 14 Case 1:13-cv-01236-CKK Document 148 Filed 11/12/13 Page 15 of 21 Order ensures that the Divestiture Assets are preserved and maintained in a condition that allows the divestitures to be effective. IV. REMEDIES AVAILABLE TO POTENTIAL PRIVATE LITIGANTS Section 4 of the Clayton Act, 15 U.S.C. § 15, provides that any person who has been injured as a result of conduct prohibited by the antitrust laws may bring suit in federal court to recover three times the damages the person has suffered, as well as costs and reasonable attorneys’ fees. Entry of the proposed Final Judgment will neither impair nor assist the bringing of any private antitrust damage action. Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. § 16(a), the proposed Final Judgment has no prima facie effect in any subsequent private lawsuit that may be brought against Defendants. V. PROCEDURES AVAILABLE FOR MODIFICATION OF THE PROPOSED FINAL JUDGMENT The United States and Defendants have stipulated that the proposed Final Judgment may be entered by the Court after compliance with the provisions of the APPA, provided that the United States has not withdrawn its consent. The APPA conditions entry upon the Court’s determination that the proposed Final Judgment is in the public interest. The APPA provides a period of at least sixty (60) days preceding the effective date of the proposed Final Judgment within which any person may submit to the United States written comments regarding the proposed Final Judgment. Any person who wishes to comment should do so within sixty (60) days of the date of publication of this Competitive Impact Statement in the Federal Register, or the last date of publication in a newspaper of the summary of this Competitive Impact Statement, whichever is later. All comments received during this period 15 Case 1:13-cv-01236-CKK Document 148 Filed 11/12/13 Page 16 of 21 will be considered by the United States Department of Justice, which remains free to withdraw its consent to the proposed Final Judgment at any time prior to the Court’s entry of judgment. The comments and the response of the United States will be filed with the Court. In addition, comments will be posted on the U.S. Department of Justice, Antitrust Division’s internet website and, under certain circumstances, published in the Federal Register. Written comments should be submitted to: William H. Stallings Chief, Transportation, Energy & Agriculture Section Antitrust Division United States Department of Justice 450 Fifth Street, N.W., Suite 8000 Washington, DC 20530 The proposed Final Judgment provides that the Court retains jurisdiction over this action, and the parties may apply to the Court for any order necessary or appropriate for the modification, interpretation, or enforcement of the Final Judgment. VI. ALTERNATIVES TO THE PROPOSED FINAL JUDGMENT The United States considered, as an alternative to the proposed Final Judgment, a full trial on the merits against the Defendants. The United States could have continued the litigation and sought preliminary and permanent injunctions against the proposed merger. However, the proposed Final Judgment avoids the time, expense, and uncertainty of a full trial on the merits. Moreover, the United States is satisfied that the divestiture of assets described in the proposed Final Judgment is an appropriate remedy. The proposed relief will facilitate entry and expansion by low-cost carriers at key slot-constrained and gate-constrained airports, thereby enhancing the ability of the purchasing carrier(s) to provide meaningful competition to New American and other legacy carriers. 16 Case 1:13-cv-01236-CKK Document 148 Filed 11/12/13 Page 17 of 21 VII. STANDARD OF REVIEW UNDER THE APPA FOR THE PROPOSED FINAL JUDGMENT The Clayton Act, as amended by the APPA, requires that proposed consent judgments in antitrust cases brought by the United States be subject to a sixty-day comment period, after which the court shall determine whether entry of the proposed Final Judgment “is in the public interest.” 15 U.S.C. § 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. § 16(e)(1)(A) & (B). 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 generally 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) (noting that the court’s review of a consent judgment is limited and only inquires “into whether the government's determination that the proposed 17 Case 1:13-cv-01236-CKK Document 148 Filed 11/12/13 Page 18 of 21 remedies will cure the antitrust violations alleged in the complaint was reasonable, and whether the mechanism to enforce the final judgment are clear and manageable.”). 7 As the United States Court of Appeals for the District of Columbia Circuit has held, under the APPA a court considers, among other things, the relationship between the remedy secured and the specific allegations set forth in the government’s complaint, whether the decree is sufficiently clear, whether 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)); see also Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40 (D.D.C. 2001); InBev, 2009 U.S. Dist. LEXIS 84787, at *3. Courts have held that: [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 is “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). 8 In determining whether a proposed settlement is in the public interest, a district court “must accord deference to the 7 The 2004 amendments substituted “shall” for “may” in directing relevant factors for a court 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. § 16(e) (2004), with 15 U.S.C. § 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). 8 Cf. BNS, 858 F.2d at 464 (holding that the court’s “ultimate authority under the [APPA] is limited to approving or disapproving the consent decree”); United States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the court is constrained to “look at the overall picture not hypercritically, nor with a microscope, but with an artist’s reducing glass”). See generally Microsoft, 56 F.3d at 1461 (discussing 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’”). 18 Case 1:13-cv-01236-CKK Document 148 Filed 11/12/13 Page 19 of 21 government’s predictions about the efficacy of its remedies, and may not require that the remedies perfectly match the alleged violations.” SBC Commc’ns, 489 F. Supp. 2d at 17; see also Microsoft, 56 F.3d at 1461 (noting the need for courts to be “deferential to the government’s predictions as to the effect of the proposed 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 proposed remedies, its perception of the market structure, and its views of the nature of the case). Courts have greater flexibility in approving proposed consent decrees than in crafting their own decrees following a finding of liability in a litigated matter. “[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 public interest.’” United States v. Am. Tel. & Tel. Co., 552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff’d sub nom. Maryland v. United States, 460 U.S. 1001 (1983); 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). To meet this standard, 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. Moreover, the court’s role under the APPA is limited to reviewing the remedy in relationship to the violations that the United States has alleged in its Complaint, and does not authorize the court to “construct [its] own hypothetical case and then evaluate the decree against that case.” Microsoft, 56 F.3d at 1459; see also InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (“the ‘public interest’ is not to be measured by comparing the violations alleged in the complaint 19 Case 1:13-cv-01236-CKK Document 148 Filed 11/12/13 Page 20 of 21 against those the court believes could have, or even should have, been alleged”). Because the “court’s authority to review the decree depends entirely on the government’s exercising its prosecutorial discretion by bringing a case in the first place,” it follows that “the court is only authorized to review the decree itself,” and not to “effectively redraft the complaint” to inquire into other matters that the United States did not pursue. Microsoft, 56 F.3d at 1459-60. As this Court confirmed in SBC Communications, courts “cannot look beyond the complaint in making the public interest determination unless the complaint is drafted so narrowly as to make a mockery of judicial power.” SBC Commc’ns, 489 F. Supp. 2d at 15. In its 2004 amendments, Congress made clear its intent to preserve the practical benefits of utilizing 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. § 16(e)(2). The language wrote into the statute what Congress intended when it enacted the Tunney Act in 1974, as Senator Tunney explained: “[t]he court is nowhere compelled to go to trial or to engage in extended proceedings which might have the effect of vitiating the benefits of prompt and less costly settlement through the consent decree process.” 119 Cong. Rec. 24,598 (1973) (statement of Senator Tunney). Rather, 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 Tunney Act proceedings.” SBC Commc’ns, 489 F. Supp. 2d at 11. 9 9 See United States v. Enova Corp., 107 F. Supp. 2d 10, 17 (D.D.C. 2000) (noting that the “Tunney Act expressly allows the court to make its public interest determination on the basis of the competitive impact statement and response to comments alone”); United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) ¶ 61,508, at 71,980 (W.D. Mo. 1977) (“Absent a showing of corrupt failure of the government to discharge its duty, the Court, in making its public interest finding, should . . . carefully consider the explanations of the government in the competitive impact statement and its responses to comments in order to determine whether those explanations are reasonable under the circumstances.”); S. Rep. No. 93-298, 93d Cong., 1st Sess., at 6 (1973) (“Where the public 20 Case 1:13-cv-01236-CKK Document 148 Filed 11/12/13 Page 21 of 21 VIII. DETERMINATIVE DOCUMENTS There are no determinative materials or documents within the meaning of the APPA that were considered by the United States in formulating the proposed Final Judgment. Respectfully submitted, /s Michael D. Billiel (DC Bar #394377) Antitrust Division U.S. Department of Justice 450 Fifth Street, N.W., Suite 4100 Washington, DC 20530 Telephone: (202) 307-6666 Facsimile: (202) 307-2784 E-mail: michael.billiel@usdoj.gov Dated: November 12, 2013 interest can be meaningfully evaluated simply on the basis of briefs and oral arguments, that is the approach that should be utilized.”). 21 Case 1:13-cv-01236-CKK Document 149-1 Filed 11/12/13 Page 1 of 10 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al. Plaintiffs, v. Case No. 1:13-cv-01236 (CKK) US AIRWAYS GROUP, INC. and AMR CORPORATION Defendants. SUPPLEMENTAL STIPULATED ORDER 1 Case 1:13-cv-01236-CKK Document 149-1 Filed 11/12/13 Page 2 of 10 WHEREAS, Plaintiff States of Arizona, Florida, Tennessee and Michigan, the Commonwealths of Pennsylvania and Virginia, and the District of Columbia (“Plaintiff States”) filed their Complaint against Defendants US Airways Group, Inc. (“US Airways”) and AMR Corporation (“American”) on August 13, 2013, as amended on September 5, 2013; AND WHEREAS, the Plaintiff States and Defendants, by their respective attorneys, have consented to the entry of this Supplemental Stipulated Order without trial or adjudication of any issue of fact or law, and without this Supplemental Stipulated Order constituting any evidence against or admission by any party regarding any issue of fact or law; AND WHEREAS, Defendants agree to be bound by the provisions of this Supplemental Stipulated Order pending its entry by the Court; AND WHEREAS, Defendants have represented to the Plaintiff States that the commitments required below can and will be made, and that the Defendants will later raise no claim of hardship or difficulty as grounds for asking the Court to modify any of the provisions below other than those set forth in this Supplemental Stipulated Order; NOW THEREFORE, before any testimony is taken, without trial or adjudication of any issue of fact or law, and upon consent of the parties, it is ORDERED, ADJUDGED, AND DECREED: I. JURSIDICTION This Court has jurisdiction over the subject matter of and each of the parties to this action. The Complaint states a claim upon which relief can be granted against 2 Case 1:13-cv-01236-CKK Document 149-1 Filed 11/12/13 Page 3 of 10 Defendants US Airways and American under Section 7 of the Clayton Act as amended (15 U.S.C. § 18). II. DEFINITIONS A. Unless otherwise indicated, defined terms have the meaning ascribed to them in the Proposed Final Judgment filed simultaneously herewith. B. “New American” or “the New American” means the merged entity after the Transaction has closed. . III. APPLICABILITY A. This Supplemental Stipulated Order applies to Defendants and all other persons in active concert or participation with any of them who receive actual notice of this Supplemental Stipulated Order by personal service or otherwise. IV. HUBS A. Following completion of the merger, and until the third anniversary of the date on which a Stipulation and Final Judgment incorporating these terms, both customary in form, are filed with the Court (the “Effective Date”), New American will maintain in a manner generally consistent with historical operations its hubs at Charlotte Douglas International Airport, John F. Kennedy International Airport, Los Angeles International Airport, Miami International Airport, Chicago O’Hare International Airport, Philadelphia International Airport, and Phoenix Sky Harbor International Airport. 3 Case 1:13-cv-01236-CKK Document 149-1 Filed 11/12/13 Page 4 of 10 V. COMMUNITIES Following completion of the merger, and until the fifth anniversary of the Effective Date, New American will provide daily scheduled service (holidays excepted) from one or more of its hubs to each airport in each of the Plaintiff States set forth in this Section V that had scheduled daily service (holidays excepted) by either American or US Airways at the time of the commencement of the Litigation, except for service that is discontinued as the result of the slot and facilities divestitures required as a condition to completing the merger: State Code Airport Arizona FLG FLAGSTAFF PHX PHOENIX TUS TUCSON INT’L YUM YUMA DAB DAYTONA BEACH EYW KEY WEST FLL FT. LAUDERDALE INT’L GNV GAINESVILLE JAX JACKSONVILLE INT’L MCO ORLANDO INT'L MIA MIAMI INT'L MLB MELBOURNE KENNEDY PBI WEST PALM BEACH INT’L Florida 4 Case 1:13-cv-01236-CKK Document 149-1 Filed 11/12/13 Page 5 of 10 PNS PENSACOLA REGIONAL RSW FORT MYERS REGIONAL SARASOTA/BRADENTON Michigan Pennsylvania SRQ BRADENTON TLH TALLAHASSEE MUNICIPAL TPA TAMPA INTERNATIONAL VPS VALPARAISO / FT WALTON BEACH AZO KALAMAZOO KAL/BTLCRK DTW DETROIT WAYNE CO FNT FLINT BISHOP GRR GRAND RAPIDS KENT CTY MQT MARQUETTE TVC TRAVERSE CITY ABE ALLENTOWN BETHLEHEM AVP WILKES-BARRE/SCRANTON ERI ERIE INTL IPT WILLIAMSPORT MDT HARRISBURG INTL PHL PHILADELPHIA PA/WILM'TON INT’L PIT PITTSBURGH INT’L 5 Case 1:13-cv-01236-CKK Document 149-1 Filed 11/12/13 Page 6 of 10 Tennessee Virginia SCE STATE COLLEGE BNA NASHVILLE METRO CHA CHATTANOOGA LOVELL MEM MEMPHIS INTL TRI TRI-CITY AIRPORT MUNICIPAL TYS KNOXVILLE TYSON CHO CHARLOTTESVILLE ALBEMARLE DCA WASHINGTON NATIONAL IAD WASHINGTON DULLES LYH LYNCHBURG ORF NORFOLK INTL PHF HAMPTON INTL RIC RICHMOND/WMBG INT’L ROA ROANOKE MUNICIPAL VI. A. FORCE MAJEURE New American shall not be deemed in violation of this Supplemental Stipulated Order if it fails to comply with the provisions in Sections IV and V herein due to force majeure events including, without limitation, strikes, boycotts, labor disputes, embargoes, acts of God, acts of the public enemy, acts of a governmental authority, terrorism, riots, rebellion, sabotage, quarantine restrictions, lockouts, war, epidemics, 6 Case 1:13-cv-01236-CKK Document 149-1 Filed 11/12/13 Page 7 of 10 volcanic eruptions, wild fires, or extraordinary security requirements (“Force Majeure”). Should any such Force Majeure occur, New American will provide notice to the Plaintiff States as soon as reasonably practicable, and provide documentation of the circumstances as reasonably requested by the Plaintiff States. In addition, to the extent the Force Majeure is of limited duration, New American will resume its obligations hereunder as soon as reasonably practicable. VII. Material Adverse Change A. In the event of a material adverse change in