Case No COMP/M.6828 - DELTA AIR LINES/ VIRGIN GROUP

Office for Publications of the European Union

L-2985 Luxembourg

Case No COMP/M.6828 - DELTA AIR LINES/ VIRGIN

GROUP/ VIRGIN ATLANTIC LIMITED

Only the English text is available and authentic.

REGULATION (EC) No 139/2004

MERGER PROCEDURE

Article 6(1)(b) NON-OPPOSITION

Date: 20/06/2013

In electronic form on the EUR-Lex website under document

number 32013M6828

Office for Publications of the European Union

L-2985 Luxembourg

Commission européenne/Europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel. +32 22991111

EUROPEAN COMMISSION

Brussels, 20.6.2013

C(2013) 3983 final

To the notifying parties:

Dear Sir/Madam,

Subject: Case No COMP/M.6828 – Delta Air Lines/ Virgin Group/ Virgin Atlantic

Limited

Commission decision pursuant to Article 6(1)(b) of Council Regulation

No 139/20041

(1) On 15 May 2013, the European Commission received a notification of a proposed

concentration pursuant to Article 4 of the Merger Regulation by which the

undertakings Delta Air Lines, Inc ("Delta", the United States of America) and Virgin

Group Holdings Limited ("Virgin Group", the British Virgin Islands) acquire within

the meaning of Article 3(1)(b) of the Merger Regulation joint control of the

undertaking Virgin Atlantic Limited ("Virgin Atlantic", the United Kingdom) by way

of purchase of shares ("the Transaction").

1. THE PARTIES

(2) Virgin Group is the holding company of a group of companies active in a wide range

of products and services worldwide, such as gyms, health care, mobiles and

transport. Virgin Group already owns 51 per cent of the shares of Virgin Atlantic

Airways Limited ("Virgin").

(3) Virgin flies to 34 destinations worldwide, including locations across North America,

the Caribbean, Africa, the Far East and Australia. Some of its most recent additions

to its flying network include in particular Cancun. Virgin does not have any integrated

joint venture and is not a member of any global airline alliance.

OJ L 24, 29.1.2004, p. 1 ("the Merger Regulation"). With effect from 1 December 2009, the Treaty on

the Functioning of the European Union ("TFEU") has introduced certain changes, such as the

replacement of "Community" by "Union" and "common market" by "internal market". The terminology

of the TFEU will be used throughout this decision.

Publication in the Official Journal of the European Union No C 143, 23.5.2013, p.7.

MERGER PROCEDURE

PUBLIC VERSION

In the published version of this decision, some

information has been omitted pursuant to Article

17(2) of Council Regulation (EC) No 139/2004

concerning non-disclosure of business secrets and

other confidential information. The omissions are

shown thus […]. Where possible the information

omitted has been replaced by ranges of figures or a

general description.

(4) Delta serves more than 160 million customers each year. Delta and the Delta

Connection carriers offer service to nearly 357 destinations in 66 countries on six

continents. Headquartered in Atlanta, Delta employs 80,000 employees worldwide

and operates a mainline fleet of more than 700 aircraft. A founding member of the

SkyTeam global alliance, Delta participates in the trans-Atlantic joint venture with

Air France-KLM and Alitalia. Including its worldwide alliance partners, Delta offers

customers more than 13,000 daily flights, with hubs in Amsterdam, Atlanta,

Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-LaGuardia, New

York-JFK, Paris-Charles de Gaulle, Salt Lake City, and Tokyo-Narita.

2. CONCENTRATION

(5) By the Transaction, Delta together with Bluebottle Investments (UK) Limited, an

indirect subsidiary of the Virgin Group acquire joint control over Virgin Atlantic

within the meaning of Article 3(1)b for the purpose of Article 3(2) of the EU Merger

Regulation by way of a purchase of shares. Virgin Atlantic is the indirect holding

company of Virgin and Virgin Holidays Limited (VHols). Virgin Atlantic is

currently for the purposes of Article 3(2) of the EU Merger Regulation jointly

controlled by the Virgin Group and Singapore Airlines Limited (Singapore Airlines).

(6) Delta is acquiring the 49% shareholding in Virgin Atlantic which is currently held by

Singapore Airlines while the remaining 51% of Virgin Atlantic will continue to be

held by the Virgin Group. Virgin and VHols are wholly owned indirect subsidiaries

of Virgin Atlantic and therefore under Virgin Atlantic's ultimate control. Delta and

Virgin Atlantic also agreed to enter into a metal neutral

profit sharing joint venture

in relation to services between the UK and the US, Canada and Mexico. For the

purpose of the assessment of the Transaction under the EU Merger Regulation,

account is taken of both the acquisition of the 49% shareholding in Virgin Atlantic

and the creation of the metal-neutral profit sharing joint venture.

(7) In the Commission's Decision in case COMP/M.1855 Singapore Airlines/Virgin

Atlantic concerning the situation of control over Virgin, the Commission found that

although the Virgin Group controlled a majority of shares in Virgin and nominated

the majority of the members on the board, Singapore Airlines had joint control of the

Virgin through its veto rights and the arbitration procedure which was provided for

the case of disagreement in certain strategic business decisions. The Commission

concluded that considering those rights as a whole, Singapore Airlines and the Virgin

Group

exercised joint control over Virgin.

(8) The Parties claim that Delta will have materially the same rights as Singapore

Airlines currently has

and that therefore Delta and the Virgin Group will jointly

control Virgin Atlantic and hence Virgin. In particular, the Parties explain that Delta

will have veto rights over (i) the employment of key personnel and (ii) the

appointment of executive directors as well as (iii) the right to force an independent

review of the budget and business plan. In the Parties view, this will oblige Delta and

the Virgin Group to cooperate in respect of key strategic governance decision for

Virgin Atlantic.

Metal neutrality indicates that partners in the joint venture are indifferent as to which operates the

"metal"( ie. the aircraft) when they jointly market services.

Section 3, paragraph 3 of the Form CO. [Information regarding other Virgin Group businesses]

(9) Under paragraph 65 of the Commission Consolidated Jurisdictional Notice (the

Jurisdictional Notice)

, joint control may exist even where there is no equality

between the two parent companies in votes or in representation in decision-making

bodies. This is the case where minority shareholders have additional rights which

allow them to veto decisions which are essential for the strategic commercial

behaviour of the joint venture. Such veto rights must be related to strategic decisions

on the business policy of the joint venture and must go beyond the veto rights

normally accorded to minority shareholders in order to protect their financial

interests as investors. Veto rights which confer joint control typically include

decisions on issues such as the budget, the business plan, major investments or the

appointment of senior management.

(10) Under the shareholders' agreements between Delta and the Virgin Group, Virgin

Atlantic cannot undertake various matters without the prior written consent of Delta

and the Virgin Group. These rights include for instance the appointment of key

personnel which includes the executive directors and persons with ultimate

responsibility for amongst others the following divisions: commercial, finance, flight

operations and corporate services. If there is no agreement on these issues, the matter

in question is suspended and the issue is referred to the CEO's of Delta and the

Virgin Group for consideration

. It therefore appears that Delta will indeed have a

veto right as regards the appointment of senior management.

(11) The decision making process on the approval of the annual budget is as follows.

[Information regarding Virgin Atlantic's governance structures]

(12) However, under paragraph 82 of the Jurisdictional Notice, there can be joint control

even if only one of the parent companies has a casting vote and "if the mutual

interdependence of the parent companies would make the exercise of the casting vote

unlikely."

(13) The Commission considers that the commercial context in which the Parties would

operate in particular in view of Delta's acquisition of the shareholding in Virgin

Atlantic as well as the fact that Delta and Virgin will establish a contractual joint

venture for air transport services (metal neutral joint venture), Delta and the Virgin

Group will be mutually interdependent. Indeed the joint venture agreement is part of

the notified concentration and, as explained in paragraph 37 of the Form CO, the

Parties intend to "cooperate across the board on routes in the joint venture, for

example, in relation to network planning, sales, marketing, pricing and passenger

services (e.g. frequent flyer programmes). The parties will reach consensus decisions

in relation to aspects of the joint venture such as network and capacity planning."

(14) Taking into account the joint venture agreement, the Commission concludes that the

transaction confers joint control on the Parties over Virgin Atlantic

. The Transaction

Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of

concentrations between undertakings, OJ C95, 16.04.2008 p. 1.

Clause 4.1 and 4.5 of the Shareholder's Agreement relating to Virgin Atlantic.

Regarding the EU air transport licensing provisions, the Parties consider that "it is not unusual for different tests of

control to be applied under different legal measures, for example, under the EU Merger Regulation and the air

transport licensing provisions." (Form CO, paragraph 89). Pursuant to paragraph 23 of the Jurisdictional Notice,

"The concept of control under the Merger Regulation may be different from that applied in specific areas of

Community and national legislation concerning, for example, prudential rules, taxation, air transport or the media.

thus constitutes a merger within the meaning of Article 3(1)(b) of the Merger

Regulation.

3. UNION DIMENSION

(15) The undertakings concerned Delta, Virgin Group and Virgin Atlantic, have a

combined aggregate world-wide turnover of more than EUR 5 000 million.

Each of

them has a Union-wide turnover in excess of EUR 250 million. [Explanation why the

"two-thirds rule" is not met]. The methodology used by the Parties to calculate their

turnover is the "point of sale" methodology, although in any event the thresholds

would also be met under the "point of origin" or "50/50 split" methods.

The notified

concentration therefore has a Union dimension within the meaning of Article 1(2) of

the Merger Regulation.

4. RELEVANT

PRODUCT AND GEOGRAPHIC MARKETS

(16) The activities of Virgin and Delta overlap in air transport of passengers, air transport

of cargo, supply of seats to tour operators

and maintenance, repair, and overhaul

services ("MRO").

4.1. Air transport of passengers

4.1.1. O&D approach

(17) The Commission has traditionally defined the relevant market for scheduled

passenger air transport services on the basis of the "point of origin/point of

destination" (O&D) city-pair approach.

Such market definition reflects the demand-

side perspective whereby customers consider all possible alternatives of travelling

from a city of origin to a city of destination which they do not consider substitutable

to a different city-pair. As a result, every combination of a point of origin and a point

of destination is considered to be a separate market.

(18) The Parties do not object to the O&D approach. They however claim that the market

for scheduled passenger air transport services increasingly has a network dimension,

particularly on the demand-side for corporate customers, frequent flyer program

customers and connecting passengers on transatlantic routes. According to the

Parties, on the supply-side, carriers with larger networks can optimize their

operations in response to price differentials across different O&D routes. In

particular, the Parties submit that a substantial hub presence at London Heathrow is a

significant competitive advantage in the context of access to connecting passengers.

The interpretation of ‘control’ in other areas is therefore not necessarily decisive for the concept of control under

the Merger Regulation [emphasis added]."

Turnover calculated in accordance with Article 5(1) of the Merger Regulation.

These three methodologies are explained in COMP/M.4439 - Ryanair/Aer Lingus, 27 June 2007, recitals 13 et seq.

As regards the sale of seats to tour operators in the UK, the Parties estimate that Virgin has a share around [10-

20]% while Delta has a share well below [0-5]%. Consequently, the Commission will futher analyse this market.

The overlaps in maintenance, repair, and overhaul services do not give rise to any horizontal or vertical affected

market. According to the Parties, their combined market shares remain indeed below 15% regardless of the precise

market segmentation.

COMP/M.5889 - United Air Lines/Coontinental Airlines, COMP/M.5440 - Lufthansa/Austrian Airlines;

COMP/M.5335 - Lufthansa/SN Airholding; COMP/M.5364 - Iberia/Vueling/Clickair; COMP/M.3280 - Air

France/KLM; COMP/M.3770 - Lufthansa/Swiss.

(19) The Commission has in the past taken into consideration the network competition

between airlines. This is particularly relevant on the supply-side, as network carriers

build their network and decide to fly almost exclusively on routes connecting to their

hubs.

In line with the Commission's notice on market definition and with the case

law, the Commission has given pre-eminence to demand-side substitution, whereby

it considered that customers still need transportation from one point to another and

that competition still takes place on an O&D city-pair basis.

(20) A large majority of respondents to the market investigation have confirmed this

approach in the present case, and confirmed that it was relevant for the purpose of

analysing the competitive effects on the overlap routes

(21) While in particular the Parties, some network carriers and some charter airlines tend

to believe competition between carriers wield network-based aspects, the O&D

approach best reflects the demand-side perspective according to which both the point

of origin and the point of destination should include all airports that are substitutable

in the eyes of passengers.