demand, the competitive environment, or New American’s cost to comply with any of the obligations of Sections IV or V of this Supplemental Stipulated Order, defendants will, unless otherwise ordered by the Court, be relieved of such obligation after 30 days prior notice by Defendants to the Plaintiffs and 20 days prior notice by Defendants to the Court. B. Notice to the Court, under this Section, Section VII, will be satisfied by a motion filed in accordance with the rules of the Court then in effect. Notice to all Plaintiffs will be satisfied by service by overnight courier addressed to Office of the Attorney General Commonwealth of Pennsylvania Antitrust Section Strawberry Square, 14th Floor Harrisburg, PA 17120 Attention: Chief, Antitrust Section VIII. ENFORCEMENT 7 Case 1:13-cv-01236-CKK Document 149-1 Filed 11/12/13 Page 8 of 10 If one or more of the Plaintiff States believes that this Supplemental Stipulated Order has been violated, they may apply to the court for an order of contempt. Before doing so, such Plaintiff State or States must give the New American notice of its belief that the Supplemental Stipulated Order has been breached and a reasonable opportunity for the New American to cure any alleged violation or violations; the New American must be in breach for more than 90 days or announced changes to one of its hubs or communities served that indicate that it will be in breach for more than 90 days. If the court finds that the New American has breached this Supplemental Stipulated Order, the court may order any remedy appropriate to cure the New American’s breach including specific performance or other equitable relief, the award of damages, other compensation and penalties and costs and attorney’s fees. IX. COMPLIANCE One (1) year after the entry of this Supplemental Stipulated Order, annually for the next five years on the anniversary of the entry of this Supplemental Stipulated Order, at other times as Plaintiff States may require, New American shall provide a verified written report to the Plaintiff States setting forth in detail the manner and form in which it has complied and is complying with this Supplemental Stipulated Order. X. FEES AND COSTS New American shall pay to the Plaintiff States their reasonable costs and attorney’s fees incurred in connection with the Litigation in the aggregate amount of $1.75 million. These costs and fees shall reimburse the cost and fees of the Offices of Attorney General of the Plaintiff States. The portion of this payment representing costs 8 Case 1:13-cv-01236-CKK Document 149-1 Filed 11/12/13 Page 9 of 10 shall be used to reimburse their costs. The portion of this payment representing fees shall be used for continued Public Protection and Antitrust Enforcement purposes except that the payment to the District of Columbia shall be paid to the 'D.C. Treasurer' and used in accordance with District of Columbia law. The Plaintiff States shall designate to the Defendants a Plaintiff State that shall receive the fees and costs covered by this section and such Plaintiff State shall redistribute these funds to the other Plaintiff States. XI. RETENTION OF JURISDICTION This Court retains jurisdiction to enable any party to this Supplemental Stipulated Order to apply to this Court at any time for further orders and directions as may be necessary or appropriate to carry out or construe this Supplemental Stipulated Order , to modify any of its provisions, to ensure and enforce compliance, and to punish violations of its provisions. 9 Case 1:13-cv-01236-CKK Document 149-1 Filed 11/12/13 Page 10 of 10 XII. EXPIRATION OF FINAL JUDGMENT Unless this Court grants an extension, this Supplemental Stipulated Order shall expire five (5) years from the date of its entry. IT IS SO ORDERED by the Court, this _____ day of _______________, 2013. BY THE COURT: Colleen Kollar-Kotelly, U.S.D.J. 15086888.2.LITIGATION 10 Case 1:13-cv-01236-CKK Document 152 Filed 11/13/13 Page 1 of 2 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ) UNITED STATES OF AMERICA, et al. ) ) Plaintiffs, ) ) v. ) ) ) US AIRWAYS GROUP, INC., et al., ) ) Defendants. ) ____________________________________) Case No. 1:13-cv-01236-CKK NOTICE OF WITHDRAWAL BY VIRGIN AMERICA INC. Virgin America Inc. respectfully withdraws its request to file a brief amicus curiae. Dated: November 13, 2013 Respectfully submitted, /s/ J. Robert Robertson J. Robert Robertson (D.C. Bar #501873) HOGAN LOVELLS US LLP 555 13TH St., N.W. Washington, DC 20004 Phone: (202) 637-5600 Fax: (202) 637-5731 robby.robertson@hoganlovells.com Attorney for Virgin America Inc. Case 1:13-cv-01236-CKK Document 152 Filed 11/13/13 Page 2 of 2 CERTIFICATE OF SERVICE I hereby certify that on this the 13th day of November, 2013, the foregoing Motion was filed with the Clerk of the Court using the Court’s CM/ECF system, served electronically via the Court’s CM/ECF system upon counsel of record, and served via first class regular mail upon the following: John Wm Butler, Jr. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 155 North Wacker Drive Suite 2700 Chicago, IL 60606-1720 Jay M. Goffman SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 4 Times Square New York, NY 10036-6522 Albert L. Hogan, III SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 155 North Wacker Drive Suite 2700 Chicago, IL 60606-1720 James A. Keyte SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 4 Times Square New York, NY 10036-6522 Sharon L. Levine LOWENSTEIN SANDLER LLP 65 Livingston Avenue Roseland, NJ 07068 Kenneth B. Schwartz SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 4 Times Square New York, NY 10036-6522 /s/ J. Robert Robertson J. Robert Robertson HOGAN LOVELLS US LLP 555 13TH St., N.W. Washington, DC 20004 Phone: (202) 637-5600 Fax: (202) 637-5731 robby.robertson@hoganlovells.com Attorney for Virgin America, Inc. 2 Case 1:13-cv-01236-CKK Document 153 Filed 11/13/13 Page 1 of 1 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, et al., Plaintiffs, v. Case No. 1:13-cv-01236-CKK US AIRWAYS GROUP, INC. and AMR CORPORATION, Defendants, ORDER Pursuant to the [150] Asset Preservation Order and Stipulation, all deadlines in this matter established by the [71] Scheduling and Case Management Order and [128] Trial Procedures Order are stayed. This includes the November 15, 2013 deadline for the filing of amicus curiae briefs. Accordingly, amici who have been granted leave to file should not file any briefs with the Court at this time. Instead, if they have objections to the proposed settlement agreement, they should use the procedures provided by the Antitrust Procedures and Penalties Act (“APPA”), 15 U.S.C. § 16, for making these concerns known. Dated: November 13, 2013 /s/ HON. COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE Case Document 170 Filed 04/25/14 Page 1 of 28 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA, 61? a1. Plaintif?, Case No. 1:13?cv?01236 (CKK) US AIRWAYS GROUP, INC. and AMR CORPORATION Defendants. FINAL JUDGMENT WHEREAS, Plaintiffs United States of America (?United States?) and the States of Arizona, Florida, Tennessee and Michigan, the Commonwealths of and Virginia, and the District of Columbia (?Plaintiff States?) ?led their Complaint against Defendants US Airways Group, Inc. Airways?) and AMR Corporation (?American?) on August 13, 2013, as amended on September 5, 2013; AND WHEREAS, the United States and the Plaintiff States and Defendants, by their respective attorneys, have consented to the entry of this Final Judgment without trial or adjudication of any issue of fact or law, and without this Final Judgment constituting any evidence against or admission by any party regarding any issue of fact or law; AND WHEREAS, Defendants agree to be bound by the provisions of the Final Judgment pending its approval by the Court; Case Document 170 Filed 04/25/14 Page 2 of 28 AND WHEREAS, the essence of this Final Judgment is the prompt and certain divestiture of certain rights or assets by the Defendants to assure that competition is not substantially lessened; AND WHEREAS, the Final Judgment requires Defendants to make certain divestitures for the purposes of remedying the loss of competition alleged in the Complaint; AND WHEREAS, Defendants have represented to the United States and the Plaintiff States that the divestitures required below can and will be made, and that the Defendants will later raise no claim of hardship or dif?culty as grounds for asking the Court to modify any of the provisions below; NOW THEREFORE, before any testimony is taken, without trial or adjudication of any issue of fact or law, and upon consent of the parties, it is ORDERED, ADJUDGED, AND DECREED: I. URSIDICTION This Court has jurisdiction over the subject matter of and each of the parties to this action. The Complaint states a claim upon which relief can be granted against Defendants US Airways and American under Section 7 of the Clayton Act as amended (15 Use. 18). II. DEFINITIONS As used in the Final Judgment: A. ?Acquirer? or ?Acquirers? means the entity or entities, approved by the United States in its sole discretion in consultation with the Plaintiff States, to which Defendants may divest all or speci?ed parts of the Divestiture Assets. Case Document 170 Filed 04/25/14 Page 3 of 28 B. ?American? means Defendant AMR Corporation, its parents, successors and assigns, divisions, subsidiaries, af?liates, partnerships and joint ventures; and all directors, officers, employees, agents, and representatives of the foregoing. As used in this de?nition, the terms ?parent,? ?subsidiary,? ?af?liate,? and ?joint venture? refer to any person or entity in which American holds, directly or indirectly, a majority (greater than 50 percent) or total ownership or control or which holds, directly or indirectly a majority (greater than 50 percent) or total ownership or control in American. C. ?Associated Ground Facilities? means the facilities owned or operated by Defendants and reasonably necessary for Acquirer(s) to operate the Divested Assets at the relevant airport, including, but not limited to, ticket counters, hold-rooms, leased jet bridges, and operations space. D. Gates and Facilities? means all rights and interests held by Defendants in the gates at Washington Reagan National Airport described in Exhibit A and in the Associated Ground Facilities, up to the extent such gates and Associated Ground Facilities were used by Defendants to support the use of the DCA Slots. E. Slots? means all rights and interests held by Defendants in the 104 slots at DCA listed in Exhibit A, consisting of two air carrier slots held by US Airways at DCA and 102 air carrier slots held by American at DCA, including the JetBlue Slots. F. ?Divestiture Assets? means (1) the DCA Slots, (2) the DCA Gates and Facilities, (3) the LGA Slots, (4) the LGA Gates and Facilities, and (5) the Key Airport Gates and Facilities. Case Document 170 Filed 04/25/14 Page 4 of 28 G. ?.l'etBlue Slots? means all rights and interests held by Defendants in the 16 slots at DCA currently leased by American to JetBlue Aiiways, Inc., listed in Exhibit A. H. ?Key Airport? means each of the following airports: (1) Boston Logan International Airport; (2) Chicago O?Hare International Airport; (3) Dallas Love Field; (4) Los Angeles International Airport; and (5) Miami International Airport. 1. ?Key Airport Gates and Facilities? means all rights and interests held by Defendants in two gates at each Key Airport as described in Exhibit C. The term ?Key Airport Gates and Facilities? includes Associated Ground Facilities, up to the extent such facilities were used by Defendants to support the gates described in Exhibit C. J. Gates and Facilities? means all rights and interests held by Defendants in the gates at New York LaGuardia Airport described in Exhibit and Associated Ground Facilities up to the extent of such gates and Associated Ground Facilities were used by Defendants to support the use of the LGA Slots. K. Slots? means the 34 slots at New York LaGuardia Airport listed in Exhibit B, consisting of the Southwest Slots and 24 additional slots held by American or US Airways. L. ?Slot Bundles? means groupings of DCA Slots and LGA Slots, as determined by the United States in its sole discretion in consultation with the Plaintiff States. M. ?Southwest Slots? means the 10 slots at LGA currently leased by American to Southwest Airlines, Inc. listed in Exhibit B. Case Document 170 Filed 04/25/14 Page 5 of 28 N. ?Transaction? means the transaction referred to in the Agreement and Plan of Merger among AMR Corporation, AMR Merger Sub, Inc., and US Airways Group, Inc., dated as of February 13, 2013. 0. Airways? means Defendant US Airways Group, Inc., its parents, successors and assigns, divisions, subsidiaries, af?liates, partnerships and joint ventures; and all directors, of?cers, employees, agents, and representatives of the foregoing. For purposes of this de?nition, the terms ?parent,? ?subsidiary,? ?af?liate,? and ?joint venture? refer to any person or entity in which US Airways holds, directly or indirectly, a majority (greater than 50 percent) or total ownership or control or which holds, directly or indirectly, a majority (greater than 50 percent) or total ownership or control in US Airways. APPLICABILITY A. This Final Judgment applies to Defendants and all other persons in active concert or participation with any of them who receive actual notice of this Final Judgment by personal service or otherwise. B. If, prior to complying with Section IV and of this Final Judgment, a Defendant directly or indirectly sells or otherwise disposes of any of the Divestiture Assets, it shall require the purchaser of the Divestiture Assets to be bound by the provisions of this Final Judgment. Defendants need not obtain such an agreement from the Acquirer(s) of the assets divested pursuant to this Final Judgment. IV. DIVESTITURES A. Subject to any necessary approval of the Federal Aviation Administration, Defendants are ordered and directed to divest the DCA Slots and LGA Slots to Acquirers Case Document 170 Filed 04/25/14 Page 6 of 28 in a manner consistent with this Final Judgment within ninety (90) calendar days after the later of completion of the Transaction or (2) the United States providing Defendants a list of the Acquirers and Slot Bundles. B. Subject to any necessary approval of the relevant airport operator, Defendants are ordered and directed to transfer the DCA Gates and Facilities as necessary to Acquirers of the DCA Slots within ninety (90) days after completion of the divestiture of the DCA Slots. C. Subject to any necessary approval of the relevant airport operator, Defendants are ordered and directed to transfer the LGA Gates and Facilities as necessary to Acquirer(s) of the LGA Slots within ninety (90) days after completion of the divestiture of the LGA Slots. D. Subject to any necessary approval of the relevant airport operator, Defendants are ordered and directed to divest the Key Airport Gates and Facilities to Acquirer(s) in a manner consistent with this Final Judgment within 180 calendar days after the later of (1) completion of the Transaction or (2) the United States providing Defendants a list of the Acquirers. E. Ali proceeds from the transfer of the DCA Slots and the LGA Slots are for the account of Defendants. Defendants agree to use their best efforts to divest the Divestiture Assets as expeditiously as possible. The United States in its sole discretion, may agree to one or more extensions of each of the time periods speci?ed in Sections IVA. IV.D., not to exceed sixty (60) calendar days in total for each such time period, and shall extend any time period by the number of days during which there is pending any objection under Case Document 170 Filed 04/25/14 Page 7 of 28 Section VI of this Final Judgment. The United States shall notify the Court of any extensions of the time periods. F. The Court orders the divestiture of the DCA Slots and DCA Gates and Facilities to proceed as follows: 1. Defendants shall offer to divest the 16 JetBlue Slots to JetBiue Airways, lnc., by making permanent the current agreement between etBlue and American to exchange the JetBlue Slots for slots at John F. Kennedy International Airport; 2. Defendants shall divest in Slot Bundles to at least two Acquirers the other 88 BOA slots listed in Exhibit A, together with any of the JetBlue Slots not sold to etBlue pursuant to paragraph IV.F. 1. above; 3. Defendants