(22) In light of the above, the effects of the Transaction will be assessed on the basis of

the city-pair O&D approach, while all substitutable airports will be included in the

respective points of origin and destination provided that they are perceived as

substitutable by travellers. The question of airport substitutability will be examined

for those O&D routes in Section 4.1.4.

4.1.2. Premium vs. non premium passengers

(23) The Commission has traditionally found that a distinction may be drawn between

time sensitive/premium and non-time sensitive/non-premium passengers.

(24) Premium passengers tend to travel for business purposes, require significant

flexibility with their tickets (such as cost-free cancellation and modification of the

time of departure, etc.) and tend to pay higher prices for this flexibility. Non-

premium customers travel predominantly for leisure purposes or to visit friends and

relatives, book long time in advance, do not require flexibility with their booking and

are generally more price-sensitive.

(25) The Parties do not object with this distinction. They moreover adopt a distinction

between premium and non-premium based on restricted Economy fares falling into

the latter category and all other fares falling into the former for the purpose of the

market definition and the calculation of the market shares. The Parties claim that this

On the network approach, see CMP/M.6447 - IAG/bmi, COMP/M.5889 - United Air Lines/Continental Airlines,

COMP/M.5830 - Olympic/Aegan Airlines, COMP/M.5747 - Iberia/British Airways. The O&D approach was

confirmed by the General Court, most recently in Case T-342/07 Ryanair Holdings plc v European Commission

[2010 ECR], paragraph 53.

Commission's Notice on the definition of the relevant market, paragraph 13 (OJ C 372, 09.12.1997, p.5),

COMP/6447 IAG/bmi, recital 31 and following.

See responses to questions 5 and 6 of Q1 – Questionnaire to Competitors, responses to questions 4 and 5 of Q2 –

Questionnaire to Corporate Customers, responses to question 4 and 5 of Q3 – Questionnaire to Travel Agencies.

For the sake of the present decision, "Transatlantic routes" stands for the 12 routes to and from New York, Boston,

Washington, Chicago, Los Angeles, San Francisco, Cancun, Miami, Las Vegas, and Orlando, from and to London

and Manchester.

COMP/M.5889 - United Air Lines/Continental Airlines, COMP/M.5440 - Lufthansa/Austrian Airlines;

COMP/M.5335 - Lufthansa/SN Airholding; COMP/M.5364 - Iberia/Vueling/Clickair.

delineation is conservative. If the boundary between premium and non-premium had

been set up otherwise, the Parties' markets shares would indeed dilute.

(26) A large majority of respondents to the market investigation confirmed this approach,

acknowledging that the distinction between premium and non-premium passengers

was relevant for the assessment of the Transaction.

(27) Some respondents amongst the Parties' competitors nonetheless indicated that the

distinction between premium and non-premium passengers has become blurred, and

that there is a chain of substitution between these two broad categories rather than a

clear-cut distinction.

(28) However, for the assessment of the Transaction, the conclusion on whether premium

and non-premium passengers belong to the same market can be left open as no

competition concerns arise under any alternative market definition.

4.1.3. Non-stop (direct) vs. one-stop (indirect) flights

(29) The Commission has in its practice considered that with respect to long-haul routes

(more than 6 hours flight duration), one-stop flights constitute a competitive

alternative to non-stop services under certain conditions (for example if they are

marketed as connecting flights on the O&D pair in the computer reservation

system).

(30) The Parties claim that one-stop services can in certain circumstances present a

competitive alternative to non-stop services. According to the Parties, this

competitive constraint would be greater the shorter the additional duration is relative

to that of non-stop services.

(31) A large majority of respondents to the market investigation confirmed that one-stop

services could constitute competitive alternatives to non-stop services as identified

above. A majority of the respondents also confirmed that one-stop services with a

greater difference in duration constituted a smaller competitive constraint to non-stop

services than one-stop services with a shorter difference in duration.

Nevertheless,

a majority of the corporate customers stated that they would not buy one-stop tickets

for their employees, emphasizing the fact that the distinction is more relevant as far

as premium passengers are concerned.

See responses to question 7 of Q1 – Questionnaire to Competitors, responses to question 6 of Q3 – Questionnaire to

Travel Agencies.

See responses to question 7 of Q1 – Questionnaire to Competitors.

"Non-stop" flights are flights that take off at airport A and land at airport B, where they offload passengers, and that are

constantly in the air from their origin airport and to their final destination airport. By contrast, "direct" flights may entail

a refuelling stop and/or a disembarking/re-embarking stop, but are marketed under a single flight code and are flown

with a single aircraft. "One-stop" flights include direct flights that do not qualify as "non-stop", as well as indirect flights

which are journeys that require a change of aircraft or a change of flight code. Unless indicated otherwise, the terms

"non-stop/one-stop" and "direct/indirect" are used interchangeably in the present decision as this terminology does not

have an effect on the outcome of the competitive assessment in the present case.

COMP/M.5440 - Lufthansa/Austrian Airlines, COMP/M.2041 - United/US Airways, COMP/M.2672 -

SAS/Spanair.

See responses to question 11 to 16 of Q1 – Questionnaire to Competitors, question 11 of Q2 – Questionnaire to

Corporate Customers, question 8 to 11 of Q3 – Questionnaire to Travel Agencies, question 5 to 8 of Q4 –

Questionnaire to Consumer Associations.

See responses to question 10 of Q2 – Questionnaire to Corporate Customers.

(32) However, for the assessment of the Transaction, the conclusion on whether or not

non-stop/direct and one-stop/indirect flights belong to the same market can be left

open as no competition concerns arise under any alternative market definition.

4.1.4. Airport substitutability

(33) The Commission has found that flights from and to airports which have sufficiently

overlapping catchment areas can be considered as substitutes in the eyes of

passengers. Such airport substitution has often been found where several airports are

located in the same city. In order to correctly capture the competitive constraint that

flights from and to two different airports exert on each other, a detailed analysis

taking into consideration the specific characteristics of the case at hand is

necessary.

(34) In the present case, such airport substitutability is particularly relevant for London

and New York, as well as for Orlando, Washington, Chicago, and Miami.

4.1.4.1. London airports

(35) London has six airports, namely London Heathrow, London Gatwick, London City,

Stansted, Luton and Southend

(36) Table 1 summarises the following: (i) the distance from the London airports to

London city centre (in km and time):

Table 1: London airports

Airports Heathrow (LHR)

Gatwick (LGW)

London City (LCY)

Distance and travel

times to London city

centre

LHR – 28 km

LGW – 46 km

LCY – 14 km

Car: LHR – 65 mins; LGW – 85 mins; LCY – 20 mins.

Bus: LHR – 65 mins; LGW – 90 mins.

Rail: LHR – 55 mins; LGW – 60 mins; LCY – 22 mins.

Source: Form CO (paragraph 226 – Table 5)

(37) Previous Commission decisions determined that a certain degree of substitutability

exists between the London airports, at least for non-premium passengers.

Also, the

Commission found in the past that at least the airports of London Heathrow, London

Gatwick, and London City were considered substitutable for both premium and non-

premium passengers flying from London to Madrid and to Barcelona

and that the

COMP/M.5747 Iberia/British Airways; COMP/M.5440 Lufthansa/Austrian Airlines; COMP/M.5335 Lufthansa/SN

Airholding; COMP/M.3280 Air France/KLM.. See also judgment of the General Court of 6 July 2010 in case T-

342/07 Ryanair v Commission paras. 99 et seq.

According to the data collected during the market investigation, there are no flights to and from Stansted, Luton

and Southend relevant for the assessment of the Transaction.

COMP/M.4439 – Ryanair/Aer Lingus, paragraph 109 and following; COMP/M.5747 – Iberia/British Airways;

COMP/M.5889 – United Air Lines / Continental Airlines; COMP/M.6447 – IAG/bmi;

COMP/M.5747 – Iberia/British Airways, paragraph 30.

airports of London Heathrow and London Gatwick were considered substitutable for

both premium and non-premium passengers flying between London and Athens.

(38) In the recent IAG/Bmi case

, the Commission assessed each of the relevant routes on

the narrowest possible market, namely a market comprising flights to and from

London Heathrow only. In line with the approach adopted in the decision relating to

COMP/M.5747-Iberia/British Airways, the effects of the concentration were

examined on a wider “London(three)” market comprising flights to and from London

Heathrow, London Gatwick and London City and also on a wider “London(five)”

market comprising flights to and from London Heathrow, London Gatwick, London

City, Luton, and Stansted.

(39) The Parties contend that no competition concern will arise as a result of the

Transaction, regardless of the precise London airport market definition. However, the

Parties consider that there is support for the following possible London airport

market definitions: (i) London Heathrow only market

, (ii) London Heathrow and

London City market for premium passengers

, and (iii) a "London (three)" market

encompassing London Heathrow, London Gatwick and London City

(40) The results of the market investigation are blurred, both for premium and non-

premium passengers.

(41) Indeed, a large majority of respondents to the market investigation considers that a

significant proportion of premium passengers would not switch to another London

airport, should the prices of fares on the Transatlantic routes to and from London

Heathrow would increase by 5-10%. However, the Parties' main competitors on the

Transatlantic routes to and from London disagree and deem that premium passengers

would switch under some circumstances

(42) As concerns the non-premium passengers, market participants' opinions are rather

mixed. A majority of competitors

, including American Airlines, US Airways and

United, considers that in case of price increase by 5-10% of the Transatlantic flights

to and from London Heathrow, a significant proportion of non-premium passengers

would switch to either London Gatwick and/or London City. A contrario, a large

majority of corporate customers contends that non-premium passengers would

continue to fly from London Heathrow, in spite of such price increase

. As concerns

the travel agencies, a majority of respondents considers that passengers would switch

from London Heathrow. However, there is no clear trend as to whether passengers

would switch to either London Gatwick and/or London City or to any other London

airport. As explained by Thomas Cook: "Our non-premium paxs are very price

COMP/M.5830 – Olympic/Aegean Airlines, paragraph 1644.

COMP/M.6447 – IAG/bmi.

The Parties consider that London Heathrow is a critical airport for the provision of transatlantic services and that it

cannot be excluded from any possible London airport market definition.

The Parties argue that London City airport provides some competitive constraint on London Heathrow for premium

passengers. In particular, British Airways offers two daily direct Business class only services between London City

and New York (JFK airport). These services would be substitutable for services to and from London Heathrow for

premium passengers who value the direct access to the City of London which this service offers.

The Parties take account in this respect of the transatlantic services to and from Gatwick. Delta does not offer any

services to and from Gatwick.

Responses to question 19.1 of Q1 – Questionnaire to competitors.

Responses to question 20 of Q1 – Questionnaire to competitors.

Responses to question 17 of Q2 – Questionnaire to corporate customers.

sensitive and we do see them swapping to airports to get themselves a cheaper

deal"

(43) Therefore, the effects of the Transaction for the relevant routes to and from London

will be examined on a market comprising flights to and from Heathrow only, and on

a wider market comprising flights to and from Heathrow, Gatwick and London City.

4.1.4.2. New York airports

(44) New York has three airports, namely John F. Kennedy International Airport ("JFK"),

Newark Liberty International Airport ("Newark") and La Guardia

. JFK is located

31 kilometres i.e. 30 minutes by car, 52 minutes by bus and 75 minutes by rail away

from the New York City centre. Newark is located 21 kilometres i.e. 22 minutes by

car and 24 minutes by rail away from the New York City centre.

(45) The Parties consider that transatlantic services between JFK or Newark and London

should be considered to be part of the same market

. They submitted a quantitative

study to support this finding

. In that study, the Parties compared Virgin's London

Heathrow-JFK and London Heathrow-Newark fares and conducted both stationary

and correlation analyses. According to the Parties, those analyses follow the method

applied by the Commission itself in previous air transport cases. [Outcome of Virgin

Atlantic's fare analysis]. Besides, the Parties referred to previous decisions where the

Commission found that transatlantic services between London and JFK or Newark

were part of the same market

(46) The market investigation has not yielded unequivocal results as to the extent to

which London-JFK and London-Newark services are regarded as substitutable by

passengers

, notably within the premium category

. In particular, many corporate

travelers (who often fall within the premium category) may be inclined to choose

between JFK and Newark on the basis of the location of their final place of

destination or place of origin in the New York area rather than on the basis of

developments in fares for services between London and each of those airports.

(47) In any event, since the Transaction does not raise serious doubts as to its

compatibility with the internal market with respect to the London-New York route

under any possible market definition, the question of whether London-JFK and

London-Newark services belong to the same market can be left open.

4.1.4.3. Orlando airports

(48) Orlando has two airports: (i) Orlando International (20 kilometres/24 minutes

away

from the city center) and (ii) Sanford International (37 kilometres/27 minutes

away

from the city center). Both Delta and Virgin operate from London and Manchester to

Orlando International, while Sanford International is mainly used by charter carriers.