shall either sublease to Acquirers of the DCA Slots, the DCA Gates and Facilities on the same terms and conditions pursuant to which the Defendants currently lease the DCA Gates and Facilities or, with the consent of the United States, pursuant to an agreement with the airport operator, relinquish the DCA Gates and Facilities to the airport operator to enable the Acquirer to lease them from the airport operator on terms and conditions determined by the airport operator, and shall make best efforts to obtain any consent or approval from the relevant airport operator for the divestitures required by this paragraph; 4. Following the divestiture of the DCA Slots, if requested by an Acquirer, Defendants shall lease the DCA Slots from the Acquirer for no consideration for a period not to exceed 180 calendar days. Defendants shall Case Document 170 Filed 04/25/14 Page 8 of 28 continue to operate the DCA Slots during this lease?back period at a level suf?cient to prevent the DCA Slots from reverting to the Federal Aviation Administration pursuant to 14 CPR. 93.227. The lease-back period may be extended at the sole discretion of the Acquirer(s), with the approval of the United States, in consultation with the Plaintiff States. G. The Court orders the divestiture of the LGA Slots and LGA Gates and Facilities to proceed as follows: 1. Defendants shall offer to divest the ten Southwest Slots to Southwest Airlines, Inc.; 2. Defendants shall divest in Slot Bundles to Acquirer(s) the other 24 LGA slots listed in Exhibit B, together with any of the Southwest Slots not sold to Southwest pursuant to Paragraph NO. 1. above; 3. Defendants shall either sublease to the Acquirer(s_) of the LGA Slots, the LGA Gates and Facilities on the same terms and conditions pursuant to which the Defendants currently lease the LGA Gates and Facilities or, with the consent of the United States, pursuant to an agreement with the airport operator, relinquish the LGA Gates and Facilities to the airport operator to enable the Acquirer to lease them from the airport operator on terms and conditions determined by the airport operator, and shall make best efforts to obtain any consent or approval from the relevant airport operator for the divestitures required by this paragraph; 4. Defendants shall make reasonable best efforts to facilitate any re- locations necessary to ensure that the Acquirer(s) can operate from contiguous Case Document 170 Filed 04/25/14 Page 9 of 28 gates at LGA to the extent such relocation does not unduly disrupt Defendants? Operations. 5. Following the divestiture of the LGA Slots, if requested by the Acquirer(s), Defendants shall lease the LGA Slots from the Acquirer for no consideration for a period not to exceed 180 calendar days. Defendants shall continue to operate the LGA Slots during this lease-back period at a level suf?cient to prevent the LGA Slots from reverting to the Federal Aviation Administration pursuant to 71 Fed. Reg. 77,854 (Dec. 27, 2006), as extended by 78 Fed. Reg. 28, 279 (Oct. 24, 2013). The lease?back period may be extended at the sole discretion of the Acquirer(s), with the approval of the United States, in consultation with the Plaintiff States. H. The Court orders the divestiture of the Key Airport Gates and Facilities, to proceed as follows: 1. Defendants shall either lease to the Acquirers the Key Airport Gates and Facilities on the same terms and conditions pursuant to which the Defendants currently lease the Key Airport Gates and Facilities, or with the consent of the United States, pursuant to an agreement with the airport operator, relinquish the Key Airport Gates and Facilities to the airport operator to enable the Acquirer to lease them from the airport operator on terms and conditions determined by the airport operator; 2. Defendants shall make best efforts to obtain any consent or approval from the relevant airport operator for the transfer(s) required by this Section; Case Document 170 Filed 04/25/14 Page 10 of 28 3. With respect to the Divestiture Assets at Boston Logan International Airport, Defendants shall make reasonable best efforts to facilitate any re?locations necessary to ensure that the Acquirer(s) can operate from contiguous gates at the Key Airport, to the extent such relocation does not unduly disrupt Defendants? operations. I. In accomplishing the divestiture ordered by this Final Judgment, Defendants shall make known, by usual and customary means, the availability of the Divestiture Assets to Acquirer(s). Defendants shall inform any such person contacted regarding a possible purchase of the Divestiture Assets that they are being divested pursuant to this Final Judgment and provide that person with a copy of this Final Judgment. Defendants shall offer to furnish to all prospective Acquirers, subject to customary con?dentiality assurances, all information and documents relating to the Divestiture Assets customarily provided in a due diligence process except such information or documents subject to the attorney-client privileges or work?product doctrine. Defendants shall make available such information to the United States at the same time that such information is made available to any other person. J. As part of their obligations under paragraph above, Defendants shall permit prospective Acquirers of the Divestiture Assets to have reasonable access to: personnel; (ii) the physical facilities of the Divestiture Assets to make reasonable inspections; all environmental, zoning, and other permit documents and information; and (iv) all ?nancial, operational, or other documents and information customarily provided as part of a due diligence process. 10 Case Document 170 Filed 04/25/14 Page 11 of 28 K. Defendants shall warrant to the Acquirer(s) that each asset will be Operational on the date of transfer. L. Defendants shall not take any action that will impede in any way the permitting, operation, or divestiture of the Divestiture Assets. M. Defendants shall warrant to the Acquirer(s) that there are no material defects in any environmental, zoning or other permits obtained or controlled by Defendants pertaining to the operation of the Divestiture Assets, and that following the sale of the Divestiture Assets, Defendants will not undertake, directly or indirectly, any challenges to the environmental, zoning, or other permits relating to the operation of the Divestiture Assets. N. Unless the United States otherwise consents in writing, the divestiture pursuant to Section IV or shall include the entire Divestiture Assets, and shall be accomplished in such a way as to satisfy the United States, in its sole discretion, in consultation with the Plaintiff States, that the Divestiture Assets can and will be used by the Acquirer(s) as part of a viable, ongoing business, engaged in providing scheduled air passenger service in the United States. Divestiture of the Divestiture Assets may be made to Acquirers, provided that in each instance it is demonstrated to the sole satisfaction of the United States, in consultation with the Plaintiff States, that the Divestiture Assets will remain viable and the divestiture of such assets will remedy the competitive harm alleged in the Complaint. The divestiture, whether pursuant to Section IV or Section of this Final Judgment, shall be: 1. made to an Acquirer(s) that, in the United States? sole judgment, in consultation with the Plaintiff States, has the intent and capability (including the 11 Case Document 170 Filed 04/25/14 Page 12 of 28 necessary managerial, operational, technical and financial capability) to compete effectively in the business of providing scheduled airline passenger service; and 2. accomplished so as to satisfy the United States in its sole discretion, in consultation with the Plaintiff States, that none of the terms of any agreement between an Acquirer(s) and Defendants gives Defendants the ability unreasonably to raise the Acquirer?s costs, to lower the Acquirer?s ef?ciency, or otherwise to interfere in the ability of the Acquirer(s) to effectively compete. V. APPOINTMENT OF TRUSTEE TO EFFECT DIVESTITURE A. If Defendants have not divested the Divestiture Assets within the time periods specified in Sections IVA. IV.D., Defendants shall notify the United States and the Plaintiff States of that fact in writing. Upon application of the United States, the Court shall appoint a Divestiture Trustee selected by the United States, in consultation with the Plaintiff States, and approved by the Court to divest the Divestiture Assets in a manner consistent with this Final Judgment. B. After the appointment of a Divestiture Trustee becomes effective, only the Divestiture Trustee shall have the right to sell the Divestiture Assets, including any arrangements related to Associated Ground Facilities. The Divestiture Trustee shall have the power and authority to accomplish the divestiture to an Acquirer(s) acceptable to the United States in its sole discretion, in consultation with the Plaintiff States, at such price and on such terms as are then obtainable upon reasonable effort by the Divestiture Tiustee, subject to the provisions of Section IV, V, and VI of this Final Judgment, and shall have such other powers as this Court deems appropriate. 12 Case Document 170 Filed 04/25/14 Page 13 of 28 C. Subject to Section V.E. of this Final Judgment, the Divestiture Trustee may hire at the reasonable cost and expense of Defendants any investment bankers, attorneys, or other agents, who shall be solely accountable to the Divestiture Trustee, reasonably necessary in the Divestiture Trustee?s judgment to assist in the divestiture. D. Defendants shall not object to a sale by the Divestiture Trustee on any ground other than the Divestiture Trustee?s malfeasance. Any such objections by Defendants must be conveyed in writing to the United States, the Plaintiff States and the Divestiture Trustee within ten (10) calendar days after the Divestiture Trustee has provided the notice required under Section VLA. E. The Divestiture Trustee shall serve at the cost and expense of Defendants, pursuant to a written agreement with Defendants on such terms and conditions as the United States approves, in consultation with the Plaintiff States, and shall account for all monies derived from the sale of the assets sold by the Divestiture Trustee and all costs and expenses so incurred. After approval by the Court of the Divestiture Trustee?s accounting, including fees for its services and those of any professionals and agents retained by the Divestiture Trustee, all remaining money shall be paid to Defendants and the trust shall then be terminated. The compensation of the Divestiture Trustee and any professionals and agents retained by the Divestiture Trustee shall be reasonable in light of the value of the Divestiture Assets and based on a fee arrangement providing the Divestiture Trustee with an incentive based on the price and terms of the divestiture and the speed with which it is accomplished, but timeliness is paramount. F. Defendants shall use their best efforts to assist the Divestiture Trustee in accomplishing the required divestiture. The Divestiture Trustee and any consultants, l3 Case Document 170 Filed 04/25/14 Page 14 of 28 accountants, attorneys, and other persons retained by the Divestiture Trustee shall have full and complete access to the personnel, books, records, and facilities of the business to be divested, and Defendants shall develOp ?nancial and other information relevant to such business as the Divestiture Trustee may reasonably request, subject to reasonable protection for trade secret or other con?dential research, development, or commercial information. Defendants shall take no action to interfere with or to impede the Divestiture Trustee?s accomplishment of the divestiture. G. After its appointment, the Divestiture Trustee shall file reports with the United States, the Plaintiff States, and the Court setting forth the Divestiture Trustee?s efforts to accomplish the divestiture ordered under this Final Judgment. To the extent such reports contain information that the Divestiture Trustee or Defendants deem con?dential, such reports shall not be ?led in the public docket of the Court. Such reports shall include the name, address, and telephone number of each person who, during the preceding month, made an offer to acquire, expressed an interest in acquiring, entered into negotiations to acquire, or was contacted or made an inquiry about acquiring any interest in the Divestiture Assets, and shall describe in detail each contact with any such person. The Divestiture Trustee shall maintain full records of all efforts made to divest the Divestiture Assets. H. If the Divestiture Trustee has not accomplished the divestiture ordered under this Final Judgment within six (6) months after its appointment, the Divestiture Trustee shall ?le with the Court a report setting forth (1) the Divestiture Trustee?s efforts to accomplish the required divestiture, (2) the reasons, in the Divestiture Tlustee?s judgment, why the required divestiture has not been accomplished, and (3) the 14 Case Document 170 Filed 04/25/14 Page 15 of 28 Divestiture Trustee?s recommendations. To the extent such reports contain information that the Divestiture Trustee deems con?dential, such reports shall not be ?led in the public docket of the Court. The Divestiture Trustee shall at the same time furnish such report to the Defendants and to the United States, which shall have the right to make additional recommendations consistent with the purpose of the trust. The Court thereafter shall enter such orders as it shall deem appropriate to carry out the purpose of the Final Judgment, which may, if necessary, include extending the trust and the term of the Divestiture Trustee?s appointment by a period requested by the United States. VI. NOTICE OF PROPOSED DIVESTITURES A. Within two (2) business days following execution of a de?nitive divestiture agreement, Defendants or the Divestiture Trustee, whichever is then responsible for effecting the divestitures required herein, shall notify the United States and the Plaintiff States, of any proposed divestitures required by Section IV or of this Final Judgment. if the trustee is responsible, it shall similarly notify Defendants. The notice shall set forth the details of the proposed divestitures and list the name, address, and telephone number of each person not previously identi?ed who offered or expressed an interest in or desire to acquire any ownership interest in the Divestiture Assets, together with full details of the same. B. Within ?fteen (15) calendar days of receipt by the United States of such notice, the United States, in its sole discretion, in consultation with the Plaintiff States, may request from Defendants, the proposed Acquirer(s), any other third party, or the Divestiture Trustee, if applicable, additional information concerning the proposed divestitures, the proposed Acquirer(s), and any other potential Acquirer(s). Defendants 15 Case Document 170 Filed 04/25/14 Page 16 of 28 and the Divestiture Trustee shall furnish any additional information requested to the United States within fifteen (15) calendar days of receipt of the request, unless the parties otherwise agree. C. Within thirty (30) calendar days after receipt of the notice, or within twenty (20) calendar days after the United States has been provided the additional information requested from Defendants, the proposed Acquirer(s), any third party, and the trustee, whichever is later, the United States, in consultation with the Plaintiff States, shall provide written notice to Defendants and/or the Divestiture Trustee, stating whether it objects to the proposed divestitures. If the United States provides written notice that it does not object, the divestitures may be consummated, subject only to the Defendants? limited right to object to the sale under Section V.D. of this Final Judgment. Absent written notice that the United States does not object to the proposed Acquirer(s) or upon objection by the United States, a divestiture proposed under Section IV or Section shall not be consummated. Upon objection by Defendants under Section V.D., a divestiture proposed under Section shall not be consummated unless approved by the Court. VII. MONITORING TRUSTEE A. Upon the ?ling of this Final Judgment, the United States may, in its sole discretion, in consultation with the Plaintiff States, appoint a Monitoring Trustee, subject to approval by the Court. B. The Monitoring Trustee shall have the power and authority to monitor Defendants? compliance with the terms of this Final Judgment, and shall have such powers as this Court deems appropriate. The Monitoring Trustee shall be required to 16 Case Document 170 Filed 04/25/14 Page 17 of 28 investigate and report on the Defendants? compliance with this Final Judgment and the Defendants? progress toward effectuating the purposes of this Final Judgment. C. Subject to Section VILE of this Final Judgment, the Monitoring Trustee may hire at the cost and expense of Defendants, any consultants, accountants, attorneys, or other persons, who shall be solely accountable to the Monitoring Trustee, reasonably necessary in the Monitoring Trustee?s judgment. D. Defendants shall not object to actions taken by the Monitoring Trustee in ful?llment of the Monitoring Trustee?s responsibilities under this Final Judgment or any other Order of this Court on any ground other than the Monitoring Trustee?s malfeasance. Any such objections by Defendants must be conveyed in writing to the United States, the Plaintiff States, and the Monitoring Trustee within ten (10) calendar days after the action taken by the Monitoring Trustee giving rise to the Defendants? objection. E. The Monitoring Trustee shall serve at the cost and expense of Defendants, pursuant to a written agreement with Defendants on such terms and conditions as the United States, in consultation with the Plaintiff States, approves. The compensation of the Monitoring Trustee and any consultants, accountants, attorneys, and other persons retained by the Monitoring Trustee shall be on reasonable and customary terms commensurate with the individuals? experience and responsibilities. The Monitoring Trustee shall, within three (3) business days of hiring any consultants, accountants, attorneys, or other persons, provide written notice of such hiring and the rate of compensation to Defendants. F. The Monitoring Trustee shall have no responsibility or obligation for the operation of Defendants? businesses. 17 Case Document 170 Filed 04/25/14 Page 18 of 28 G. Defendants shall use their best efforts to assist the Monitoring Trustee in monitoring Defendants? compliance with their individual obligations under this Final Judgment. The Monitoring Trustee and any consultants, accountants, attorneys, and other persons retained by the Monitoring Trustee shall have full and complete access to the personnel, books, records, and facilities relating to compliance with this Final Judgment, subject to reasonable protection for trade secret or con?dential research, deveIOpment, or commercial information or any applicable privileges. Defendants shall take no action to interfere with or to impede the Monitoring Trustee?s accomplishment of its other responsibilities. The Monitoring Trustee shall, within three (3) business days of hiring any consultants, accountants, attorneys, or other persons, provide written notice of such hiring and the rate of compensation to Defendants. H. After its appointment, the Monitoring Trustee shall ?le reports every ninety (90) days, or more frequently as needed, with the United States, the Plaintiff States, the Defendants and the Court setting forth the Defendants? efforts to comply with their individual obligations under this Final Judgment. To the extent such reports contain information that the trustee deems con?dential, such reports shall not be ?led in the public docket of the Court. I. The Monitoring Tmstee shall serve until the completion of the divestitures required by Sections IV and of this Final Judgment, including any lease back period pursuant to Section IV.F.5. or IV.G.5. l8 Case Document 170 Filed 04/25/14 Page 19 of 28 FINANCING Defendants shall not ?nance all or any part of any purchase made pursuant to Section lV or of this Final Judgment. For purposes of this Section subleasing shall not be regarded as ?nancing. IX. ASSET PRESERVATION Until the divestiture required by this Final Judgment has been accomplished, Defendants shall take all steps necessary to comply with the Asset Preservation Stipulation and Order entered by this Court. Defendants shall take no action that would jeopardize the divestiture ordered by this Court. X. AFFIDAVITS I A. Within twenty (20) calendar days of entry of the Court entering the Asset Preservation Order and Stipulation in this matter, and every thirty (30) calendar days thereafter until the divestiture has been completed under Section IV or V, Defendants shall deliver to the United States and the Plaintiff States an af?davit as to the fact and manner of its compliance with Section IV or of this Final Judgment. Each such ?af?davit shall include the name, address, and telephone number of each person who, during the that ?rst twenty (20) calendar days or, thereafter, the preceding thirty (30) calendar days, made an offer to acquire, expressed an interest in acquiring, entered into negotiations to acquire, or was contacted or made an inquiry about acquiring, any interest in the Divestiture Assets, and shall describe in detail each contact with any such person during that period. Each such af?davit shall also include a description of the efforts defendants have taken to solicit buyers for the Divestiture Assets, and to provide required information to prospective Acquirers, including the limitations, if any, on such 19 Case Document 170 Filed 04/25/14 Page 20 of 28 information. Assuming the information set forth in the af?davit is true and complete, any objection by the United States to information provided by Defendants, including iimitation on information, shall be made within fourteen (14) calendar days of receipt of such af?davit. B. Within twenty (20) calendar days of the Court entering the Asset Preservation Order and Stipulation in this matter, Defendants shall deliver to the United States an af?davit that describes in reasonable detaii all actions defendants have taken and all steps Defendants have implemented on an ongoing basis to comply with Section IX of this Final Judgment. Defendants shall deliver to the United States an af?davit describing any changes to the efforts and actions outlined in Defendants? earlier af?davits ?led pursuant to this section within ?fteen (15) calendar days after the change is implemented. C. Defendants shall keep all records of all efforts made to preserve and divest the Divestiture Assets until one year after such divestiture has been completed. XI. COMPLIANCE INSPECTION A. For the purposes of determining or securing compliance with this Final Judgment, or of any related orders such as any Asset Preservation Order, or of determining whether the Final Judgment should be modi?ed or vacated, and subject to any legally recognized privilege, from time to time authorized representatives of the United States Department of Justice, including consultants and other persons retained by the United States, shall, upon written request of an authorized representative of the Assistant Attorney General in charge of the Antitrust Division, and on reasonable notice to Defendants, be permitted: 20 Case Document 170 Filed 04/25/14 Page 21 of 28 (1) access during Defendants? office hours to inspect and copy, or at the option of the United States, to require Defendants to provide hard copy or electronic copies of, all books, ledgers, accounts, records, data, and documents in the possession, custody, or control of Defendants, relating to any matters contained in this Final Judgment; and (2) to interview, either informally or on the record, Defendants? officers, employees, or agents, who may have their individual counsel present, regarding such matters. The interviews shall be subject to the reasonable convenience of the interviewee and without restraint or interference by Defendants. B. Upon the written request of an authorized representative of the Assistant Attorney General in charge of the Antitrust Division, Defendants shall submit written reports or response to written interrogatories, under oath if requested, relating to any of the matters contained in this Final Judgment as may be requested. C. No information or documents obtained by the means provided in this section shall be divulged by the United States to any person other than an authorized representative of the executive branch of the United States, except in the course of legal proceedings to which the United States is a party (including grand jury proceedings), or for the purpose of securing compliance with this Final Judgment, or as otherwise required by law. D. If at the time information or documents are furnished by Defendants to the United States, Defendants represent and identify in writing the material in any such information or documents to which a claim of protection may be asserted under Rule 26(c)(7) of the Federal Rules of Civil Procedure, and Defendants mark each pertinent 21 Case Document 170 Filed 04/25/14 Page 22 of 28 page of such material, ?Subject to claim of protection under Rule 26(c)(7) of the Federal Rules of Civil Procedure,? then the United States shall give Defendants ten (10) calendar days notice prior to divulging such material in any legal proceeding (other than a grand jury proceeding). XII. NO REACQUISITION Defendants shall not reacquire any interest in any part of the Divestiture Assets divested under this Final Judgment during the term of this Final Judgment. Nothing in this Final Judgment shall prevent Defendants from engaging in trades, exchanges, or swaps involving Divestiture Assets with an Acquirer, provided such arrangements do not increase Defendants? percentage of slots operated or held or gates operated or held at the airport in question, except that, consistent with industry practice, Defendants may temporarily operate slots for periods _of no more than two consecutive months at the request of the Acquirer. Nothing in this Section XII shall prevent Defendants from acquiring additional slots, gates or facilities, other than the Divestiture Assets, at DCA, LGA or the Key Airports subject to the noti?cation requirement in Section Nothing in this Section shall prevent Defendants from cooperating in gate or facility re- locations in the ordinary course of the airport operator?s business, including re-locating to the Divestiture Assets, provided the Acquirer of those gates is offered alternative gates and Associated Ground Facilities from the airport operator. NOTIFICATION OF FUTURE TRANSACTIONS A. Unless such transaction is otherwise subject to the reporting and waiting period requirements of the Hart?Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C. 18a (the Act?), Defendants shall not acquire any interest in 22 Case Document 170 Filed 04/25/14 Page 23 of 28 any slot at DCA that was in use at the completion of the Transaction without providing notice to the United States at least thirty (30) calendar days prior to the acquisition, provided however that this reporting requirement shall not apply to transactions that do not result in an increase in Defendants? percentage of slots operated or held at DCA. Defendants shall maintain a record of any non-reportable transactions and shall provide such record to the United States upon request. B. Any noti?cation provided pursuant to Section above shall be provided in the same format as required by the HSR Act, and shall include the names of the principal representatives of the parties to the transaction who negotiated the agreement and any management or strategic plans discussing the proposed transaction. If within the 30-day period after noti?cation the United States makes a written request for additional information regarding the transaction, Defendants shall not consummate the proposed transaction or agreement until thirty (30) calendar days after submitting all such additional information. Early termination of the waiting periods in this paragraph may be requested and, where appropriate, granted in a similar manner as applicable under the requirements and provisions of the HSR Act and rules promulgated thereunder. C. All references to the HSR Act in this Final Judgment refer to the HSR Act as it exists at the time of the transaction or agreement and incorporate any subsequent amendments to the HSR Act. XIV. BANKRUPTCY For purposes of Section 365 of the Bankruptcy Reform Act of 1978, as amended, and codi?ed as 11 U.S.C. 101 et. seq. (the ?Bankruptcy Code?) or any analogous provision under any law of any foreign or domestic, federal, state, provincial, local, 23 Case Document 170 Filed 04/25/14 Page 24 of 28 municipal or other governmental jurisdiction relating to bankruptcy, insolvency or reorganization (?Foreign Bankruptcy Law?), no sublease or other agreement related to the Divesture Assets will be deemed to be an executory contract, and if for any reason a sublease or other agreement related to the Divesture Assets is deemed to be an executory contract, the Defendants shall take all necessary steps to ensure that the Acquirer(s) shall be protected in the continued enjoyment of its right under any such agreement including, acceptance of such agreement or any underlying lease or other agreement in proceedings under the Bankruptcy Code or any analogous provision of Foreign Bankruptcy Law. XV. RETENTION OF JURISDICTION This Court retains jurisdiction to enable any party to this Final Judgment to apply to this Court at any time for further orders and directions as may be necessary or appropriate to carry out or construe this Final Judgment, to modify any of its provisions, to ensure and enforce compliance, and to punish violations of its provisions. XVI. EXPIRATION OF FINAL JUDGMENT Unless this Court grants an extension, this Final Judgment shall expire ten (10) years from the date of its entry. XVII. PUBLIC INTEREST DETERMINATION Entry of this Final Judgment is in the public interest. The parties have complied with the requirements of the Antitrust Procedures and Penalties Act, 15 U.S.C. 16, including making copies available to the public of this Final Judgment, the Competitive Impact Statement, and any comments thereon and the United States? responses to comments. Based upon the record before the Court, which includes the Competitive 24 Case Document 170 Filed 04/25/14 Page 25 of 28 Impact Statement and any comments and response to comments ?led with the Court, entry of this Final Judgment is in the public interest. By separate Memorandum Opinion issued this day, the Court provides an explanation of why this Final Judgment is in the public interest. Date: 5/ 6? The Honorable Colleen Kollar-Kotelly United States District Judge Case Document 170 Filed 04/25/14 Page 26 of 28 EXHIBIT A DCA SLOTS JetBluc Slots (currently held by American) 1284 1040 1018 1012 1025 1200 1034 1334 1013 1058 1172 1221 1014 1217 1097 1174 Additional American Air Carrier Slots 1090 1144 1570 1321 1425 1445 1521 1585 1092 1159 1274 1296 1493 1496 1044 1051 1667 1233 1322 1341 1616 1138 1139 1271 1430 1464 1547 1272 1351 1481 1506 1525 1611 1381 1420 1480 1641 1662 1104 1342 1543 1666 1208 1286 1299 1345 1388 1422 1620 1117 1121 1167 1312 1460 1473 1624 1625 1628 1364 1411 1561 1646 1074 1100 1202 1446 1405 1499 1276 1292 1353 1396 1634 1441 1475 1492 1503 1559 1587 1623 1008 1606 1575 1642 1122 1216 US Airways Air Carrier Slots 1070 1066 DCA Gates Up to ?ve (5) gates from among Gates 24necessary. 