Responses to question 15 of Q3 – Questionnaire to travel agencies.

There are no flights to and from La Guardia relevant for the assessment of the Transaction.

Form CO, paragraph 224 (b).

Form CO, Annex 76.

Case COMP/39.596 BA/AA/IB, paragraphs 29 and 30, Case COMP/M.3280 Air France / KLM, paragraph 34.

In the sense that an increase in fares of 5-10% for one of these two categories of services would entice a significant

number of passengers to switch to the other category.

See responses to questions 18 of Q3 – Travel Agents, responses to question 20 of Q2 – Corporate Customers,

responses to questions 23 of Q1 – Competitors, Air Transport of Passengers.

By car.

Ibid.

(49) The Parties submit that both airports are substitutable as (i) Orlando is a holiday

destination, where non-premium passengers make up the vast majority of the

passenger numbers

; (ii) Sanford International airport is 37 kilometres miles away

from Orlando city centre, and Orlando International airport is around 20 kilometres

away from Orlando city centre; and (iii) such non-premium leisure passengers are

unlikely to be concerned about whether the airport is 20 or 37 kilometres from the

Orlando city centre (or relevant tourist destination at which they are staying, e.g.

Disney World).

(50) On the London-Orlando route, a majority of competitors considers that should the

fares on the London-Orlando International route increase, premium customers would

not switch to Sanford International. As explained by Aer Lingus: "While we consider

these airports to be substitutable, Premium passengers are not so price sensitive.

Consequently, such a price increase would not result in switching from their

preferred airport"

. As regards non-premium passengers, a majority of competitors

and of travel agencies deems that non-premium passengers would switch to Sanford

International in such situation. For instance, Brussel Airlines' response reads as

follows: "Non-Premium passengers are looking at the price (in first instance)"

(51) On the Manchester-Orlando route, a large majority of competitors, corporate

customers and travel agencies as well as the manager of the Manchester airport

contend that premium passengers would not switch to Sanford International, should

fares on Manchester-Orlando International increase by 5-10%

. As stated by Carlson

Wagon lit: "Generally, Sanford International Airport is only serviced by charter

companies, offering only non-flexible, economy service. Business travellers

appreciate the flexibility of Orlando International, the distance to Orlando and its

facilities, and a 5-10% price increase will likely not be sufficient to make them switch

to a carrier serving Sanford International"

. Conversely, the same market players

consider that non-premium passengers would switch from Orlando International to

Sanford International, should the fares on the Manchester-Orlando International

route increase by 5-10%.

(52) As a consequence, for the purpose of the present case, the two Orlando airports

appear to be substitutable for non-premium passengers only.

4.1.4.4. Washington airports

(53) Washington DC has two airports, namely Dulles International Airport (42

kilometres/30 minutes

away from the city centre) and Ronald Reagan Washington

National Airport (7 kilometres/12 minutes

from the city centre).

According to the

According to a CAA survey data from 2012 put forward by the Parties, 95 per cent of passengers travelled for

leisure on the London-Orlando route.

Response to question 23.1 of Q1 – Questionnaire to competitors.

Response to question 23.2 of Q1 – Questionnaire to competitors.

Responses to question 18 of Q2 – Questionnaire to corporate customers.

Response to question 16.1 of Q3 – Questionnaire to travel agencies.

By car.

Ibid.

The Parties state that for the assessment of the impact of the Transaction on the London-Washington route, the

relevant airports are Dulles International Airport and Ronald Reagan Washington National Airport, although

Baltimore-Washington International Airport may be considered by some passengers to and from Washington DC as

a substitute for these two airports. Given that Virgin only connects to Dulles International Airport and Delta mainly

to Ronald Reagan Washington National Airport, including Baltimore-Washington International airport in the

competitive assessment will not alter the outcome of the assessment of the Transaction.

Parties no competition concerns will arise from the Transaction regardless the precise

Washington DC airport market definition.

(54) The market investigation revealed mixed results on the substitutability of the two

airports for premium and non-premium passengers. Subsequently, no firm

conclusions can be drawn on the substitutability of the two airports of Washington

DC.

(55) For the assessment of the Transaction, the conclusion on the substitutability of the

two Washington DC airports can be left open as no competition concerns arise under

any alternative market definition.

4.1.4.5. Chicago airports

(56) Chicago has two airports, namely O'Hare International Airport (29 kilometres/24

minutes

away from the city centre) and Midway International Airport (17

kilometres/18 minutes

away from the city centre). According to the Parties no

competition concerns will arise from the Transaction regardless the precise Chicago

airport market definition.

(57) The market investigation revealed mixed results on the substitutability of the two

airports for premium and non-premium passengers. Subsequently, no conclusions

can be drawn on the substitutability of the two airports of Chicago.

(58) For the assessment of the Transaction, the conclusion on the substitutability of the

two Chicago airports can be left open as no competition concerns arise under any

alternative market definition.

4.1.4.6. Miami airports

(59) Miami has two airports, namely Miami International (7 kilometres/11 minutes

away from the city centre) and Fort Lauderdale International (39 km kilometres/30

minutes

away from the city centre). According to the Parties no competition

concerns will arise from the Transaction regardless the precise Miami airport market

definition.

(60) The market investigation revealed mixed results on the substitutability of the two

airports for premium and non-premium passengers. Subsequently, no conclusions

can be drawn on the substitutability of the two airports of Miami.

(61) For the assessment of the Transaction, the conclusion on the substitutability of the

two Miami airports can be left open as no competition concerns arise under any

alternative market definition.

4.1.5. Inclusion of charter services

(62) Charter flights, as opposed to scheduled flights, are usually defined as air transport

services that take place outside normal schedules, normally through a hiring

arrangement with a particular customer (in particular a tour operator). Charter

companies often fly to destinations where no scheduled airline is active and usually

operate on a seasonal basis with a relatively low frequency of flights, in response to

By car.

Ibid.

By car.

Ibid.

the requirements of tour operators (for example, once a week on Saturday, only

during the summer or only during the ski season).

(63) Indeed, charter companies did not traditionally sell tickets directly to passengers.

They sold seats on their aircraft to tour operators which included the flight in a

holiday package. As such, the flight (air transport) is part of a package holiday, the

price of which includes flights, accommodation and other services. However, charter

companies now sell to some extent so-called "dry seats" directly to passengers (that

is to say seats only without other services), in addition to sales of seats to tour

operators for inclusion in package holidays.

(64) The Commission has previously held that most of the services offered by charter

companies (package holiday sales, seat sales to tour operators) are not in the same

market as scheduled point-to-point air transport services

. As concerns the sale of

"dry seats", the Commission recently left open whether they are part of the same

relevant market noticeably for long-haul flights

(65) The Parties consider that they face a meaningful competition from charter airlines on

five routes: (i) London-Orlando, (ii) Manchester-Orlando, (iii) London-Las Vegas,

(iv) Manchester-Las Vegas and (v) London-Cancun.

(66) Indeed, the Parties submit that leisure destinations, such as Orlando, Las Vegas and

Cancun, where the overwhelming majority of passengers even on scheduled airlines

are non-premium passengers travelling for leisure purposes, are the kind of

destinations where the scheduled airlines have regard to competition from charter

airlines.

(67) Respondents to the market investigation confirm the Commission's precedents. As

concerns the package holiday sales and seat sales to tour operators, the majority of

the respondents consider that they are not substitutable with scheduled passenger air

transport services in the eyes of customers on the overlap routes.

(68) As a consequence, for the assessment of the Transaction, the Commission concludes

that most of the services offered by charter companies (package holiday sales, seat

sales to tour operators) are not in the same market as scheduled air transport services.

(69) As concerns the competitive constraint exerted by charter carriers selling dry seats,

on the five routes referred to by the Parties, a large majority of respondents to the

market investigation do not see the charter airlines as credible alternatives to

scheduled airlines for premium services.

(70) However, for non-premium services, a majority of travel agencies deem that, facing

such fare increase, some of their customers would switch to buying dry seats from

charter carriers.

(71) Therefore, the relevance of dry seats offered by charter carriers to non-premium

passengers will be considered by the Commission in the competitive assessment in

the route- by-route analysis where relevant (Section 6.1).

COMP/M.4439 - Ryanair/Aer Lingus, COMP/M.5141 - KLM/Martinair, COMP/M.6663 – Ryanair/Aer Lingus III.

COMP/M.574 – Iberia/British Airways, paragraphs 34 and 35.

4.2. Air transport of cargo

4.2.1. Relevant product market

(72) In line with previous Commission decisions, the Parties submit that the O&D

approach to the market definition is inappropriate for the air transport of cargo, given

that cargo is generally less time sensitive than passengers and is usually transported

by trans-modal means of transport "behind" and "beyond" the points of origin and

destination.

Therefore, the relevant market should be defined more broadly.

(73) A majority of the respondents to the market investigation confirmed that a wider

market for air transport of cargo exists as, unlike passengers, cargo can be transported

with a higher number of stopovers and therefore any one-stop route is a substitute for

any non-stop route.

Besides, while some market players argued that that a separate

market could be identified including only non-stop flights used to transport specific

goods, such as livestock, perishable products, lifesaving drugs, etc., a large majority

of respondents indicated that such a distinction would not be material.

(74) Furthermore, the Parties submit that, as supported by previous Commission

decisions

, there is a single market for air transport of cargo and it is not appropriate

to sub-divide that market by type of air cargo carrier or by the nature of the goods

transported.

(75) The evidence collected through the market investigation indicates that there is no

reason to further sub-divide the market according to the type of provider. Even

though some market players argued that integrators

would have a specific market

segment as they focus on the express small packages market, a large majority of

respondents considered that all four types of air cargo carriers, namely (i) cargo

airlines with dedicated freighter airplanes; (ii) carriers with only belly space cargo

capacity on passenger flights; (iii) combination airlines (that is to say airlines with

both dedicated freighter airplanes and belly space cargo capacity); and (iv)

integrators, compete with each other for the same business in so far as they offer air

transport of cargo services.

(76) In previous decisions, the Commission considered a market for air transport of cargo

including all kinds of transported goods.

The market investigation in the present case

largely supports such approach. Whilst some respondents indicated that dangerous

goods require special handling for safety and security reasons, the large majority of

competitors indicated that they transport all kinds of goods in the same aircraft.

Likewise, the majority of respondents to the market investigation (competitors and

customers) confirmed that the market for air transport of cargo should not be further

COMP/M.5747 – Iberia/British Airways, recital 36; COMP/M.6447 – IAG/bmi, recital 87.

See responses to question 5 of Q8 – Questionnaire to Cargo Competitors and responses to question 6 of Q9 –

Questionnaire to Cargo Customers.

See responses to questions 6 and 6.1 of Q9 – Questionnaire to Cargo Customers.

COMP/M.5747 – Iberia/British Airways, recitals 38 and 40; COMP/M.6447 – IAG/bmi, recitals 89 and 91.

Integrators offer not only airport to airport services, but also handle cargo from the point of origin to the airport and

from the airport to the final destination, including legal formalities such as customs clearance. Examples of

integrators are DHL, UPS, FedEx and TNT.

See responses to questions 8 and 8.1 of Q8 – Questionnaire to Cargo Competitors and responses to questions 8 and

8.1 of Q9 – Questionnaire to Cargo Customers.

COMP/M.5747 – Iberia/British Airways, recital 40; COMP/M.6447 – IAG/bmi, recitals 91-92.

See responses to question 6 of Q8 – Questionnaire to Cargo Competitors.

sub-divided according to the nature of the transported items, mainly because

different kinds of cargo can be transported in the same aircraft. Some respondents

also pointed to the use of standardized forms of packaging and to the fact that no

different handling is required for loading and unloading the cargo.

(77) Finally, in line with previous Commission decisions, the Parties submit that the

markets for air transport of cargo are inherently unidirectional, due to differences in

demand at each end of the route, and must therefore be assessed on a unidirectional

basis.

The majority of respondents to the market investigation confirmed this

approach, mainly because of differences in terms of demand, products being shipped,

rate structure, customer base and deployed capacity.

(78) Therefore, the competitive assessment will be based on a broader market for air

transport of cargo encompassing all types of air cargo carriers and including all kinds

of transported goods on a unidirectional basis.

4.2.2. Relevant geographic market

(79) In line with previous Commission decisions, the Parties submit that for

intercontinental routes, catchment areas at each end of the route broadly correspond

to continents for those continents where local infrastructure is adequate to allow for

onward connections (for instance by road, train, or inland waterways, etc.), such as

Europe and North America. However, in respect of continents where local

infrastructure is less developed, the catchment area corresponds to the country of

destination.