26 Case Document 170 Filed 04/25/14 Page 27 of 28 EXHIBIT LGA SLOTS Southwest Slots (currently held by American) 3351 2101 3335 3422 3665 3314 2215 3045 2120 3312 American LGA Slots 3189 3068 2139 2147 3236 2222 2096 2075 37 84 2033 3841 2008 3594 3671 3380 3258 3282 3080 2032 2230 3013 2166 2111 3826 LGA Gates Up to two contiguous gates on Concourse currently leased by American at LGA. 27 Case Document 170 Filed 04/25/14 Page 28 of 28 EXHIBIT KEY AIRPORT GATES Boston Logan International Airport Two gates that Defendants currently lease or two gates that Defendants would be entitled to occupy following any relocation of gates and facilities at the direction of Massport. Chicago O?Hare International Airport Gates LI and L2. Defendants, at their own expense, will recon?gure Gate LZA, LZB, and L2C, as follows: Gate L2A will be restored to a mainline gate by removing the gate at L213, moving the gate podium that currently serves Gate L2G south, creating one additional bay for gate L2A, and restriping the tarmac. Defendants will retain their interest in Gate L2G. Dallas Love Field Gates currently leased by American at Dallas Love Field, or which American will be entitled to occupy following completion of construction of the Love Field Modernization Program. Los Angeles International Airport Gates 31A and 318 in Terminal 3. Miami International Airport Two gates currently leased by US Airways in Terminal 3. '28 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 1 of 31 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ____________________________________ ) ) ) Plaintiffs, ) ) ) v. ) ) US AIRWAYS GROUP, INC., et al., ) ) Defendants. ) ____________________________________) UNITED STATES OF AMERICA, et al., Civil Action No. 13-cv-1236 (CKK) (Before Special Master Levie) REPORT AND RECOMMENDATION #1 OF THE SPECIAL MASTER (Redacted) Currently pending before the Special Master are Defendants US Airways Group, Inc.’s, and AMR Corporation’s (collectively, “Defendants”) Motion to Compel Production of Factual Materials and Information Regarding DOJ’s Approvals of Four Prior Airline Mergers from Plaintiffs. For the reasons that follow, the Special Master determines that, although Defendants have established the relevance of their requests, the various privileges asserted by Plaintiffs protect almost all of the requested material from disclosure. Accordingly, the Special Master recommends that the Court grant in part and deny in party Defendants’ Motion. Pursuant to ¶ 5 of the Order Appointing Special Master [Doc. No. 69], the Special Master certifies this Report and Recommendation for appeal to the Court.1 The parties agreed that the issue presented in the instant Motion was of such significance as to warrant use of the expanded word length provisions of ¶ 3 of the Order Appointing Special Master. For similar reasons, the Special Master believes it appropriate to certify this Report and Recommendation for appeal to the Court immediately, in the event any party wishes to appeal. Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 2 of 31 I. Introduction / Summary Defendants are two large “legacy” airlines who announced plans in early 2013 to merge. The Department of Justice (“DOJ”), six state Attorneys General2 and the District of Columbia filed suit to challenge the merger in August 2013.3 [Doc. No. 1]. The Court appointed the Special Master to oversee discovery, including discovery disputes. [Doc. No. 69]. Defendants and Plaintiffs exchanged requests for production of documents (“RFP’s”) and interrogatories (“ROG’s”) in late August and engaged in numerous “meet and confer” sessions addressing the discovery sought. On September 20, Defendants filed the instant Motion to Compel, following which Plaintiffs filed an Opposition and Defendants filed a Reply. Accompanying the court filings were privilege logs submitted by the United States and Plaintiff States along with declarations from Defendants, the United States and Plaintiff States. Upon request of the Special Master, the documents at issue in this Motion were submitted to the Special Master for in camera review. The Special Master has considered all of the written submissions, including the documents at issue, and has heard oral argument on the Motion. The matter is now ripe for resolution. At issue in this Motion are six requests for production and one interrogatory, which seek documents and facts relating to the United States’ decisions not to challenge four prior airline mergers. In particular, Requests Nos. 15 – 17 and 19 seek “all documents that constitute, reflect, or contain the facts or forecasts upon which the DOJ based its clearance” of the 2005 merger between US Airways and America West (RFP 15), the 2008 merger between Delta and 2 The Attorney General for the State of Texas has since reached a settlement agreement on these matters with Defendants and has withdrawn from the litigation. [Doc. No. 95]. An Amended Complaint was filed on September 5, 2013. [Doc. No. 73]. 2 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 3 of 31 Northwest Airlines (RFP 16), the 2010 merger between United and Continental (RFP 17), and the 2011 merger between Southwest Airlines and AirTran (RFP 19): including but not limited to factual information, assumptions, and forecasts concerning geographic market definition, product market definition, market participants, market shares, market concentration, capacity, competitive effects, entry, expansion, efficiencies, supply, demand, and other market conditions related to domestic scheduled air passenger service. (See Mot. Exh. A at 20-21, 23, 27). RFP 18 seeks: All documents that constitute, reflect, or contain the facts or forecasts upon which the DOJ based its decision not to seek to block or obtain a consent decree concerning the sale of slots at Newark related to the 2010 merger between United and Continental, including but not limited to factual information, assumptions, and forecasts concerning geographic market definition, product market definition, market participants, market shares, market concentration, capacity, competitive effects, entry, expansion, efficiencies, supply, demand, and other market conditions related to domestic scheduled air passenger service. (Mot. Exh. A at 25). RFP 20 seeks: All documents related to the airline merger analysis outlined in The Year in Review: Economics at the Antitrust Division, 2008-2009, Review of Industrial Organization, 2009, vol. 35, issue 4, pages 349-367, including all documents constituting, setting forth, or relating to the facts, studies, analyses, methods, and estimates that were the “basis” for conclude[ing] that the merger was likely precompetitive and ought not be challenged,” and all documents referring to this publication that post-date the publication. (Mot. Exh. A at 29). ROG 2 asks Plaintiffs to “[p]rovide all of the factual information that each of the Plaintiffs relied upon in making a decision not to challenge under the antitrust laws each of the Previously Cleared Mergers.” (Mot. Exh. B at 5). In the only direct reference to Interrogatory 2 in the Motion, Defendants characterize this Interrogatory as “ask[ing] for the same factual information [as in RFPs 15-19] directly.” (Mot. at 2). 3 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 4 of 31 The privilege log submitted by the United States shows that the responsive discovery consists of eighteen documents which include: five staff recommendation memoranda; five Economic Advisory Group memoranda; four routing and transmittal slips; one PowerPoint presentation; two emails/email strings; and one email containing an attached PowerPoint presentation. (See Opp. Exh. B). The State Plaintiffs’ privilege log shows that the responsive state discovery consists of two staff recommendation memoranda from the District of Columbia Attorney General’s office; one recommendation memorandum from the office of the Michigan Attorney General; one report and two recommendation memoranda from the office of the Pennsylvania Attorney General; and one recommendation memorandum from the office of the Tennessee Attorney General. As noted, the Special Master has reviewed all of this material in camera. II. Relevance a. Legal Standard Under Rule 26 of the Federal Rules of Civil Procedure, [p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense … For good cause, the court may order discovery of any matter relevant to the subject matter involved in the action. Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence. [Fed. R. Civ. P. 26(b)(1) (amended 2000)]. The Rule is designed to “encourage the exchange of information,” [In re England, 375 F.3d 1169, 1177 (D.C. Cir. 2004)], and, for this reason, “relevance is to be broadly construed” at this stage of litigation. [Burlington Ins. Co. v. Okie Dokie, Inc., 368 F.Supp.2d 83, 86 (D.D.C. 2005) (citing Food Lion v. United Food & Commer. Workers Int’l Union, 103 F.3d 1007, 1012 (D.C. Cir. 1997))]. Likewise, [t]he key inquiry is the relevance of the information to the issues in the case, not its eventual admissibility at trial. … [T]he test of relevancy for purposes 4 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 5 of 31 of discovery under Fed. R. Civ. P. 26(b)(1) is broader than the test for admissibility at trial, as the Rule specifically provides. Hence, a party may discover information which is not admissible at trial if such information will have some probable effect on the organization and presentation of the moving party's case. [Estate of Esther Klieman v. Palestinian Auth., 2013 U.S. Dist. LEXIS 134031 at *25-26 (D.D.C. Sept. 19, 2013) (quoting Smith v. Schlesinger, 513 F.2d 462, 472-73 (D.C. Cir. 1975))(emphasis added)].4 Although the Rule contemplates broad discovery, the court is tasked with limiting “the frequency or extent of discovery otherwise permitted under the rules or by local rule . . . if the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the action and the importance of the discovery in resolving the issues.” [Fed. R. Civ. P. 26(b)(2)(C); see U.S. v. Kellogg Brown & Root Servs., 284 F.R.D. 22, 26 (D.D.C. 2012)]. The party requesting the discovery, here the Defendants, carries the burden of demonstrating the relevance of any material sought. (See Kellogg Brown & Root, 284 F.R.D. at 33). If Defendants make that showing, the burden will shift to Plaintiffs “to prove an applicable privilege.” [Alexander v. FBI, 186 F.R.D. 185, 187 (D.D.C. 1999)]. Schlesinger pre-dates the 2000 Amendments to the Federal Rules of Civil Procedure. The earlier version of Rule 26 permitted discovery of “any matter, not privileged, which is relevant to the subject matter involved in the pending action,” and did not create separate standards for material related directly to a party’s claims or defenses and material relevant only to the subject matter of the case. [Fed. R. Civ. P. 26 (b)(1) (amended 1970)]. The Advisory Committee’s comments to the 2000 amendments, however, make clear that “[t]he dividing line between information relevant to the claims and defenses and that relevant only to the subject matter of the action cannot be defined with precision. … When judicial intervention is invoked [in a discovery dispute], the actual scope of discovery should be determined according to the reasonable needs of an action.” (Fed. R. Civ. P. 26, cmt. to 2000 amend.) In other words, although “the scope of discovery has narrowed somewhat under the revised rule,” “the change, while meaningful, is not dramatic, and broad discovery remains the norm.” [Sanyo Laser Prods. Inc. v. Arista Records, Inc., 214 F.R.D. 496, 500 (S.D. Ind. 2003); see also Thompson v. Dep’t of Housing and Urban Dev., 199 F.R.D. 168, 172 (D. Md. 2001)]. In this particular case, the “reasonable needs” of this unique and significant antitrust action require appropriately extensive discovery. The Special Master therefore recommends adhering to Schlesinger’s recommendation that information be deemed relevant if it is likely to have “some probable effect on the organization and presentation of the moving party’s case.” (Schlesinger, 513 F.2d at 472-73). 5 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 6 of 31 b. Discussion Defendants argue that the material at issue is relevant because it will enable them “to show that this merger is procompetitive even when evaluated using similar models, forecasts, and analyses as those the government itself relied on when it concluded that earlier mergers did not violate section 7 [of the Clayton Act]. [Mot. at 3-4 (citing U.S. v. Leggett & Platt, Inc., 542 F.2d 655, 658 (6th Cir. 1976))]. At oral argument, Defendants elaborated upon this point and explained that, at trial, they likely will present economic models and studies demonstrating that the proposed merger is procompetitive. According to Defendants, the models and studies probably will be similar to those relied upon by the Department of Justice when evaluating the earlier mergers. Defendants anticipate that the government will attack their use of these models by arguing that similar models failed to accurately predict the anticompetitive outcomes of those earlier mergers. In other words, the government will seek to demonstrate that the models it earlier relied upon were in fact fundamentally unsound. Defendants contend that having access to the actual models used by the Department of Justice will enable them (Defendants) to guard against attacks by Plaintiffs on the “soundness” of Defendants’ models. Defendants explain that accessing these models will enable them to show that it was not the unsoundness of the models but, rather, unaccounted-for outside economic forces, in particular the financial recession, which led to the airlines’ decreased capacity following the earlier mergers. Adjusting the government’s own models and analyses to account for these outside forces will show that those prior mergers are now having procompetitive effects, albeit later in time than the earlier models would have indicated. In other words, the contemplated production of Plaintiffs’ analyses is reasonably likely to lead to admissible 6 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 7 of 31 evidence that will enable Defendants to show that the economic models which predict procompetitive outcomes, and upon which Defendants may rely here, are in fact viable, sound models. Defendants argue that they are unable to create their own models based on the “raw data” which Plaintiffs have offered to produce because such “raw data” will omit certain factors essential to the government’s analyses, such as the “neutral assumptions” upon which the DOJ’s economists aver they relied.5 (See Mot. Exh. D at 66). Defendants further contend that Plaintiffs themselves “have established the relevance of this inquiry by alleging that the prior airline mergers did not produce the benefits DOJ predicted, and [Plaintiffs are] attempting to use this fact to attack the current merger.” (Mot. at 4). By way of example, at oral argument, Defendants referenced numerous paragraphs in the Amended Complaint (¶¶ 34, 35, 36-39; 59-67 & 72) which refer directly to the earlier mergers, and noted that Plaintiffs’ RFP No. 3 seeks information regarding the reports and analyses Defendants prepared regarding the four earlier mergers – the same material sought by Defendants. Plaintiffs argue that the requested material falls outside of the scope of permissible discovery because the government’s decision not to challenge earlier, arguably similar mergers is not a defense to the alleged anticompetitive threat posed by this merger.6 (See Opp. at 2-3). For this reason, they contend, documents regarding those earlier decisions cannot be relevant in this matter. (Id.) According to Plaintiffs, “[h]ow [they] analyzed other mergers years ago when industry conditions were different has no bearing on legality of this merger” because “every 5 Defendants submitted an article written by DOJ economists in which the economists addressed the type of analysis upon which they relied when considering the 2008 Delta Airlines – Northwest Airlines merger which included a reference to certain “neutral assumptions.” (See Mot. Exh. D at 64-67). This article is discussed in greater detail infra at § III (e) (“Waiver”). Defendants were very clear during oral argument that they are not seeking the material at issue in order to pursue a defense of selective prosecution. 7 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 8 of 31 merger must be evaluated on its own terms in light of current industry conditions.” (Opp. at 2-3). Plaintiffs note that they offered to produce to Defendants “the basic factual materials collected in earlier investigations,” but claim that Defendants rejected that offer. (Id. at 1). The scope of discovery in this case is framed by Plaintiffs’ claim that the proposed merger is likely to “substantially lessen competition, and tend to create a monopoly, in violation of Section 7 of the Clayton Act,” [Am. Compl. (Doc. No. 73) at ¶ 13] and by Defendants’ defenses to that allegation, including Defendants’ contention that the merger is likely to increase, not decrease, competition. The Special Master finds compelling Defendants’ explanation that the requested discovery is relevant because it is likely to provide evidence that Defendants can use to rebut Plaintiffs’ claim that the anticompetitive outcomes of the earlier mergers are likely to be replicated if the instant merger is approved. [See Reply at 1-2 (citing Am. Compl. at ¶¶ 34-35, 59-67, 72)]. The Amended Complaint addresses each of the four mergers, notes specific anticompetitive outcomes that have resulted from them, and suggests that the proposed merger would have both its own similar negative impact and that the impact would be exacerbated by the effects of the earlier mergers. (See Am. Compl. at ¶¶ 59-67). Having access to Plaintiffs’ analyses will enable Defendants to show that certain negative effects resulting from the earlier mergers, such as increased prices and decreased capacity, did not stem from the mergers themselves but, rather, from outside economic factors. In particular, use of Plaintiffs’ models may enable Defendants to show that the predicted procompetitive outcomes are coming into being at the current time, thereby refuting Plaintiffs’ claims that “the planned merger would be a further step in [the] industry-wide effort” to limit capacity, 8 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 9 of 31 “result[ing] in fewer flights and higher fares.” (Id. at ¶ 59). The requested discovery therefore is likely to lead to admissible evidence. This finding is supported by the fact that Plaintiffs themselves issued a request (Pls.’ RFP No. 3) seeking “documents or data generated, modified, or acquired by you … relating to runs of any model used by the company to estimate or project the market share, passengers, or revenue of existing or additional scheduled air passenger service in a city pair for the purposes of … evaluating or analyzing the effects of any prior airline mergers, including Delta-Northwest, United-Continental, Southwest-AirTran, and US Airways – America West… .” (Reply Exh. 1 at 3). It is difficult to read Plaintiffs’ request as not seeking essentially the same material from Defendants that Defendants seek to obtain from Plaintiffs in the contested requests and interrogatory. That Plaintiffs are seeking this material makes it reasonably likely that Defendants are correct in their theory that Plaintiffs will attempt to attack the unsoundness of Defendants’ models by showing that parallel models applied to the earlier mergers did not accurately predict the anticompetitive outcomes of the earlier mergers. The material sought is therefore relevant to the extent that it will enable Defendants to bolster their theory and defend against Plaintiffs’ attacks. Defendants argue that United States v. Leggett & Platt, Inc., 542 F.2d 655, 658 (6th Cir. 1976) provides support for the idea that such analyses can be relevant under certain circumstances. [See Mot. at 3-4 (citing Leggett, 542 F.2d at 658)]. In their Opposition and at oral argument, Plaintiffs seek to distinguish Leggett & Platt from the instant case and assert that they are unfamiliar with case law in which a court ordered production of “confidential assessments and internal deliberations.” (See Opp. at 1, 3). 9 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 10 of 31 In Leggett & Platt, the Sixth Circuit noted that “investigatory inquiries into other industry acquisitions are relevant, and thereby discoverable unless privileged, to the extent they contain factual materials, such as surveys and economic analyses.” (Leggett, 542 F.2d at 658). While the Special Master does not take issue with this general proposition, the Special Master does not find Leggett & Platt dispositive here. In that case, the government admitted that the requested discovery was relevant and the Sixth Circuit ultimately determined that the documents were privileged and therefore undiscoverable. (Id.) The Sixth Circuit’s comment, therefore, is dicta and not central to that court’s holding. Nonetheless, the fact that Leggett & Platt does not provide persuasive authority for a determination of relevance here does not mean that the material is not relevant. Indeed, the Advisory Committee’s comments to Rule 26 suggest that claims of relevancy need to be addressed in light of the facts of each particular case: A variety of types of information not directly pertinent to the incident in suit could be relevant to the claims or defenses raised in a given action. For example, other incidents of the same type, or involving the same product, could be properly discoverable under the revised standard. … Similarly, information that could be used to impeach a likely witness, although not otherwise relevant to the claims or defenses, might be properly discoverable. In each instance, the determination whether such information is discoverable because it is relevant to the claims or defenses depends on the circumstances of the pending action. (Fed. R. Civ. P. 26, cmt. to 2000 amend.)(emphasis added). This case presents unique circumstances. Plaintiffs claim that earlier mergers, which they elected not to challenge, have resulted in decreased capacity and increased ticket prices, and that the proposed current merger will exacerbate these effects. (See Am. Compl. at ¶¶ 59-67). By making this allegation, Plaintiffs placed the four earlier mergers at issue. Their assessment of the predicted outcomes of those mergers is directly relevant to these claims and to the defenses that 10 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 11 of 31 may be used to counter these claims. Because relevance is to be broadly construed at this stage, and because Defendants have put forth a reasonable scenario under which the requested material is likely to lead to admissible evidence, the Special Master finds, in the circumstances of this case, that the material is relevant for purposes of discovery. Based on this finding, the Special Master now examines the applicability of the various invocations of privileges and work product protection. Despite a finding of relevance, the Special Master recommends that the materials sought, with one exception, not be produced because they are protected by the deliberative process privilege and the work product doctrine. II. Privilege Claims a. Deliberative Process Privilege (1) The Privilege Plaintiffs claim that the deliberative process privilege protects from disclosure all DOJ- generated documents except for document 15 and all of the State Plaintiff documents except for those generated by the office of the Pennsylvania Attorney General. The deliberative process privilege “allows the government to withhold documents and other materials that would reveal ‘advisory opinions, recommendations and deliberations compromising part of a process by which governmental decisions and policies are formulated.” [In re Sealed Case, 121 F.3d 729, 737 (D.C. Cir. 1997) (quoting Carl Zeiss Stiftung v. V.E.B. Carl Zeiss, Jena, 40 F.R.D. 318, 324 (D.D.C. 1966) aff’d 384 F.2d 979 (D.C. Cir. 1967))]. The purpose of the privilege is to assure that subordinates within an agency will feel free to provide the decisionmaker with their uninhibited opinions and recommendations without fear of later being subject to public ridicule or criticism; to protect against premature disclosure of proposed policies before they have been finally formulated or adopted; and to protect against confusing the issues and misleading the public by dissemination of documents suggesting 11 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 12 of 31 reasons and rationales for a course of action which were not in fact the ultimate reasons for the agency's action. [Public Citizen, Inc. v. OMB, 598 F.3d 865, 874 (D.C. Cir. 2009) (quoting Coastal States Gas Corp. v. Department of Energy, 617 F.2d 854, 866 (D.C. Cir. 1980))]. For the privilege to apply to a document, the document must be (1) predecisional, meaning that it was created prior to the agency decision at issue; and (2) deliberative, such that it “reflects the give-and-take of the consultational process.” [Judicial Watch, Inc., v. Food & Drug Admin., 449 F.3d 141, 151 (D.C. Cir. 2006)]. “Documents including "recommendations, draft documents, proposals, suggestions, and other subjective documents which reflect the personal opinions of the writer rather than the policy of the agency," are considered deliberative.” [Am. Petroleum Tankers Parent, LLC v. U.S, 2013 U.S. Dist. LEXIS 96331 at *27 (D.D.C. July 10, 2013)]. The “deliberative” element generally renders purely factual material unprotected “unless the material is so inextricably intertwined with the deliberative sections of documents that its disclosure would inevitably reveal the government's deliberations.” [In re Sealed Case, 121 F.3d at 737 (citing NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 151 (1975))]. Moreover, the privilege is qualified and may be overcome by a showing of sufficient need. (In re Sealed Case, 121 F.3d at 737). “This need determination is to be made flexibly on a case-by-case, ad hoc basis,” and should include an assessment of various factors, including “ ‘the relevance of the evidence, ‘the availability of other evidence,’ ‘the seriousness of the litigation,’ ‘the role of the government,’ and the ‘possibility of future timidity by government employees.’ ” [Id. at 737-38 (quoting In re Subpoena Served Upon the Comptroller of the Currency, 967 F.2d 630, 634 (D.C. Cir. 1992)]. 12 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 13 of 31 (2) Discussion With regard to the “predecisional” element of the privilege, Plaintiffs have submitted a Declaration from William Stallings, Chief of the Transportation Energy and Agriculture Section at the DOJ’s Antitrust Division, which avers with respect to the 17 documents7 to which the United States claims privilege that “all of the documents are confidential communications… which preceded a final decision made in each of the above merger investigations.” (Pl. Opp., “Declaration of William H. Stallings,” at ¶ 5).8 Plaintiffs’ privilege logs and the Special Master’s in camera review of the documents confirm that the dates of each document precede the merger decision in question. (See generally Pl. Opp. Exh. B). As Defendants have not challenged the dates associated with the documents and the Special Master has no reason to doubt the declaration or dates provided, the Special Master concludes that the “predecisional” element of the deliberative process privilege has been satisfied. The “deliberative” element requires a more extensive discussion. Defendants argue that, inasmuch as they seek only “facts” and not “the ultimate policy recommendations conveyed to the relevant decisionmaker,” the material must be produced. (Mot. at 5). Plaintiffs respond that Defendants seek not just factual information but, rather, the “‘analyses’ specifically undertaken to guide government enforcement decisions” which “reflect Plaintiffs’ exercise of judgment in sifting through the relevant universe of information and focusing on what attorneys and As to document 15 only the investigatory files privilege is claimed. The declarations from the Plaintiff States include similar assertions. 13 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 14 of 31 economists consider important in a given case and thus are privileged.” [Opp. at 4 (internal citations omitted)].9 Factual material may be protected by the deliberative process privilege if it “‘reflect[s] an agency’s preliminary positions or ruminations about how to exercise discretion on some policy matter’ and thus would ‘expose the deliberative process within an agency. … Conversely, when material could not reasonably be said to reveal an agency’s or official’s mode of formulating or exercising policy-implementing judgment, the deliberative process privilege is inapplicable.’” [In re Apollo Group, Inc. Securities Litigation, 251 F.R.D. 12, 28 (D.D.C. 2008) (quoting Petroleum Info. Corp. v. Dep’t of the Interior, 976 F.2d 1429, 1434-35 (D.C. Cir. 1992))]. Having reviewed the documents, the Special Master agrees with Plaintiffs that the factual material contained in the documents generated by DOJ attorneys and by attorneys for the Plaintiff States, [DOJ Doc Nos. 1-3, 6, 8, 10-13, 16 – 18; State Doc Nos. DC-01 – DC-02, MI01, TN-01] is encompassed within the deliberative process privilege. These documents clearly are analytical in the selection and evaluation of facts and applicable law and rely upon specific portions of previously completed economic analyses to put forth policy recommendations. In formulating these documents, the authors selected particular details from DOJ Economic Advisory Group (“EAG”) analyses, relied upon those details to offer predictions about the outcomes of the proposed mergers, and issued recommendations based on the predicted outcomes. The Special Master’s review of these documents confirms that they are indeed an integral “part of a process by which governmental decisions and policies are formulated,” (Sears, 421 U.S. at 151), and that factual information in these documents is “inextricably intertwined” with the analyses such that disclosure of the facts will reflect the deliberative process used by the Defendants’ Motion (p. 5) notes that they seek “the facts, data analyses, economic studies, models, and forecasts that underlie those recommendations . . . .” 14 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 15 of 31 attorneys in terms of their legal theories and the application of those theories to the facts in each case. [See FTC v. Boehringer Ingelheim Pharms., Inc., 286 F.R.D. 101, 108 (D.D.C. 2012) (citing In re Vitamins Antitrust Litig., 211 F.R.D. 1, 5 (D.D.C. 2002))]. Moreover, these documents constitute legal advice offered to decision-makers within the DOJ and State Plaintiffs’ offices. As the D.C. Circuit has noted, “[t]here can be no doubt that [ ] legal advice, given in the form of an intra-agency memoranda prior to any agency decision on the issues involved, fit exactly within the deliberative process rationale.” [Brinton v. Dep’t of State, 363 F.2d 600, 604 (D.C. Cir. 1980); see Citizens for Responsibility and Ethics in Washington v. Office of Administration, 249 F.R.D. 1, 10-11 (D.D.C. 2008)]. The documents prepared by non-lawyer economists employed by the DOJ’s Economic Advisory Group [DOJ Doc Nos. 4-5, 7, 9, 14] present a somewhat different question. In these documents, the economists used factual data provided by the proposed merging airlines to analyze the potential outcomes of that merger. “Generally speaking, the [deliberative process] privilege does not protect ‘purely factual’ data unless revealing that data would ‘expose an agency's decisionmaking process in such a way as to discourage candid discussion within the agency . . . .’” [Branch Ministries, Inc. v. Richardson, 970 F. Supp. 11, 14-15 (D.D.C. 1997) (quoting Quarles v. Department of the Navy, 893 F.2d 390, 392 (D.C. Cir. 1990)]. Plaintiffs have offered to provide the underlying factual data to Defendants, however, and Defendants rejected their request, indicating that they seek not just the facts, but the “factual analyses.” (See Mot. at 5). While the facts themselves may not be protected by the deliberative process privilege, the selection of particular economic models is a subjective choice and therefore qualifies for protection. With this differentiation, the Special Master anticipates that the Plaintiffs produce all 15 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 16 of 31 of the “basic factual materials collected in earlier investigations” underlying the analyses (see Opp. at 1), including both data referenced and not referenced in the memoranda at issue, to the extent that Plaintiffs have not yet produced that material,10 but does not order Plaintiffs to provide any part of the reports themselves, or the actual models, formulas, or forecasts used in the reports. “[S]ubjective documents which reflect the personal opinions of the writer rather than the policy of the agency,’ are considered deliberative.” Am. Petroleum, 2013 U.S. Dist. LEXIS 96331 at *27 (quoting Coastal States, 617 F.2d at 866)]. The decision to use these models represents the individual economist’s or economists’ determination that these models, and the selection of the particular facts applied to those models, offer the most accurate means of assessing the merger at issue; it does not represent DOJ’s opinion that these models are best suited to the type of data at issue. “Documents which are protected by the privilege are those which would inaccurately reflect or prematurely disclose the views of the agency, suggesting as agency position that which is as yet only a personal position.” (Coastal States, 617 F.2d at 866). A brief summary of the documents at issue11 confirms that they consist largely of subjective opinions, and not merely facts. DOJ Document 4 [26 WORDS REDACTED] Delta and Northwest [21 WORDS REDACTED] Delta and Northwest [32 WORDS REDACTED] Delta and Northwest constitutes a subjective choice – in essence representing his “personal opinion” [19 WORDS REDACTED] Delta’s and Northwest’s [4 WORDS REDACTED]. Likewise, in DOJ Document 5, [10 WORDS REDACTED] Delta-Northwest [40 WORDS REDACTED]. In reaching this conclusion, the economists [7 WORDS REDACTED] See Opp. at 1. At oral argument, Plaintiffs indicated that they had produced or were in the process of producing to Defendants all of the material submitted to DOJ by the airlines at issue in the earlier mergers. The highlighted portions show material for which the Special Master recommends redaction. 