(80) The evidence collected through market investigation confirms that in areas where

transport infrastructure allows for smooth onward connections the catchment area for

air transport of cargo can be broader than a country and can correspond to

continents.

This is particularly the case for Europe (encompassing the EEA area)

and North America (encompassing the United States and Canada)

. However, with

regard to Mexico, a large majority of respondents to the market investigation

indicated that transport infrastructure in this country is less developed and thus

insufficient to consider Mexico as part of a wider area.

Consequently, air transport

of cargo from Europe to Mexico (and vice versa) must then be assessed on a

continent (Europe) to country basis (and vice versa).

(81) Therefore, for the assessment of the Transaction, the relevant cargo markets are the

ones for air transport of overall cargo on a continent-to-continent (Europe - North

See responses to questions 7 and 7.1 of Q8 – Questionnaire to Cargo Competitors and responses to question 7 of Q9

– Questionnaire to Cargo Customers.

COMP/M.5747 – Iberia/British Airways, recital 39; COMP/M.6447 – IAG/bmi, recital 90.

See responses to questions 9 and 9.1 of Q8 – Questionnaire to Cargo Competitors and responses to questions 9 and

9.1 of Q9 – Questionnaire to Cargo Customers.

COMP/M.5440 – Lufthansa/Austrian Airlines, recital 30; COMP/M.5747 – Iberia/British Airways, recital 42;

COMP/M.6447 – IAG/bmi, recital 94.

See responses to question 10 of Q8 – Questionnaire to Cargo Competitors and responses to question 10 of Q9 –

Questionnaire to Cargo Customers.

See responses to question 13 of Q8 – Questionnaire to Cargo Competitors and responses to question 13 of Q9 –

Questionnaire to Cargo Customers.

See responses to question 11 of Q8 – Questionnaire to Cargo Competitors and responses to question 11 of Q9 –

Questionnaire to Cargo Customers.

See responses to questions 10 and 12 of Q8 – Questionnaire to Cargo Competitors and responses to questions 10

and 12 of Q9 – Questionnaire to Cargo Customers.

America and vice versa) and continent-to-country basis (Europe – Mexico and vice

versa) as the case may be.

5. CONCEPTUAL FRAMEWORK FOR THE ASSESSMENT OF THE PRESENT

TRANSACTION

(82) Prior to assessing the impact of the Transaction on the relevant markets, the

conceptual framework for the assessment of the Transaction must be determined. In

this respect, the Transaction raises one main conceptual issue: the treatment of

Delta's alliance and JV partners for the purposes of both the determination of affected

markets and the competitive assessment of the Transaction.

5.1. Alliances and profit-sharing joint ventures – passenger air transport services

(83) Delta is a founding member of the Skyteam alliance and participates in a profit-

sharing transatlantic joint venture with Air France/KLM and Alitalia (the "Air

France/KLM/Alitalia joint venture").

(84) In accordance with previous cases

, the assessment of the Transaction will be

carried out on the routes operated directly by Delta as well as by Delta's partners in

the Air France/KLM/Alitalia joint venture to the extent that they fall within the scope

of the JV agreement.

(85) [Information regarding the scope of Delta's joint venture with Air

France/KLM/Alitalia]

(86) [Scope of the JV arrangements between Delta and Virgin Atlantic]

(87) Similarly, there are two other revenue-sharing joint ventures covering air passenger

services on transatlantic routes, namely the oneworld Alliance Transatlantic Joint

Business of IAG (British Airways and Iberia) and American Airlines and the Star

Alliance A++ Joint Venture of United, Lufthansa and Air Canada. Their market

positions will be analysed as being a single one on all relevant routes.

5.2. Alliances and profit-sharing joint ventures – air transport of cargo

(88) Delta provides air transport of cargo services in the context of the Air

France/KLM/Alitalia joint venture and is a member of the SkyTeam Cargo alliance,

which provides for less integrated cooperation between SkyTeam members in

transporting cargo across the SkyTeam global network.

(89) For the purpose of the present case, the assessment will be carried out on the cargo

routes operated directly by Delta as well as by Delta's joint venture partners (Air

Delta's transatlantic joint venture with Air France/KLM/Alitalia covers routes between Europe and

North America (Canada, the US and Mexico) including points beyond Europe and beyond US entry

points into Delta's US domestic network. The Air France/KLM/Alitalia joint venture also covers

services between Amsterdam and India and between North America and Tahiti.

See for instance COMP/M. 5747 – Iberia/British Airways, 14 July 2010.

[Information regarding the scope of Delta's joint venture with Air France/KLM/Alitalia]. SkyTeam Cargo alliance

comprises Aeroflot, Aeromexico Cargo, Air France – KLM Cargo, Alitalia Cargo, China Airlines, China Southern

Cargo, Czech Airlines Cargo, Delta Cargo, Korean Air Cargo.

France/KLM/Alitalia) to the extent that they fall within the scope of the joint venture

revenue-sharing arrangements.

6. COMPETITIVE ASSESSMENT

6.1. Air transport of passengers

(90) The Transaction gives rise to horizontal overlaps on (i) two non-stop/non-stop routes:

London-New York and London-Boston, and (ii) ten non-stop/one-stop overlap

routes: London-Washington, London-Chicago, London-Los Angeles, London-San

Francisco, London-Cancun, London-Miami, London-Orlando, London-Las Vegas,

Manchester-Orlando and Manchester-Las Vegas.

These routes will be analysed in

turn below.

6.1.1. Methodology for calculating market shares

(91) The Commission regularly

endorses the use of Marketing Information Data Tapes

(MIDT) data as the best available proxy to estimate market shares. The Parties

therefore submitted data on market size and market share on the basis of MIDT data

for each relevant O&D route.

(92) MIDT data capture the booking of airline tickets made through Global Distribution

System (GDS); however MIDT data does not contain the bookings made directly via

the airline web-sites and charter sales.

(93) The Commission proceeded to a market reconstruction, asking the Parties and their

competitors to provide actual passenger numbers on each relevant O&D route. This

data encompasses the bookings through GDS as well as the bookings made directly

via the airline web-sites

(94) The market shares as calculated on the basis of the market reconstruction are within

similar ranges as the market shares calculated using MIDT data.

(95) The Commission uses data calculated through the market reconstruction for the

purpose of conducting the competitive assessment of the Transaction

(96) For the assessment of the Transaction, all one-stop flights are taken into acount

without applying a cut-off at a certain maximal duration of the connection time. The

Commission takes the view that the competitive analysis can include all booked one-

No competition concerns are deemed to arise on all affected non-stop/one-stop overlaps where throughout the last

four IATA seasons (for Delta this included Delta's integrated transatlantic joint venture partners Air France/KLM

and Alitatlia to the extent that the routes in question were within the scope of the joint venture): (i) the Parties'

combined market share was below 25%, or (ii) one of the Parties had a market share below 2%. There were no non-

stop/one-stop overlap routes for which at least one end of the city pair was outside the EU and on which the total

annual traffic was below 30,000 passengers. Similarly, no competition concerns are deemed to arise on all affected

one stop/one-stop overlaps where throughout the last four IATA seasons (i) the Parties’ combined market share was

below 25% or (ii) one of the Parties had a market share below 2% or (iii) where the total annual traffic was below

30,000 passengers.

Commission's Decisions of 30 March 2012 in Case No COMP/M.6447 – IAG/ BMI; 27 July 2010 in Case No

COMP/M.5889 – United Airlines/ Continental Airlines; 14 July 2010 in Case No COMP/M.5747 – Iberia/ British

Airways.

A limited number of minor market participants did not respond. However, they would likely represent a small

number of the passengers flying on the affected routes. In any event, their inclusion would have reduced the

Parties’ market shares.

However, the market reconstruction achieved in the present case confirms the possibility to rely on MIDT data for

similar cases.

stop tickets because the low popularity of very long one-stop flights will be reflected

in the booking data in that they will only account for a very small part of the relevant

market.

6.1.2. Congestion at relevant airports

6.1.2.1. UK airports

(a) London Heathrow

(97) Heathrow is a fully coordinated airport under the EU Slot Regulation (Level 3)

meaning that each business and general aviation movement requires the prior

allocation of a slot. At Heathrow there are constraints on airline access to slots across

the whole operating day on every day of the week across all months of the year. It is

therefore not currently possible for an airline to rely on the slot pool at Heathrow to

launch or extend services and each season there is either very limited availability or

no availability at all, as explained by the London Heathrow slot coordinator, ACL

(98) According to the Parties

, 56.6 % of all Heathrow slots are currently held by BA,

American Airlines, and Iberia, compared to 3.3% by Virgin

(and only 0.3% for

Delta (with 7% for all of the members of the SkyTeam alliance). The next largest slot

holders at Heathrow are Lufthansa with 5.6%, and Aer Lingus with 3.3%.

(b) London Gatwick

(99) Like Heathrow, Gatwick is designated as a fully coordinated airport under the EU

Slot Regulation (Level 3). Demand currently exceeds capacity throughout most or all

of the day at Gatwick

. According to ACL, the slot coordinator at Gatwick:

"Gatwick’s capacity limitations are runway movement and terminal passenger

throughput constraints. Runway capacity is the dominant constraint on airline access

to slots. Access to slots is limited by available capacity for much of the operating

day, particularly in the morning period and during summer seasons. London

Gatwick is also governed by environmental limits on the number of night movements

and night noise points permitted between 2300 – 0600 local time. Significant entry or

growth in the key morning and evening peak times of day is likely to be limited by

slot availability, although a secondary market for slots exists and slots at other times

(eg, afternoon/late evening) can be available from the pool"

(100) Virgin held 2% of the slots at Gatwick during the Winter 2012 IATA season

Council Regulation (EEC) No 95/93 of 18 January 1993 on common rules for the allocation of slots at Community

airports, OJ L 14, 22.1.1993, p. 1–6 and Regulation (EC) No 793/2004 of the European Parliament and of the

Council of 21 April 2004 amending Council Regulation (EEC) No 95/93 on common rules for the allocation of

slots at Community airports.

See ACL's response to Q5 – Questionnaire to slot coordinators.

Form CO, paragraph 373.

Virgin has recently obtained 9 slots pursuant to the remedies taken by the Parties in the IAG/bmi case. These 9

slots amount to 1.3% of the Heathrow slots.

Impact assessment of revisions to Regulation 95/93 Final report (Steer Davies Gleave, March 2011 available at:

http://ec.europa.eu/transport/air/studies/doc/airports/2011-03-impact-assessment-revisions-regulation-95-93.pdf

See ACL's response to question 6 of Q7 – Questionnaire to slot coordinators.

Delta does not operate ex Gatwick.

(101) Manchester is a level 3 coordinated airport. Manchester Airport is however broadly

not capacity or slot constrained, but is subject to a limited supply at the peaks.

6.1.2.2. North-American airports

(a) New York airports

(102) In the New York urban area, both JFK and Newark are subject to slot control. The

Parties indicated that for both airports, while availability of slots was limited in the

late afternoon and evening (from 1:00 pm to 9:59 pm), slots were generally available

in the morning and early afternoon (from 6:00 am to 1:00 pm)

(103) The United States' Federal Aviation Administration ("the FAA"), which acts as a slot

coordinator for these two airports, indicated that they both had slot constraints from

6:00 am to 10:59 pm daily and that the peak hours were generally from 7:00 am to

9:29 am and from 1:00 pm to 9:29 pm. The FAA also indicated that there had been

several instances during each of the last four IATA seasons where it was unable to

satisfy slot requests at each of those airports. In addition, the FAA does not expect

capacity to change at those airports in the next three to five years

(104) These elements point to a fairly high level of congestion at both airports during most

of the day, resulting in high barriers to entry and expansion on routes from or to these

airports, unless for carriers which already hold a substantial portfolio of slots at one

of them. Indeed, the more slots a carrier holds at a given congested airport, the easier

it is for that carrier to find a set of slots the use of which it can modify (in terms of

routes), so as to be in a position to add frequencies on certain routes.

(b) Other North American airports

(105) The information submitted by the Parties and collected during the market

investigation shows that no significant congestion would exist at other relevant US

airports and at Cancun airport.

6.1.3. Non-stop-non-stop long-haul overlaps: London-New York and London-Boston

(106) The Transaction gives rise to non-stop-non-stop overlaps on two routes, namely

London-New York and London-Boston.

6.1.3.1. General arguments put forward by the Parties

(107) The Parties put forward a number of arguments applying to both routes, as to why

they believe that the Transaction does not raise competition concerns

(108) They first argue that their transatlantic services are predominantly complementary

and that this complementarity would allow them to build a more significant UK / US

network, in particular thanks to their respective domestic networks in the United

States and the United Kingdom. The Parties consider that such a stronger network

could help them act as a more effective competitive constraint on the Transatlantic

Joint Business of British Airways and American Airlines ("BA / AA"), […]. In this

Form CO, paragraph 382.

See FAA's responses to questions 7 to 9 of Q5 – Questionnaire to Slot Coordinators.

Form CO, paragraphs 350 to 451.

respect, the Parties stress the importance of connecting traffic to sustain operations

on transatlantic O&D routes. Indeed, by offering more connecting opportunities, a

carrier can attract further connecting passengers and increase its load factors on the

trunk routes. This, in turn, strengthens its performance on the route and enables it to

compete more aggressively on price for O&D passengers.

(109) The Parties also referred to London Heathrow, stressing its importance for UK / US

transatlantic routes, its very high level of congestion and the large share of slots held

at that airport by British Airways. […].

(110) Furthermore, the Parties stress that the ability to attract premium passengers is

critical to an airline's ability to compete effectively on transatlantic routes and argue

that the Transaction would reinforce this ability by providing them with a more

extensive network and the opportunity to offer more frequencies.

(111) [The Parties' views on relevant factors to compete effectively and closeness of

competition]

(112) [The Parties' views on relevant factors to compete effectively and closeness of

competition]

(113) [The Parties' views on the American Airlines/US Airways merger]

6.1.3.2. Closeness of competition between the Parties – general considerations

(114) The Parties have provided data on the share of passengers originating in Europe and

North America among their respective passengers on the London-New York and

London-Boston routes, distinguishing between premium and non-premium

passengers

. [The Parties' views on closeness of competition]

(115) [The Parties' views on closeness of competition]

(116) [The Parties views on closeness of competition]

(117) These various elements, whether taken individually or together, do not lead to firm

conclusions as regards closeness of competition between the Parties. However, they

constitute useful initial indications, hinting in general at a limited degree of

substitutability between Delta and Virgin on the London-New York and London-

Boston routes. These indications will be complemented below by the outcome of the

market investigation on a route-by-route basis.

6.1.3.3. London-New York

(118) According to the Parties, the London-New York route is the most-travelled

international long-haul service in the world. In the Winter 2011 IATA season, a total

of [500,000-1 million] passengers (among whom [300,000-400,000] premium

passengers) travelled on that route on a point-to-point basis. In the Summer 2012

IATA season, [1.5 million - 2 million] passengers (among whom [500,000 - 1

million] premium passengers) travelled on that route. For each of these seasons and

Form CO, Annex 74.

Form CO, paragraphs 429 and 438.

[The Parties' views on closeness of competition]

Form CO, Exhibits D, F and G, Parties' separate responses to request for information Q7 of 16 May 2013.

Form CO, Exhibit D Delta Benchmarking Strategy

Parties' separate responses to request for information Q7 of 16 May 2013.

Form CO, Exhibit I, page 2.

within each category of passengers (premium and non-premium), [90-100]% of these

passengers travelled non-stop

(119) Delta offers both non-stop and one-stop services on the London-New York route

while Virgin only offers non-stop services. Since the Parties' activities do not overlap

in the one-stop segment and since one-stop passengers account for a very minor

proportion of all passengers for all the relevant combinations of airports and both for

premium and non-premium passengers, the inclusion of one-stop services in the

analysis would not lead to alter the conclusions of the competitive assessment for the

London-New York route.

(120) In the Winter 2012 and in the Summer 2013 IATA seasons, Delta offered three daily

non-stop services between London Heathrow and JFK. Over the same period, Virgin

offered four daily non-stop services between London Heathrow and JFK and two

daily non-stop services between London Heathrow and Newark.

(121) Over the same period, BA / AA offered a total of 11-12 daily non-stop services

between London Heathrow and JFK (depending on the season). Moreover, they

offered three daily non-stop services between London Heathrow and Newark. In

addition, British Airways offered a Business class only service between JFK and

London City with 1-2 daily frequencies (depending on the season). This service is

non-stop in the US – UK direction and one-stop in the opposite direction. Since none

of the Parties offers non-stop services between London City and New York,

disregarding British Airways' services between London City and New York is a

conservative approach, which will be followed in the the remainder of this analysis.

(122) In the Winter 2012 and Summer 2013 IATA Seasons, United offered five daily non-

stop services between London Heathrow and Newark.

(123) Finally, Kuwait Airways offered three non-stop weekly frequencies between London

Heathrow and JFK over the same period.

(124) In view of these characteristics, and since the market definition has been left open

with respect to the substitutability of JFK and Newark, it is appropriate to assess the

effects of the Transaction on the following possible markets for non-stop services on

the London-New York route: London Heathrow-JFK and London Heathrow –New

York (including JFK and Newark). Moreover, for each of these possible markets,

sub-segmentations must be considered with respect to the type of passengers

(premium and non-premium).

(125) The market position of the Parties and their competitors on these markets is as

follows:

For the various routes under assessment, the numbers of passengers stem from the Commission's market

reconstruction. They correspond to one-way travels, meaning that a passenger who flies roundtrip is counted twice

as much as a passenger who flies inbound (or outbound) only.

Table 2: Market shares on London-New York (non-stop services only)

London Heathrow- JFK

Carrier Winter 2011 Summer 2012

Premium Non-

premium

All

passengers

premium Non-

premium

All

passengers

Delta [5-10]% [20-30]% [10-20]% [5-10]% [10-20]% [10-20]%

Virgin [20-30]% [30-40]% [30-40]% [20-30]% [30-40]% [30-40]%

Delta +

Virgin

[30-40]% [50-60]% [40-50]% [30-40]% [50-60]% [40-50]%

BA / AA [60-70]% [40-50]% [50-60]% [60-70]% [40-50]% [50-60]%

Kuwait

Airways

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

London Heathrow- New York (JKF + Newark)

Carrier Winter 2011 Summer 2012

Premium Non

premium

All

passengers

premium Non-

premium

All

passengers

Delta [0-5]% [10-20]% [10-20]% [5-10]% [10-20]% [10-20]%

Virgin [20-30]% [30-40]% [30-40]% [20-30]% [30-40]% [30-40]%

Delta +

Virgin

[30-40]% [50-60]% [40-50]% [30-40]% [50-60]% [40-50]%

BA / AA [50-60]% [30-40]% [40-50]% [50-60]% [30-40]% [40-50]%

United [5-10]% [10-20]% [10-20]% [5-10]% [10-20]% [10-20]%

Kuwait

Airways

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

Source: Market reconstruction

(a) Parties' arguments

(126) In addition to the general arguments summarised in Section 6.1.3.1 above, the Parties

adduced route-specific justifications as to why the proposed Transaction does not

raise competition concerns. [Delta's plans regarding the London-New York route]

(127) Besides, the Parties argue that post-Transaction, the combined entity will be clearly

constrained by BA / AA and United. The Parties underline in particular the high

market shares of BA / AA, notably in the premium segment, and their significant

advantage in terms of number of frequencies, capacity and ability to increase both

capacity and frequencies due to British Airways' substantial slot portfolio at London

Heathrow. The Parties also claim that United and Kuwait Airways' non-stop services

as well as the various one-stop services offered on the route would constrain the

combined entity.

(b) Commission's assessment

(i) London Heathrow - JKF (non-stop services)

(128) BA / AA is likely to retain a very strong position in the premium segment post-

merger, with a market share currently higher than 60%. Moreover, BA / AA has a

significant frequency advantage with 11 daily frequencies in the Summer 2013 IATA

season, as opposed to seven for the combined entity. Premium passengers usually

attach value to high frequency services. In addition, in light of the general elements

mentioned in Section 6.1.3.2 and the outcome of the market investigation, the Parties

are rather distant competitors and BA / AA are closer to each of them than the other

Party. Indeed, a large majority of both travel agents and corporate customers took the

view that BA / AA was clearly a closer competitor to each Party than the other Party

with respect to premium passengers

100

. Respondents notably referred to reasons

relating to frequency and schedules, brand and frequent flyer programmes. Most

competitors took a similar view. This suggests that should the combined entity raise

prices, a large proportion of customers is likely to switch to BA / AA, which is the

closest competitor to each of the Parties.

(129) [Outcome of quantitative analysis]

(130) In view of the above and of the other available evidence, the proposed Transaction

does not raise serious doubts as to its compatibility with the internal market on the

market for air transport services for premium passengers on the London Heathrow-

JFK airport pair.

(131) On the non-premium segment, the Parties have higher combined market shares than

on the premium segment. However, BA / AA's will remain a strong competitor, with

market shares above 40%. Moreover, as regards closeness of competition between

the Parties on the non-premium segment, the same findings emerge from the market

investigation as on the premium segment: BA / AA is clearly a closer competitor to

Form CO, paragraph 540 and Confidential Annex 1.

100

See responses to questions 24 and 25 of Q3 – Travel Agents, responses to questions 27 and 28 of Q2 – Corporate

Customers, responses to questions 26 and 27 of Q1 – Competitors, Air Transport of Passengers.

each Party than the other Party

101

, which is also borne out by the elements mentioned

in Section 6.1.3.2. In particular, it should be noted that whilst Delta's brand appears

to be strong in the United States and less so in Europe and Virgin faces the opposite

situation, BA / AA benefits from the existence of strong brands both in the United

States and Europe. This is a further element suggesting that BA / AA is a closer

competitor to Virgin than Delta for passengers booking or originating in Europe and

a closer competitor to Delta than Virgin for passengers booking or originating in the

United States. It is also noted that there are potential one-stop alternatives on the

route. It is also noted that there are potential one-stop alternatives on the route: 15

daily one-stop services between London Heathrow and JFK are offered by various

carriers.

(132) In addition, as already pointed out with respect to premium passengers, BA / AA

have a significant frequency advantage over the combined entity. Even though such

advantage is not as crucial as for premium passengers, it is nevertheless an important

aspect also in the eyes of non-premium passengers which further contributes to

positioning BA / AA as a closer competitor to each Party than the other Party.

(133) Furthermore, while slot constraints at both London Heathrow and JFK constitute in

general high barriers to entry on the London Heathrow – JFK route, this does not

apply to British Airways and American Airlines. Indeed, within the IAG group,

British Airways and Iberia hold together more than 50% of all slots at London

Heathrow and American Airlines holds around 14% of all slots at JFK. British

Airways and American Airlines have indicated that slots would be available at both

airports to expand operations on the route and that, in addition, they would be able

and willing to increase capacity on the route if demand were to increase

102

. The

ability of BA / AA to increase frequencies and capacity in case of a price rise is a

further factor allowing BA / AA to exert significant constraint on the combined

entity post-merger on the non-premium segment.

(134) In view of the above and of the other available evidence, the Transaction does not

raise serious doubts as to its compatibility with the internal market on the market for

air transport services for non-premium passengers on the London Heathrow-JFK

airport pair.

(135) Moreover, since the Transaction does not raise serious doubts as to its compatibility

with the internal market on the premium segment and on the non-premium segment,

it does not raise serious doubts with respect to the "all-passenger" London Heathrow

– JFK market.

(ii) London Heathrow – New York (JKF and Newark) (non-stop

services)

(136) BA / AA is likely to retain a very strong position in the premium segment post-

merger, with a market share higher than 50%. Moreover, as on the London Heathrow

– JFK market, BA / AA has a significant frequency advantage, with 14 daily

frequencies in the Summer 2013 IATA Season, as opposed to 9 for the combined

101

See responses to questions 24 and 25 of Q3 – Travel Agents, responses to questions 27 and 28 of Q2 – Corporate

Customers, responses to questions 26 and 27 of Q1 – Competitors, Air Transport of Passengers.

102

See British Airways and American Airline's joint responses to questions 35 and 36 of Q1 – Competitors, Air

Transport of Passengers.

entity. Moreover, the findings reached concerning the London Heathrow – JFK

premium market as regards closeness of competition between Parties also apply to

the London Heathrow – New York premium market. In addition, on that market, the

Parties face competition from United, even though its market share on the premium

segment is limited.

(137) Therefore, the Transaction does not raise serious doubts as to its compatibility with

the internal market on the London Heathrow-New York market for premium

passengers.

(138) On the non-premium segment, the Parties' combined market shares are higher than

50%. However, BA / AA and, to a lesser extent, United will remain strong

competitors, with market shares respectively above 30% and 10%.