16 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 17 of 31 Delta and Northwest [10 WORDS REDACTED] Delta and Northwest [7 WORDS REDACTED]. This selection of facts and of economic models constitutes a subjective choice that qualifies for protection under the privilege. Document 7 likewise relies on the economists’ own selection of facts and models to issue various conclusions regarding the likely effects of the proposed Delta-Northwest merger [7 WORDS REDACTED]. Here, too, the economist’s selection of particular [32 WORDS REDACTED] present subjective choices central to his ultimate findings. Document 9 is similarly based on a particular selection of facts, inferences, and models, which its author uses to offer predictions of the likely [4 WORDS REDACTED] Southwest Airlines-Air Tran merger. [49 WORDS REDACTED] rests upon a selection of particular facts and upon the use of particular models and formulas chosen by the economist to reach conclusions regarding the harm likely to result from the merger. Finally, Document 14 presents analyses [4 WORDS REDACTED] of the United Airlines – Continental merger. [41 WORDS REDACTED]. Nonetheless, the release of this material would tend to “prematurely disclose the views of the agency, suggesting as agency position that which is as yet only a personal position,” (Coastal States, 617 F.2d at 866) because it would tend to disclose that, in the opinion of the memorandum’s authors, certain analytic approaches were best suited to the assessment of the merger at issue. While the use of selected facts and economic models suggests a finding that this material is protected by the privilege, quite important is the concern that permitting discovery of this material will create a risk of “diminish[ing] candor within an agency” (Petroleum Info. Corp., 976 F.2d at1435) by restricting the amount of information provided in recommendations from the EAG to the DOJ decision makers. Each of these documents contains extensive descriptions 17 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 18 of 31 of the economists’ work, including long, detailed economic analyses and the identification of certain self-selected inferences upon which the economists relied. Disclosing this material creates a real risk that, in the future, economists may be inclined to provide only the bare facts considered and the bare results of their analyses, with little description of how the economist in question reached those conclusions. This outcome would ultimately harm the decision making process by limiting the information provided to the decision maker, thereby inflicting the exact type of harm that the deliberative process privilege is intended to prevent. (See Public Citizen, 598 F.3d at 874; see also Am. Petroleum, 2013 WL 3562575 at *12). Finally, while the deliberative process privilege is a qualified privilege that may be overcome by a showing of sufficient need, (see In re Sealed Case, 121 F.3d at 737), the Special Master finds that such a showing has not been made in this case. Factors to be considered in the assessment of need include “the relevance of the evidence,” “the availability of other evidence,” “the seriousness of the litigation,” “the role of the government,” and the “possibility of future timidity by government employees.” (In re Subpoena Served Upon the Comptroller of the Currency, 967 F.2d at 634). Although the material requested is relevant (see supra § II) and the size of the proposed merger renders this litigation particularly serious, Defendants have not presented persuasive reasons that they have sufficient need for the models, analyses, and conclusions drawn so as to overcome the invocation of the deliberative process privilege. Defendants aver that they need the information in order to defend the soundness of their own models and to rebut Plaintiffs’ claim that the anticompetitive outcomes of the earlier mergers are likely to be replicated if the instant merger is approved. (See Mot. at 4, Reply at 2- 18 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 19 of 31 3).12 Plaintiffs, however, have offered to provide to Defendants all of the material which the other airlines provided to DOJ when DOJ considered those earlier mergers. Using this material, Defendants may complete their own analyses of the earlier mergers and may rely on those analyses defend their own analysis of the current merger and to rebut Plaintiffs’ claims. For example, to the extent that Defendants argue that the procompetitive effects of earlier mergers were delayed due to the economic recession, Defendants may present one model showing how the parties may have expected the merger to impact the airline market in the absence of the recession, and one showing how the merger actually did impact the market in light of the recession. Defendants may generate these models independently and do not require access to the actual inferences and models used by Plaintiffs. For these reasons, the Special Master finds that the deliberative process privilege applies to this material and that Defendants have not demonstrated sufficient need for overcoming that privilege. The Special Master expects that Plaintiffs, as they have represented, will provide Defendants all basic factual material, not already produced, gathered during Plaintiffs’ consideration of the earlier mergers. b. Work Product Protection (1) The Work Product Doctrine Plaintiffs claim that the work product doctrine protects from disclosure all of the DOJ documents, except for document 15, and all responsive discovery from the State Plaintiffs. While Defendants note that they want to know what the “neutral assumptions” were upon which DOJ economists relied, (see Mot. Exh. D at 66), the Special Master does not find that such a “need” rises to the level of substantial need or undue hardship in not getting this information. If, as Defendants claim, they wish to show that different neutral assumptions may have produced more accurate results, Defendants can do so using whatever neutral assumptions they choose. While knowledge of DOJ’s assumptions might be useful to Defendants, that knowledge is far from necessary to Defendants’ stated purposes. 19 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 20 of 31 The work product doctrine protects material prepared in anticipation of litigation by an attorney or the attorney’s representative. [U.S. v. Deloitte LLP, 610 F.3d 129, 134-35 (D.C. Cir. 2010); see Fed. R. Civ. P. 26(b)(3)(A)]. Two categories of work product exist: (1) fact work product and (2) opinion work product. “To the extent that work product contains relevant, nonprivileged facts, the [work product protection] merely shifts the standard presumption in favor of discovery and requires the party seeking discovery to show 'adequate reasons' why the work product should be subject to discovery. However, to the extent that work product reveals the opinions, judgments, and thought processes of counsel, it receives some higher level of protection, and a party seeking discovery must show extraordinary justification." [In re Sealed Case, 676 F.2d 793, 809-10 (D.C. Cir. 1982); see Yeda Research & Dev. Co. v. Abbott GMBH & Co. KG, 2013 LEXIS 84948 at *26-27 (D.D.C. June 18, 2013); U.S. v. ISS Marine Servs., 905 F. Supp. 2d 121, 133 (D.D.C. 2012); U.S. v. Clemens, 793 F. Supp. 2d 236, 244-48 (D.D.C. 2012)]. (2). Discussion Defendants do not challenge the fact that the materials in question were prepared in anticipation of litigation. The various declarations from the DOJ and the State Plaintiffs aver that the material was “prepared … in the course of an investigation that was undertaken with litigation in mind.” [Safecard Services, Inc. v. Securities and Exchange Commission, 926 F.2d 1197, 1202 (D.C. Cir. 1991); see Opp. Exh. B (Stallings Decl.) at ¶¶ 3-4; Rushkoff Decl. at ¶¶ 34; Pascoe Decl. at ¶¶ 4, 8-9; Donahue Decl. at ¶¶ 3-4, 8; Domen Decl. at ¶¶ 4, 7-8]. The Special Master’s review of the material confirms that many of the documents offer a direct opinion regarding whether to pursue litigation regarding a particular case and, that in all cases, the opinions offered were designed to inform the decisionmaker’s choice in this regard.13 The To the extent that certain materials were prepared by non-lawyer economists, it is clear from examination of the documents and declarations submitted by the United States and the Plaintiff States that those materials were drafted 20 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 21 of 31 Special Master therefore concludes that the material was prepared in anticipation of litigation and qualifies for protection under the work product doctrine. Defendants do argue, however, that the work product doctrine “does not protect relevant facts from discovery.” (Mot. at 7). The Special Master is concerned that Defendants’ argument represents too narrow a view of the doctrine. In fact, the work product doctrine protects both “deliberative material” and “factual materials prepared in anticipation of litigation.” [Tax Analysts v. Internal Revenue Service, 117 F.3d 607, 620 (D.C. Cir. 1997); see Martin v. Office of Special Counsel, Merit Sys. Protection Bd., 819 F.2d 1181, 1187 (D.C. Cir. 1987)]. The difference lies in overcoming the privilege. While fact work product is protected, that protection can be overcome upon a showing of substantial need and undue hardship. [In re Sealed Case, 676 F.2s at 809-10; see Upjohn Co. v. U.S., 449 U.S. 383, 401-02 (1981)]. By contrast, “Opinion work product … is virtually undiscoverable.” [Director, Office of Thrift Supervision v. Vinson & Elkins LLP, 124 F.3d 1304, 1307 (D.C. Cir. 1997)]. This point is formalized in Rule 26: “If the court orders discovery of [factual] materials, it must protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of a party’s attorney or other representative concerning the litigation.” [Fed. R. Civ. P. 26 (b)(3)(B)]. “To the extent that work product reveals the opinions, judgments, and thought processes of counsel, it receives some higher level of protection, and a party seeking discovery must show extraordinary justification." [In re Sealed Case, 676 F.2d 793, 809-10 (D.C. Cir. 1982)]. Defendants urge the Special Master to consider the “factual analyses” to be no different from the basic factual material upon which those analyses are based. (Mot. at 7). Those at the behest of attorney supervisors at DOJ and the State attorney general offices to inform the attorneys’ litigation preparations. The privilege therefore applies to these materials as well as the material drafted by the attorneys themselves. [See In re Apollo Group, Inc. Sec. Litig., 251 F.R.D. 12, 29-30 (D.D.C. 2008)]. 21 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 22 of 31 analyses, however, were prepared “for the specific purpose of analyzing aspects” of the mergers at issue. [Exxon Corp. v. Federal Trade Comm’n, 476 F. Supp. 713, 718 (D.D.C. 1979)]. They are not “purely factual material that contains no opinions or strategic thinking of the [entity] who prepared them, or the attorney for whom they were prepared,” [Cause of Action v. F.T.C., 2013 U.S. Dist. LEXIS 116791 at *56 (D.D.C. Aug. 19, 2013)], but, rather, “material which might disclose” the drafting attorneys’ or economists’ “appraisal of factual evidence.” [Mervin v. F.T.C. , 591 F.2d 821, 826 (D.C. Cir. 1978)]. Indeed, the major value of these memoranda and reports lies not in the basic factual material, but in how Plaintiffs’ economists and attorneys used that data. The assessment of the data using models selected by Plaintiffs and their agents is precisely the type of work product that the doctrine is intended to protect. The Special Master therefore concludes that the work product doctrine protects the models, forecasts, and analyses as privileged opinion work product that need not be disclosed. Defendants are correct that the work product privilege theoretically is a qualified privilege. In practice, however, opinion work product is “virtually undiscoverable.” (Office of Thrift Supervision, 124 F.3d at 1307). While it theoretically may be possible to envision a situation of extreme need or extraordinary justification, Defendants have failed to demonstrate that such a situation is present here. As noted in the discussion of “substantial need” as it pertains to the deliberative process privilege, Plaintiffs have indicated a willingness to provide Defendants with the “basic factual materials.” (Opp. at 1). Using this material, Defendants may prepare their own analyses of prior mergers, and may use those analyses to defend against Plaintiffs’ claims.14 14 To the extent that Defendants argue that Rule 26 (b)(2)(D) should be interpreted to permit access to the analyses of the economists engaged in the preparation material for earlier, unrelated litigation (see Mot. at 8), Rule 26 (b)(2)(D) applies to non-testifying experts retained for the litigation at hand, and not for prior litigation. [See U.S. ex rel. Westrick v. Second Chance Body Armor, Inc., 288 F.R.D. 222, 227-28 (D.D.C. 2012)]. It is therefore inapplicable to these circumstances. Even if it were applicable here, the rule provides that a party may only obtain, by interrogatory or deposition, an opinion held by a non-testifying expert retained by the opposing party upon a showing of “exceptional circumstances under which it is impracticable for the party to obtain facts or opinions on 22 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 23 of 31 Finally, the Special Master concludes Defendants have not met the lower standard of “substantial need” and “undue hardship” that would apply if the material in question were considered to be fact, rather than opinion, work product. [See FED. R. CIV. P. 26(b)(3)]. “In evaluating whether there is a substantial need, courts have considered factors including: ‘(1) [the] importance of the materials to the party seeking them for case preparation; (2) the difficulty the party will have obtaining them by other means; and (3) the likelihood that the party, even if he obtains the information by independent means, will not have the substantial equivalent of the documents he seeks.’" [Yeda, 2013 U.S. Dist. LEXIS 84948 at *28-29 (quoting MeadWestvaco Corp. v. Rexam PLC, 2011 U.S. Dist. LEXIS 78028 at *4 (E.D. Va. July 18, 2011))]. While the materials sought are important to Defendants in that they would assist Defendants’ efforts to support the “soundness” of their economic models and to disprove Plaintiffs’ arguments opposing the merger, Defendants have not shown that they are unable to obtain substantially similar material. To the contrary, Plaintiffs have or are in the process of providing to Defendants all of the basic factual material that Plaintiffs considered when assessing the earlier mergers. Using this material, Defendants may develop their own models assessing the earlier mergers and may use these models to show that the use of particular factors would have correctly predicted the outcome of those mergers, and that any anticompetitive outcomes the same subject by other means.” [FED. R. CIV. P. 26 (b)(2)(D)]. Factors to be considered in evaluating whether the “exceptional circumstances” test has been met include: “(1) the interest in allowing counsel to obtain the expert advice they need in order [to] properly evaluate and present their clients' positions without fear… .; (2) the view that each side should prepare its own case at its own expense; (3) the concern that it would be unfair to the expert to compel its testimony and also the concern that experts might become unwilling to serve as consultants if they suspected their testimony would be compelled; and (4) the risk of prejudice to the party who retained the expert as a result of the mere fact of retention.” [Westrick, 228 F.R.D. at 228 (quoting Long Term Capital Holdings, L.P. v. U.S., 2003 U.S. Dist. LEXIS 14579 at *2 (D. Conn. May 6, 2003))]. As noted, Defendants may use the basic factual information provided by Plaintiffs to independently obtain expert opinions to support their defenses. There is, therefore, very little reason to mandate production under this rule. Defendants have not shown that “exceptional circumstances” warrant disclosure in these circumstances. 