(139) Moreover, the findings reached concerning the London Heathrow – JFK non-

premium market as regards closeness of competition between the Parties, and BA /

AA's ability to increase frequencies and capacity if prices were to go up post-merger

also apply to the London Heathrow – New York non-premium market. It is also

noted that there are potential one-stop alternatives on the route; in particular BA /

AA offered three daily one-stop services between London Heathrow and Newark.

(140) In view of the above and of the other available evidence, the Commission considers

that the the proposed Transaction does not raise serious doubts as to its compatibility

with the internal market on the London Heathrow – New York market for non-

premium passengers.

(141) Moreover, since the Transaction does not raise serious doubts as to its compatibility

with the internal market on the premium segment and on the non-premium segment,

the Commission considers that it also does not raise serious doubts with respect to

the London Heathrow-New York "all-passengers" market.

(142) In light of the above and of the other available evidence, the Commission considers

that the Transaction does not raise serious doubts as to its compatibility with the

internal market with respect to the London-New York route on any possible relevant

market.

6.1.3.4. London-Boston

(143) In the Winter 2011 IATA season, a total of [100,000-200,000] passengers (among

whom [50,000-100,000] premium passengers) travelled on that route on a point-to-

point basis. In the Summer 2012 IATA season, [400,000-500,000] passengers

(among whom [100,000-200,000] premium passengers) travelled on that route. For

each of these seasons and within each category of passengers (premium and non-

premium), [90-100]% of these passengers travelled non-stop.

(144) Delta offers both non-stop and one-stop services on the London-Boston route while

Virgin only offers non-stop services. Since the Parties' activities do not overlap in the

one-stop segment and since, in addition, one-stop passengers account for a limited

proportion of all passengers and Delta accounts for a limited proportion of one-stop

passengers, for all the relevant combinations of airports and both for premium and

non-premium passengers, the inclusion of one-stop services in the analysis would not

lead to alter the conclusions of the competitive assessment for the London-Boston

route.

(145) Delta launched non-stop services on the London Heathrow-Boston route as of the

Summer 2011 IATA Season with two daily frequencies, using two daily slot pairs at

London Heathrow obtained on the basis of the slot commitment in the BA/AA/IB

Antitrust case

103

. As of the Winter 2011 IATA Season, Delta reduced its service to

one daily frequency, which it maintained throughout subsequent seasons

104

(146) In the Winter 2012 and in the Summer 2013 IATA seasons, Virgin also offered one

daily service between London Heathrow and Boston.

(147) Over the same period, BA / AA, offered four daily non-stop services between

London Heathrow and Boston.

(148) The market position of the Parties and BA / AA on this markets is as follows:

Table 3: Market shares on London-Boston (non-stop services only)

London Heathrow- Boston

Carrier Winter 2011 Summer 2012

Premium Non-

premium

All

passengers

premium Non-

premium

All

passengers

Delta [0-5]% [10-20]% [10-20]% [5-10]% [10-20]% [10-20]%

Virgin [20-30]% [20-30]% [20-30]% [20-30]% [20-30]% [20-30]%

Delta +

Virgin

[20-30]% [40-50]% [30-40]% [20-30]% [40-50]% [30-40]%

BA / AA [70-80]% [50-60]% [60-70]% [70-80]% [50-60]% [60-70]%

Source: Market reconstruction

(a) Parties' arguments

(149) In addition to the general arguments summarised in Section 6.1.3.1 above, the Parties

adduced route-specific justifications as to why the proposed Transaction does not

raise competition concerns. [Delta's plans regarding the London-Boston route]

105

(150) Moreover, according to the Parties, although the Transaction would reduce the

number of providers of non-stop services from three to two, this would not lead to an

anti-competitive outcome […]. The Parties refer to the strength of BA / AA in terms

103

Case COMP/39.596 BA/AA/IB.

104

However, as of the Winter 2012 IATA season, Delta reduced its capacity on the London-Boston route by switching

from a Boeing 767-400 to a Boeing 767-300 aircraft. This resulted in a [10-20]% reduction in the number of seats

in the Business class cabin and a [10-20]% reduction in the number of seats in the Economy class cabin.

105

Form CO, paragraph 540 and Confidential Annex 1.

of feed traffic, capacity, frequency

106

and ability to increase both capacity and

frequencies due to British Airways' substantial slot portfolio at London Heathrow.

The Parties also refer to BA / AA's high market shares on the point-to-point market,

notably on the premium segment. They claim that the Transaction would allow them

to increase their penetration of premium passengers through a better network and

increased frequencies. They take the view that this would result in more effective

competition because BA / AA would face a stronger rival.

(151) [Outcome of Virgin Atlantic's load factor and fare analysis]

107

(152) Besides, the Parties stress the role of one-stop services, which would exert a

significant competitive constraint on their non-stop services. They note that one-stop

fares are usually the cheapest available fares through booking websites, especially

during peak travel periods.

(153) In addition, they emphasize the "availability" of one daily slot pair at London

Heathrow for entry on the London-Boston route under the slot commitment in the

antitrust BA/AA/IB case

108

. Indeed, since Delta handed back one of the two daily slot

pairs it had obtained for its London-Boston operations in March 2011, another carrier

could, provided that it satisfies relevant eligibility conditions, apply for one daily slot

pair to launch operations on that same route. According to the Parties, this would

result in one of the usual barriers to entry on transatlantic routes from London – that

is, the scarcity of slots at London Heathrow – being absent on that particular route.

The Parties further underline that each of them only operates with one daily

frequency, so that the competitive constraint lost as a result of the Transaction could

be restored with one daily frequency (and therefore one daily slot pair).

(b) Commission's assessment

(154) BA / AA is likely to retain a very strong position in the premium segment post-

merger, with a market share currently higher than 70%. Moreover, BA / AA enjoys a

significant frequency advantage with four daily frequencies in the Summer 2013

IATA season, as opposed to two for the combined entity. As already indicated,

premium passengers usually attach value to high frequency services. In addition, in

light of the general elements mentioned in Section 6.1.3.2 and the outcome of the

market investigation, the Parties are not particularly close competitors and BA / AA

is clearly closer to each of them than the other Party. Indeed, a large majority of both

travel agents and corporate customers took the view that BA / AA was a closer

competitor to each Party than the other Party with respect to premium passengers

109

Respondents notably referred to reasons relating to capacity, frequency, schedules

and service. Most competitors took a similar view. This suggests that should the

combined entity raise prices, a large proportion of customers is likely to switch to

BA / AA, which is the closest competitor to each of the Parties.

106

The Parties note that BA / AA has made plans to reduce overall services for the Summer 2013 IATA season

compared to previous years but underline that this is partially compensated by the use of a larger aircraft, namely a

Boeing 747 instead of three Boeing 767 aircraft.According to the Parties, this change would result in a net increase

in premium seat capacity of 41% in spite of a lower number of frequencies.

107

Form CO, paragraph 500.

108

Case COMP/39.596 BA/AA/IB.

109

See responses to questions 29 and 30 of Q3 – Travel Agents, responses to questions 32 and 33 of Q2 – Corporate

Customers, responses to questions 28 and 29 of Q1 – Competitors, Air Transport of Passengers.

(155) [Outcome of quantitative analysis]

(156) In view of the above and of the other available evidence, the Commission considers

that the the proposed Transaction does not raise serious doubts as to its compatibility

with the internal market on the market for air transport services for premium

passengers on the London Heathrow-Boston route.

(157) On the non-premium segment, the Parties have higher combined market shares than

on the premium segment. However, BA / AA will remain a very strong competitor,

with market shares above 50%. Moreover, as regards closeness of competition

between the Parties on the non-premium segment, the same findings emerge from the

market investigation as on the premium segment: BA / AA is clearly a closer

competitor to each Party than the other Party

110

, which is also borne out by the

elements mentioned in Section 6.1.3.2. In particular, it should be noted that whilst

Delta's brand appears to be strong in the United States and less so in Europe and

Virgin faces the opposite situation, BA / AA benefits from the existence of strong

brands both in the United States and Europe. This is a further element suggesting that

BA / AA is a closer competitor to Virgin than Delta for passengers booking or

originating in Europe and a closer competitor to Delta than Virgin for passengers

booking or originating in the United States. [Information about Delta's price

benchmarking].

111

These are further factors pointing to BA / AA being a closer

competitor to each Party than to the other Party. It is also noted that there are

potential one-stop alternatives on the route: 4 daily one-stop services between

London and Boston are offered by various carriers.

(158) In addition, as already pointed out with respect to premium passengers, BA / AA has

a significant frequency advantage over the combined entity. Even though such

advantage is not as crucial as for premium passengers, it is nevertheless an important

aspect also in the eyes of non-premium passengers, which further contributes to

positioning BA / AA as a closer competitor to each Party than the other Party.

(159) The Commission also assessed the empirical evidence provided by the Parties on the

London-Boston route, [Outcome of quantitative analysis]. Moreover, as the

quantitative analysis for this route took into account Delta’s past entry with an

additional frequency added on the market, the predicted effects post-Transaction

would be even more limited as the qualitative assessment has shown that the Parties

would be very likely to continue to operate the same number of frequencies on the

route post-Transaction (1 by Delta and 1 by Virgin).

112

In any event, the Commission

considers that the quantitative assessment of potential price effects should be viewed

in the context of the qualitative assessment.

(160) Furthermore, while slot constraints at London Heathrow constitute in general a high

barrier to entry on the London Heathrow – Boston route

113

, this does not apply to

British Airways and American Airlines. Indeed, within the IAG group, British

Airways and Iberia hold together more than 50% of all slots at London Heathrow.

British Airways and American Airlines have indicated that slots would be available

110

See responses to questions 29 and 30 of Q3 – Travel Agents, responses to questions 32 and 33 of Q2 – Corporate

Customers, responses to questions 28 and 29 of Q1 – Competitors, Air Transport of Passengers.

111

Form CO, Exhibit D.

112

[The Parties' rationale for the transaction]

113

As already indicated, Boston Logan International Airport, unlike London Heathrow, is not congested.

at both airports to expand operations on the London-Boston route and that in

addition, they would be able and willing to increase capacity on the route if demand

were to increase

114

. The ability of BA / AA to increase frequencies and capacity in

case of a price rise is a further factor allowing BA / AA to exert constraint on the

combined entity post-merger on the non-premium segment.

(161) As regards the "availability" of one daily slot pair under the slot commitment in the

antitrust BA/AA/IB case for a potential new entrant, on which the Parties put

significant emphasis, it is first noted that if a carrier applied for a slot to enter into the

London-Boston route, its application would be assessed against the criteria laid down

in the BA / AA / IB commitment. Moreover, even though the mere fact that a slot

would be available for entry into the London-Boston route would reduce the overall

level of the barriers to entry on that route, it is recalled that "for entry to be

considered a sufficient competitive constraint on the merging parties, it must be

shown to be likely, timely and sufficient to deter or defeat any potential anti-

competitive effects of the merger"

115

. However, in this case, there is no indication that

a carrier might be willing to apply for a slot to start operations on the London-Boston

route, even if the Parties were to increase prices post-Transaction.

(162) Nevertheless, in view of all the above and of the other available evidence, the

Commission considers that the Transaction does not raise serious doubts as to its

compatibility with the internal market with respect to the market for air transport

services for non-premium passengers on the London Heathrow-Boston airport pair.

(163) Moreover, since the Transaction does not raise serious doubts as to its compatibility

with the internal market on the premium segment and on the non-premium segment,

the Commission considers that it does not raise serious doubts with respect to the all-

passenger London Heathrow – Boston market.

(164) In light of the above and of the other available evidence, the Commission considers

that the Transaction does not raise serious doubts as to its compatibility with the

internal market with respect to the London– Boston route under any possible market

definition.

6.1.4. Non-stop/one-stop overlap routes

(165) The Transaction gives rise to horizontal overlap on ten long-haul routes on which

Virgin offers a non-stop service while Delta only offers a one-stop service. These

routes are: London-Washington, London-Chicago, London-Los Angeles, London-

San Francisco, London-Cancun, London-Miami, London-Las Vegas, London-

Orlando, Manchester-Las Vegas, and Manchester-Orlando.

(166) The Commission will first assess the closeness of competition between Virgin's non-

stop services and Delta's one-stop services, before assessing the effects of the

Transaction on these routes.

114

See British Airways and American Airline's joint responses to questions 35 and 37of Q1 – Competitors, Air

Transport of Passengers.

115

Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations

between undertakings (OJ C 31, 5.2.2004, p. 5), paragraph 68

(167) For the reasons explained below the overlap between Virgin's non-stops services and

Delta's one-stop services will not give rise to competition concerns. If non-stop and

one-stop flights were to be considered as two separate markets there would be no

overlap between Virgin and Delta. Subsequently, it is not necessary to reach a

definitive conclusion on whether non-stop and one-stop passenger air transport

services are part of the same market as it would not change the conclusion of the

competitive assessment, as already indicated in Section 4.1.3 above.

6.1.4.1. Closeness of competition between Virgin's non-stop services and Delta's one-stop

services

(168) The concept of "closeness of competition" may play an important role in better

understanding the competitive constraint exerted by different competitors on each

other in differentiated markets such as airline markets

116

. It is therefore relevant to

assess whether Virgin's non-stop services and Delta's one-stop services would be

considered as close substitutes on the ten non-stop/one-stop overlap routes.

(169) [Parties' views on one-stop services]

(170) [Parties' views on one-stop services]

(171) The Parties however argue that Virgin and Delta are not each other's closest

competitors on the ten non-stop/one-stop overlap routes, given that Delta only offers

a one-stop service and Virgin offers a non-stop service while there are other

competitors which offer non-stop services on all but two of the ten non-stop/one-stop

overlap routes

117

(172) The majority of respondents to the Commission's market investigation stated that

they would be ready to consider buying one-stop tickets instead of non-stop tickets

on the ten non-stop/one-stop overlap routes

118

. However, corporate customers

consider that one-stop flights are not an alternative to non-stop flights save under

specific circumstances such as if there is no alternative, if the costs are (significantly)

lower and the one-stop does not significantly increase the total travel duration.

(173) When asked which criteria would make them choose a non-stop flight over a one-

stop flight, respondents to the Commission's market investigation

119

identified most

frequently the price difference followed closely by the schedules of the respective

flights. Conversely, competitors, corporate customers and travel agents identified

most frequently travel duration as a criterion for passengers when it comes to

choosing a non-stop flight over a one-stop flight

120

(174) On the ten non-stop/one-stop overlap routes, the difference in the fastest travel time

on non-stop flights and the fastest-travel time on one-stop routes is in general more

than two hours and thirty minutes

121

(175) The majority of respondents to the market investigation (competitors, travel agents,

corporate customers) indicated that they do not consider Virgin and Delta as each

116

See paragraphs 28-30 of the Horizontal Merger Guidelines.

117

The two routes are Manchester-Orlando and Manchester-Las Vegas.

118

See responses to question 12 of Q1, question 10 of Q2 and question 9 of Q3.

119

See responses to question 14.2 of Q1, question 11.2 of Q2 and question 10.2 of Q3.

120

See responses to question 14.1 of Q1, question 11.1 of Q2 and question 10.1 of Q3.

121

With the exception of some routes on which the difference is of around two hours: London-Chicago, London-Los

Angeles, and London-Las Vegas, Form CO, table 3 pages 72-73.

other's closest competitor on the ten non-stop/one-stop overlap routes. In the majority

of cases, BA / AA Airlines or United are identified as Virgin's or Delta's closest

competitor. Indeed on eight overlap routes BA / AA offers non-stop flights compared

to Delta which offers one-stop flights. Even on the two routes on which Virgin is the

only non-stop operator and Delta is offering a one-stop service, respondents

identified other one-stop carriers as closer to Delta than Virgin.

(176) In addition, the share of passengers that actually chose one-stop services during the

Winter 2011 and Summer 2012 IATA seasons on these ten non-stop/one-stop

overlap routes remains rather limited. If no distinction by passenger type is made,

more than two thirds of all passengers chose non-stop services over one-stop services

on these routes, with the exception of the Manchester-Las Vegas route on which the

share was [40-50]%.

(177) In the light of the above, the Commission considers that Delta and Virgin are not

each other's closest competitors, and are not close competitors on the ten non-

stop/one-stop overlap routes.

6.1.4.2. Description of the routes

(a) London-Washington

(178) In the Winter 2012 and Summer 2012 IATA seasons a total of [500,000 - 1 million]

passengers travelled between London and Washington DC, of which [90-100]%

travelled between London Heathrow and Dulles International Airport.

(179) In total [90-100]% of the passengers on this route travelled using non-stop services.

In addition, [60-70]% of the passengers travelling on this route during the Winter and

Summer 2012 IATA seasons were non-premium passengers

(180) Virgin offers for the Summer 2013 IATA season a daily non-stop service between

London Heathrow and Dulles International Airport while Delta only offers one-stop

services from London Heathrow via its hubs in the United States to Ronald Reagan

Washington National Airport.

122

In addition, Delta's Skyteam partners Air France

and KLM offer one-stop services between London Heathrow/London City to Dulles

International Airport.

(181) Non-stop services on the London-Washington route during the Summer 2013 IATA

season are also provided by British Airways, with two daily flights and six weekly

flights, and United Airlines with 3 daily flights from London Heathrow to Dulles

International Airport. Both carriers also provide one-stop services between London

and Washington DC as well as other carriers.

(182) Table 4 below displays the market shares of the Parties and their competitors for

premium, non-premium and for all-passengers on the London-Washington route. On

the basis of the market reconstruction, the cases whereby the airports at London and

Washington are considered separate markets will result in market shares of a similar

magnitude or in no overlap between Virgin and Delta. The Transaction on this route

is therefore assessed on the city-pair market.

122

The only exception is Delta's daily service between London Heathrow – John F Kennedy International Airport –

Dulles International Airport.

Table 4: Market shares on London-Washington

Winter 2011/2012 Summer 2012

Premium

Non

Premium

Total Premium

Non

Premium

Total

Virgin

(non-

stop)

[10-20]% [20-30]% [20-30]% [20-30]% [30-40]% [20-30]%

Delta

(one-

stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

Delta +

Virgin

[20-30]% [20-30]% [20-30]% [20-30]% [30-40]% [30-40]%

BA / AA

(non-

stop)

[40-50]% [20-30]% [30-40]% [50-60]% [20-30]% [30-40]%

BA / AA

(one-

stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

United

(non-

stop)

[20-30]% [40-50]% [30-40]% [20-30]% [30-40]% [30-40]%

United

(one-

stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

Others

(one-

stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

Source: Market reconstruction

(b) London-Chicago

(183) In the Winter 2012 and Summer 2012 IATA seasons a total of [400 000 - 500 000]

passengers travelled between London and Chicago, of which [90-100]% passengers

travelled between London Heathrow and O'Hare International Airport.

(184) In total [90-100]% of the passengers on this route travelled using non-stop services.

In addition, [60-70]% of the passengers travelling on this route during the Winter and

Summer 2012 IATA were non-premium passengers.

(185) Virgin only offers a service between London Heathrow and Chicago O'Hare

International Airport during the Summer IATA season. The frequency of this service

for the 2013 Summer IATA season varies between three flights per week to a daily

service. Delta only offers one-stop services from and to London Heathrow via its

hubs in the United States mainly connecting to Midway International Airport. In

addition, Air France and KLM offer one-stop services between London

Heathrow/London City to O'Hare International Airport.

(186) Non-stop services on the London-Chicago route during the Summer 2013 IATA

season are also provided by British Airways/American Airlines, with in total six

daily flights, and United Airlines, with three daily flights, between London Heathrow

and O'Hare International Airport. These carriers also provide one-stop services

between London and Chicago as well as other carriers.

(187) Table 5 below displays the market shares of the Parties and their competitors for

premium, non-premium and for all-passengers on the London-Chicago route. On the

basis of the market reconstruction, the cases whereby the airports at London and

Chicago are considered separate markets will result in market shares of a similar

magnitude or in no overlap between Virgin and Delta. The Transaction on this route

is therefore assessed on the city-pair market.

Table 5: Market shares on London-Chicago

Winter 2011/2012 Summer 2012

Premium

Non

Premium

Total Premium

Non

Premium

Total

Virgin (non-

stop)

[0-5]% [0-5]% [0-5]% [10-20]% [20-30]% [20-30]%

Delta (one-

stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

Delta +

Virgin

[0-5]% [0-5]% [0-5]% [10-20]% [20-30]% [20-30]%

BA / AA

(non-stop)

[60-70]% [50-60]% [50-60]% [60-70]% [40-50]% [40-50]%

BA / AA

(one-stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

United (non-

stop)

[20-30]% [40-50]% [30-40]% [10-20]% [20-30]% [20-30]%

United (one-

stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

Others (one-

stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

Source: Market reconstruction

(188) In the Winter 2011 and Summer 2012 IATA seasons a total of [500 000- 1 million]

passengers travelled by air between London and Los Angeles, of which [90-100]%

travelled between London Heathrow and Los Angeles.

(189) In total [90-100]% of the passengers on this route travelled using non-stop services.

In addition, [60-70]% of the passengers travelling on this route during the Winter and

Summer 2012 IATA were non-premium passengers.

(190) Virgin offers two daily non-stop services between London Heathrow and Los

Angeles. Delta only offers one-stop services between London Heathrow and Los

Angeles (LAS) via its hubs in the United States. In addition, Air France and KLM

offer one-stop services between London Heathrow/London City and Los Angeles.

(191) Non-stop services on the London-Los Angeles route during the Summer 2013 IATA

season are also provided by British Airways/American Airlines with in total three

daily flights, United Airlines with one daily flight and Air New Zealand with one

daily flight between London Heathrow and Los Angeles. Emirates provides a daily

non-stop service between London Gatwick and Los Angeles. British

Airways/American Airlines and United Airlines also provide one-stop services

between London and Los Angeles as well as other carriers.

(192) Table 6 below displays the market shares of the Parties and their competitors for

premium, non-premium and for all-passengers on the London-Los Angeles route. On

the basis of the market reconstruction, the cases whereby the airports at London are

considered separate markets will result in market shares of a similar magnitude or in

no overlap between Virgin and Delta. The Transaction on this route is therefore

assessed on the city-pair market.

Table 6: Market shares on London-Los Angeles

Winter 2011/2012 Summer 2012

Premium

Non

Premium

Total Premium

Non

Premium

Total

Virgin

(non-stop)

[20-30]% [30-40]% [30-40]% [20-30]% [30-40]% [20-30]%

Delta

(one-stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

Delta +

Virgin

[20-30]% [30-40]% [30-40]% [20-30]% [30-40]% [30-40]%

BA / AA

(non-stop)

[40-50]% [20-30]% [30-40]% [50-60]% [20-30]% [30-40]%

BA / AA

(one-stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

United

(non-stop)

[10-20]% [10-20]% [10-20]% [5-10]% [10-20]% [10-20]%

United

(one-stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

Air New

Zealand

(non-stop)

[10-20]% [10-20]% [10-20]% [5-10]% [10-20]% [10-20]%

Others

(one-stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

Source: Market reconstruction

(d) London-San Francisco

(193) In the Winter 2011 and Summer 2012 IATA seasons a total of [500 000 – 1 million]

passengers travelled by air between London and San Francisco, of which [90-100]%

travelled between London Heathrow and San Francisco.

(194) In total [90-100]% of the passengers on this route travelled using non-stop services

In addition, [60-70]% of the passengers travelling on this route during the Winter and

Summer 2012 IATA were non-premium passengers.

(195) Virgin offers one daily non-stop service between London Heathrow and San

Francisco. Delta only offers only one-stop services between London Heathrow and

San Francisco via its hubs in the United States. In addition, Air France and KLM

offer one-stop services between London Heathrow/London City and San Francisco.

(196) Non-stop services on the London-San Francisco route during the Summer 2013

IATA season are also provided by British Airways with two daily flights and United

Airlines with one daily flight and five weekly flights

123

between London Heathrow

and San Francisco. These carriers also provide one-stop services between London

and San Francisco as well as other carriers.

(197) Table 7 below displays the market shares of the Parties and their competitors for

premium, non-premium and for all-passengers on the London-San Francisco route.

On the basis of the market reconstruction, the cases whereby the airports at London

are considered separate markets will result in market shares of a similar magnitude or

in no overlap between Virgin and Delta. The Transaction on this route is therefore

assessed on the city-pair market.

123

Five times a week UK origin and six times a week US origin.

Table 7: Market shares on London-San Francisco

Winter 2011/2012 Summer 2012

Premium

Non

Premium

Total Premium

Non

Premium

Total

Virgin

(non-

stop)

[30-40]% [30-40]% [30-40]% [30-40]% [30-40]% [30-40]%

Delta

(one-

stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

Virgin +

Delta

[30-40]% [30-40]% [30-40]% [30-40]% [30-40]% [30-40]%

BA / AA

(non-

stop)

[40-50]% [20-30]% [30-40]% [30-40]% [20-30]% [20-30]%

BA / AA

(one-

stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

United

(non-

stop)

[10-20]% [20-30]% [20-30]% [20-30]% [30-40]% [20-30]%

United

(one-

stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

Others

(one-

stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

Source: Market reconstruction

(e) London-Cancun

(198) In the Winter 2011 and Summer 2012 IATA seasons a total of [100,000-200 000]

passengers travelled by air between London and Cancun

124

, of which [80-90]%

travelled between London Gatwick and Cancun.

(199) In total [80-90]% of the passengers on this route travelled using non-stop services. In

addition, [80-90]% of the passengers travelling on this route during the Winter and

Summer 2012 IATA were non-premium passengers.

(200) Virgin offers 3 weekly non-stop services between London Gatwick and Cancun.

Delta only offers one-stop services between London Heathrow and Cancun its hubs

in the United States. In addition, Air France offers one-stop services between London

Heathrow and Cancun

(201) Non-stop services on the London-Cancun route during the Summer 2013 IATA

season are also provided by British Airways with three weekly services between

124

Including passengers carried by charter airlines via "dry seats".

London Gatwick and Cancun. British Airways also provides one-stop services

between London and Cancun as well as other carriers.

(202) Table 8 below displays the market shares of the Parties and their competitors for

premium, non-premium and for all-passengers on the London-Los Cancun route. On

the basis of the market reconstruction, the cases whereby the airports at London are

considered separate markets will result in market shares of a similar magnitude or in

no overlap between Virgin and Delta. The Transaction on this route is therefore

assessed on the city-pair market.

Table 8: Market shares on London-Cancun

Winter 2011/2012 Summer 2012

Premium

Non

Premium

Total Premium

Non

Premium

Total

Virgin

(non-stop)

[0-5]% [0-5]% [0-5]% [40-50]% [40-50]% [40-50]%

Delta (one-

stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

Delta +

Virgin

[0-5]% [0-5]% [0-5]% [40-50]% [40-50]% [40-50]%

BA / AA

(non-stop)

[80-90]% [60-70]% [70-80]% [50-60]% [40-50]% [40-50]%

BA / AA

(one-stop)

[5-10]% [10-20]% [10-20]% [0-5]% [5-10]% [5-10]%

United

(one-stop)

[0-5]% [10-20]% [5-10]% [0-5]% [0-5]% [0-5]%

Others

(one-stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

Source: Market reconstruction

(f) London-Miami

(203) In the Winter 2012 and Summer 2012 IATA seasons a total of [500 000 - 1 million]

passengers travelled by air between London and Miami, of which [90-100]%

passengers travelled between London Heathrow and Miami International Airport.

(204) In total [90-100]% of the passengers on this route travelled on this route using non-

stop services. In addition, [60-70]% of the passengers travelling on this route during

the Winter and Summer 2012 IATA were non-premium passengers

(205) Virgin offers a daily service between London Heathrow and Miami International

Airport during the Summer 2013 IATA season. As of April 2012 Delta stopped its

non-stop service between London and Miami and Delta currently only offers one-

stop services from and to London Heathrow via its hubs in the United States mainly

connecting to Fort Lauderdale-Hollywood International Airport. In addition, Air

France offers a one-stop service between London Heathrow and Miami International

Airport.

(206) Non-stop services on the London-Miami route during the Summer 2013 IATA

season are also provided by British Airways/American Airlines with in total three

daily flights between London Heathrow and Miami International Airport. These

carriers also provide one-stop services between London and Miami as well as other

carriers.

(207) Table 9 below displays the market shares of the Parties and their competitors for

premium, non-premium and for all-passengers on the London-Miami route. On the

basis of the market reconstruction, the cases whereby the airports at London and

Miami are considered separate markets will result in market shares of a similar

magnitude or in no overlap between Virgin and Delta. The Transaction on this route

is therefore assessed on the city-pair market.

Table 9: Market shares on London-Miami

Winter 2011/2012 Summer 2012

Premium

Non

Premium

Total Premium

Non

Premium

Total

Virgin (non-

stop)

[30-40]% [30-40]% [30-40]% [30-40]% [40-50]% [30-40]%

Delta (one-

stop)

[0-5]% [10-20]% [10-20]% [0-5]% [5-10]% [5-10]%

Delta +

Virgin

[30-40]% [50-60]% [50-60]% [30-40]% [40-50]% [40-50]%

BA / AA

(non-stop)

[50-60]% [30-40]% [40-50]% [60-70]% [40-50]% [40-50]%

BA / AA

(one-stop)

[0-5]% [0-5]% [0-5]% [0-5]% [5-10]% [0-5]%

United (one-

stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

Others (one-

stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

Source: Market reconstruction

(g) London-Orlando

(208) In the Winter 2011 and Summer 2012 IATA seasons, [500 000 - 1 million]

passengers

125

travelled by air between London and Orlando (Orlando International-

MCO and Orlando Sanford-SFB). In the Winter 2011 and Summer 2012 IATA

seasons, [90 000-100 000] passengers travelled from London Heathrow to Orlando

(MCO).

(209) [80-90]% of the passengers on this route travelled via non-stop services. Both in

Winter 2011 and in Summer 2012 IATA seasons, [80-90]% of the passengers

travelled on non-premium services.

(210) Virgin offers a two daily non-stop service between London Gatwick and Orlando

(MCO). It also offers a four weekly one-stop service with a UK origin (London

Heathrow to Orlando International) and a two daily one-stop service with a US origin

(Orlando International to London Heathrow).

(211) Delta for its part offers only one-stop services between London Heathrow and

Orlando (MCO) via Atlanta (ATL), New York (JFK), Detroit (DTW) and

Minneapolis (MSP). It offers 16 daily services with a UK origin and 27 daily

frequencies with a US origin.

(212) Other operators on this route offer both non-stop and one-stop services. BA / AA

offer between one and two daily non-stop services from London Gatwick to Orlando

(MCO) and between 27

126

and 43

127

daily one-stop services between London

Heathrow and Orlando (MCO) via Dallas (DFW), New York (JFK), Los Angeles

(LAX), Miami (MIA) and Chicago (ORD). United

128

, US Airways

129

, and Aer

Lingus

130

also offer one-stop services from London Heathrow and London

Gatwick

131

to Las Vegas (LAS) via various cities in the United States, Canada,

Mexico or Ireland, such as New York (EWR), San Francisco (SFO), Toronto (YYZ),

Mexico (MEX) and Dublin (DUB).

(213) In addition, the charter companies Thomson Airways, Thomas Cook Airlines and

Monarch offer non-stop flights between London and Orlando (SFB).

(214) As regards the UK end of this route, in light of the Parties' and their competitors'

operations on the London-Orlando route, the effects of the Transaction will be

assessed on a market comprising services from London Heathrow, Gatwick and

City

132

. Virgin only recently started operating one-stop services from London

Heathrow via Manchester to Orlando and Delta only operates from Heathrow. In any

event even if only services from Heathrow were considered, the Parties would face a

significant competitive constraint from BA / AA's non-stop and one-stop services to

Orlando from Heathrow.

125

Including passengers carried by charter airlines via "dry seats".

126

UK origin.

127

US origin.

128

Between 25 and 26 daily UK origin, between 36 and 37 daily US origin.

129

Between 5 and 6daily UK origin and 8 daily US origin.

130

Five daily services two days per week at the UK end and four daily services two days per week at the US end.

131

Through its codeshare agreement with Lufthansa, United offers a non-stop service ex. London City to Orlando

(MCO) via Frankfurt (FRA).

132

BA / AA have a UK bound flight between Las Vegas and London City (via New York).

(215) As concerns the Orlando end, as mentioned above in Section 4.1.4.3, Orlando has

two airports, namely Orlando International (MCO) and Sanford International (SFB).

Both Delta and Virgin fly solely to Orlando International. . The Commission's

assessment will focus on the London – Orlando (MCO) route as concerns premium

passengers and on the London-Orlando (MCO and SFB) as concerns non-premium

passengers.

(216) Table 10 displays the market shares of the Parties and their competitors on all-

passengers, premium and non-premium air services markets on the London -Orlando

(MCO) route

133

Table 10: Market shares on London - Orlando

Source: Market reconstruction

133

If flights from Orlando SFB were included on the non-premium and all passenger segments, the ranges would be

the same.

134

Virgin also offers one-stop flights on both routes via Manchester through a code share agreement with BA / AA.

However, the number of passengers carried on this route is insignificant.

Winter 2011/2012 Summer 2012

Premium Non-

Premium

All

passengers

Premium Non-

Premium

All

passenger

Virgin (non-

stop)134

[50-60]% [60-70]% [60-70]% [50-60]% [60-70]% [60-70]%

Delta (one-stop) [0-5]% [5-10]% [0-5]% [0-5]% [5-10]% [5-10]%

Virgin+Delta [60-70]% [70-80]% [70-80]% [60-70]% [70-80]% [60-70]%

BA / AA (non-stop) [30-40]% [10-20]% [10-20]% [30-40]% [10-20]% [10-20]%

BA / AA (one-stop) [0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

United (one-stop) [0-5]% [5-10]% [5-10]% [0-5]% [5-10]% [0-5]%

US Airways (one-

stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

Total 100% 100% 100% 100% 100% 100%

(h) London-Las Vegas

(217) In the Winter 2011 and Summer 2012 IATA seasons, between [400 000-500 000]

passengers travelled by air between London (Heathrow, Gatwick and City) and Las

Vegas (McCarran International Airport - LAS). In the Winter 2011 and Summer

2012 IATA seasons, [100 000-200 000] passengers travelled from London Heathrow

to Las Vegas.

(218) [80-90]% of the passengers on this route travelled via non-stop services. Both in

Winter 2011 and in Summer 2012 IATA seasons, [80-90]% of the passengers

travelled on non-premium services on a London-Las Vegas route.

(219) Virgin offers a daily non-stop service between London Gatwick and Las Vegas

(LAS) and a two weekly one-stop service between London Gatwick and London

Heathrow and Las Vegas (LAS) via Manchester (MAN).

(220) Delta for its part offers only one-stop services between London Heathrow and Las

Vegas (LAS) via Atlanta (ATL), New York (JFK), Detroit (DTW) and Minneapolis

(MSP). It offers 11 daily services with a UK origin and 13 daily services with a US

origin.

(221) Other operators on this route offer both non-stop and one-stop services. BA / AA

offer one daily non-stop services from London Gatwick and London Heathrow to

Las Vegas (LAS) and between 100 and 200 weekly one-stop services

135

between

London Heathrow and Las Vegas (LAS) via Dallas (DFW), New York (JFK), Los

Angeles (LAX), Miami (MIA) and Chicago (ORD). United

136

, US Airways

137

and

Aeromexico

138

also offer one-stop services from London Heathrow to Las Vegas

(LAS) via various cities in the United States, Canada or Mexico, such as New York

(EWR), San Francisco (SFO), Montréal (YUL) and Mexico (MEX).

(222) As regards the UK end of this route, in light of the Parties' and their competitors'

operations on the London-Las Vegas route, the effects of the Transaction will be

assessed on a market comprising services from London Heathrow, Gatwick and

City

139

. Virgin only recently started operating one-stop services from London

Heathrow via Manchester to Las Vegas and Delta only operates from Heathrow. In

any event even if only services from Heathrow were considered, the Parties would

face a significant competitive constraint from BA / AA's non-stop and one-stop

services to Las Vegas from Heathrow.

(223) As concerns the Las Vegas end, there is only one airport, namely McCarran

International Airport (LAS). As a consequence, the Commission's assessment will

focus on the London - Las Vegas (LAS) route.

(224) Table 11 displays the market shares of the Parties and their competitors on all-

passengers, premium and non-premium air services markets on the London -Las

Vegas (LAS) route:

135

167 weekly UK origin and 242 weekly US origin.

136

155 weekly UK origin, 176 weekly US origin.

137

21 weekly UK origin and 14 weekly US origin.

138

3 weekly US origin only.

139

BA / AA have a UK bound flight between Las Vegas and London City (via New York).

Table 11: Market shares on London - Las Vegas

Winter 2011/2012 Summer 2012

Premium Non-

Premium

All

passenger

Premium Non-

Premium

All

passenger

Virgin (non-

stop)140

[50-60]% [60-70]% [60-70]% [50-60]% [60-70]% [60-70]%

Delta (one-stop) [0-5]% [5-10]% [5-10]% [5-10]% [5-10]% [5-10]%

Virgin+Delta [50-60]% [70-80]% [70-80]% [60-70]% [70-80]% [70-80]%

BA / AA (non-stop) [30-40]% [10-20]% [20-30]% [30-40]% [10-20]% [10-20]%

BA / AA (one-stop) [0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

United (one-stop) [0-5]% [0-5]% [0-5]% [0-5]% [5-10]% [0-5]%

US Airways (one-