23 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 24 of 31 stemming from those outcomes were the result of outside factors, and not due to the consolidation resulting from the mergers. Likewise, Defendants have put forth no evidence that independently developing this information would cause them any type of “undue hardship,” or that they lack the resources to generate their own models based on the factual material provided. To the contrary, Defendants appear to have means equal to those of the government that will enable them to obtain the information they seek. [See Pl. Exh. B, “Order Denying BCBS’s Motion to Compel Responses to Interrogatories,” United States v. Blue Cross Blue Shield of Michigan, Civ. No. 10-14155-DPHMKM , Doc. No. 178 at 5 (D. Mich. 2012 )]. In any event, the burden is on Defendants to show that they lack such resources, and Defendants have not put forth a persuasive showing here. (See Yeda, 2013 LEXIS 84948 at *26-27). Accordingly, even if the material were simply “fact” work product, Defendants would not be entitled to discover it in these circumstances. c. Attorney-Client Privilege Plaintiffs claim that DOJ Document Nos. 1-3, 6, 8, 10-12, 13, and 16-18, and State Document Nos. DC-01, DC-02, MI-01, and TN-01 are protected by the attorney-client privilege. The attorney-client privilege is designed to protect “confidential communications from clients to their attorneys made for the purpose of securing legal advice or services.” [Tax Analysts, 117 F.3d at 618 (D.C. Cir. 1997) (citing In re Sealed Case, 737 F.2d 94, 98-99 (D.C. Cir. 1984))]. The privilege only protects communications between attorneys and clients if those communications “rest on confidential information obtained from the client.” (In re Sealed Case, 737 F.2d at 98-99). This privilege is not implicated here. Even assuming, as Plaintiffs aver, that the “client” for purposes of these documents are “employees at varying levels of seniority” at DOJ and at the 24 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 25 of 31 Plaintiff States’ attorney general offices, (Opp. at 7), a review of the material at issue makes clear that the documents in question do not rest on confidential material obtained from those supervisors. To the contrary, the documents rely on data obtained from the airlines, but the airlines were certainly never the “clients” of the attorneys involved. The Special Master therefore concludes that the attorney-client privilege does not protect this discovery. (See Citizens for Responsibility and Ethics in Washington, 249 F.R.D. at 4). d. Investigatory Files Privilege Plaintiffs claim that all of the DOJ documents, and Plaintiff State documents DC-01, DC02, MI-01, and TN-01 are protected by the law enforcement investigatory files privilege. Of note, Plaintiffs claim that DOJ Doc. No. 15 is only protected by this privilege. The investigatory files privilege is intended to prevent disclosure of law enforcement material when such disclosure would be “contrary to the public interest in the effective functioning of law enforcement. The privilege serves to preserve the integrity of law enforcement techniques and confidential sources, protects witnesses and law enforcement personnel, safeguards the privacy of individuals under investigation, and prevents interference with investigations.” [Tuite v. Henry, 181 F.R.D. 175, 176 (D.D.C. 1998 ), aff’d 203 F.3d 53 (D.C. Cir. 1999)]. “To sustain the claim, three requirements must be met: (1) there must be a formal claim of privilege by the head of the department having control over the requested information; (2) assertion of the privilege must be based on actual personal consideration by that official; and (3) the information for which the privilege is claimed must be specified, with an explanation why it properly falls within the scope of the privilege.” [In re Sealed Case, 856 F.2d 25 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 26 of 31 268, 271 (D.C. Cir. 1988) (citing Black v. Sheraton Corp. of America, 564 F.2d 531, 542-43 (D.C. Cir. 1977); Friedman v. Bache Halsey Stuart Shields, Inc., 738 F.2d 1336, 1341-42 (D.C. Cir. 1984))]. Plaintiffs have satisfied the second requirement, but have failed to either expressly claim the investigatory files privilege or to designate the privileged material with adequate specificity. Plaintiffs have submitted declarations from William Stallings, Chief of the Transportation, Energy and Agriculture Section at the DOJ’s Antitrust Division, and from various senior attorneys with the Plaintiff States’ attorney general offices. In each, the declarant states that he or she reviewed the material over which a privilege has been claimed. (See Stallings Decl. at ¶ 5; Rushkoff Decl. at ¶ 4; Pascoe Decl. at ¶¶ 7-8; Domen Decl. at ¶ 6).15 In none of the declarations, however, does the declarant formally assert a claim that the materials are privileged under the investigatory files privilege. Likewise, none of the declarations either delineate the particular material to be specified or explain why that material should be protected. Plaintiffs’ privilege logs do purport to claim that the investigatory files privilege applies to these documents. The logs, however, simply include this privilege as one of many for each document, and suggest that the privilege should apply to the entire document. This is at odds with the purpose of the privilege, which is to preserve the integrity of law enforcement techniques and investigations. (See Tuite, 181 F.R.D at 176). It is difficult to see how releasing information regarding economic analyses may hamper future law enforcement efforts, and Plaintiffs have not provided any suggestion as to how disclosure of these documents may have such an effect. It is not immediately apparent from the Domen declaration that Mr. Domen is the “head of a department having control over the requested information.” This discrepancy is immaterial, however. The investigatory files privilege may be found to apply as long as the individual asserting the privilege is a “supervisory personnel of sufficient rank.” [Landry v. FDIC, 204 F.3d 1125, 1136 (D.C. Cir. 2000)]. 26 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 27 of 31 Moreover, the privilege itself is qualified, and “[t]he public interest in nondisclosure must be balanced against the need of a particular litigant for access to the privileged information.” [In re Sealed Case, 856 F.2d at 272 (citing Black, 564 F.2d at 545; Friedman, 738 F.2d at 1341)]. In balancing these interests, a court must consider, (1) the extent to which disclosure will thwart governmental processes by discouraging citizens from giving the government information; (2) the impact upon persons who have given information of having their identities disclosed; (3) the degree to which governmental self-evaluation and consequent program improvement will be chilled by disclosure; (4) whether the information sought is factual data or evaluative summary; (5) whether the party seeking discovery is an actual or potential defendant in any criminal proceeding either pending or reasonably likely to follow from the incident in question; (6) whether the police investigation has been completed; (7) whether any interdepartmental disciplinary proceedings have arisen or may arise from the investigation; (8) whether the plaintiff's suit is non-frivolous and brought in good faith; (9) whether the information sought is available through other discovery or from other sources: (10) the importance of the information sought to the plaintiff's case. [In re Sealed Case, 856 F.2d at 272 (quoting Frankenhauser v. Rizzo, 59 F.R.D. 339 (E.D. Pa 1973); Friedman, 738 F.2d at 1342-43)]. Plaintiffs contend that the privilege should apply because “if the requested materials are compelled here to allow Defendants to argue inconsistency, nothing would prevent future litigants from raising the same argument.” (Opp. at 8). Plaintiffs’ argument ignores the fact that Defendants have not asserted a need for the arguments in order to “argue inconsistency” of enforcement, but rather to defend their own economic modeling and to refute certain claims made in the Amended Complaint. (See Mot. at 3-4). Regardless, the investigatory files privilege is not concerned with the type of arguments that may be made by these or future litigants, but with the risk of “chilling” future investigations. Plaintiffs have not provided any reasons that disclosure here would have such an effect on ongoing or future law enforcement investigations. 27 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 28 of 31 By contrast, as discussed in § II (b), supra, Defendants have put forth numerous reasonable bases for which they need access to this material. The balancing test required by the investigatory files privilege therefore weighs in Defendants’ favor, and the Special Master finds that this privilege does not protect the material at issue. However, because the material is protected by the deliberative process privilege and work product doctrine, this finding should not be construed as a determination that Plaintiffs must disclose this material. The exception is DOJ Document 15, as to which Plaintiffs have not asserted any privilege other than investigatory files. For the reasons outlined above, Plaintiffs have not provided a sufficient reasons that the investigatory files privilege should protect this document, and the Special Master therefore concludes that this document should be disclosed. e. Waiver Defendants contend that, even if the material is privileged, Plaintiffs have waived that privilege by releasing public statements about the prior mergers and by permitting its economists to publish an article describing the mergers. (Mot. at 9). Waiver of the deliberative process privilege occurs when “‘specific documents or information’ withheld as privileged” were previously disclosed to “‘unnecessary third parties.’” [Elec. Frontier Found. v. U.S. DOJ, 890 F. Supp. 2d 35, 46-47 (D.D.C. 2012) (quoting In re Sealed Case, 121 F.3d 729, 741 (D.C. Cir. 1997)]. Waivers “should not be lightly inferred,” and “release of a document only waives these privileges for the document or information specifically released, and not for related materials.” (In re Sealed Case, 121 F.3d at 741). With regard to the work product doctrine, “the party seeking to pierce the privilege must show that the holder of the privilege disclosed work product to a third party under circumstances ‘inconsistent with the maintenance of secrecy from the disclosing party's adversary.’” (Judicial 28 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 29 of 31 Watch, Inc. v. Dep’t of Homeland Security, 841 F. Supp. 2d 142, 158 (D.D.C. 2012) (quoting Deloitte, 610 F.3d at 140)]. Defendants bear the burden of proving waiver of both the work-product doctrine (see Judicial Watch, 841 F. Supp. 2d at 158) and deliberative process privileges. [See Elec. Frontier Found., 890 F. Supp. 2d at 46-47]. They have not carried their burden in this case. The DOJ press releases are brief documents which state DOJ’s decision regarding each respective merger and provide brief synopses of the merger, the parties, and the reasoning behind the DOJ decisions. With regard to this reasoning, DOJ provided three sentences explaining its decision not to challenge the Southwest-Airtran merger (see Mot. Exh. C at 53); four sentences regarding its decision on the United Airlines – Continental merger (see Mot. Exh. C at 54); four sentences regarding its decision in the Delta Airlines – Northwest merger (see Mot. Exh. C at 56); and six sentences explaining its decision in the America West – US Airways merger (see Mot. Exh. C at 58). Each press release provides only a very broad overview of the agency’s reasoning, and in no case do the documents provide any of the analytic or economic modeling information that Defendants have requested. Under these circumstances, the press releases can hardly be said to constitute a waiver of either the work product doctrine or deliberative process privilege. While the DOJ economists’ article “The Year in Review: Economics at the Antitrust Division 2008-2009” does go into greater detail regarding the analytic methods relied upon by the antitrust division, Defendants have not demonstrated that this article creates a waiver. First, the article only discusses the Delta-Northwest merger, so any waiver would be confined to that merger alone. Second, while the article broadly discusses the type of economic modeling used, an in camera review of the documents makes clear that the actual analyses were far more 29 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 30 of 31 complex than those described in this article. For example, while the article explains the “in conducting [the] analysis [DOJ economists] worked with a number of different hypothetical post-merger schedules” (Mot. Exh. D at 65), the protected documents provide specific examples of these schedules. While waiver may have occurred as to the specific information discussed in this document, which has already been disclosed to Defendants by virtue of having been included in the article, that waiver does not extend to the more extensive analysis discussed in the actual protected material. Likewise, the discussion of this merger is not “inconsistent with the maintenance of secrecy from the disclosing party's adversary.” (Deloitte, 610 F.3d at 140). Rather, the decision to withhold more extensive details and formulas from this article suggests an intent to protect the secrecy of that information. For these reasons, the Special Master recommends against a finding of waiver in these circumstances. f. Interrogatory No. 2 Finally, to the extent that Interrogatory No. 2 “asks for the same factual material [as in RFPs 15-19] directly,” (Mot. at 2), the Special Master finds no reason to recommend that Defendants be permitted to discover directly this material. For the reasons outlined above, while the material is relevant to Defendants’ defenses, it is also protected by the deliberative process privilege and work product doctrine. Rule 26 expressly provides that parties are entitled only to “any nonprivileged matter that is relevant to any party’s claim or defense.” [Fed. R. Civ. P. 26(b)(1) (emphasis added)]. The material at issue is plainly privileged, and therefore undiscoverable. 30 Case 1:13-cv-01236-CKK Document 106 Filed 10/10/13 Page 31 of 31 III. Conclusion For the foregoing reasons, the Special Master recommends that the Court grant Defendants’ motion with respect to DOJ Doc. No. 15, and deny Defendants’ motion with respect to all of the remaining documents. The Special Master recommends that Plaintiffs be ordered to produce DOJ Doc. No. 15 no later than three calendar days after entry of the Court’s Order. _______/s/ Hon. Richard A. Levie (Ret.) ______ Hon. Richard A. Levie (Ret.) Special Master 31 Case 1:13-cv-01236-CKK Document 106-1 Filed 10/10/13 Page 1 of 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ____________________________________ ) UNITED STATES OF AMERICA, et al., ) ) Civil Action No. 13-cv-1236 (CKK) Plaintiffs, ) ) ) v. ) ) US AIRWAYS GROUP, INC., et al., ) ) Defendants. ) ____________________________________) Order Adopting Special Master Report and Recommendation #1 Upon consideration of Special Master Report and Recommendation #1 on Defendants’ Motion to Compel Production of Factual Materials and Information Regarding DOJ’s Approvals of Four Prior Airline Mergers from Plaintiffs, it is this _____ day of ______, 2013 hereby: ORDERED that Plaintiffs’ and Defendants’ objections to Report and Recommendation #1 are overruled; and it is Further Ordered that Defendants’ Motion to Compel is DENIED with respect to Document Nos. 1-14 and 16-18; and it is Further Ordered that Defendants’ Motion to Compel is GRANTED with respect to Document No. 15; and it is Further Ordered that Plaintiffs shall provide responsive material within three calendar days of the entry of this Order. _______________________________ COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE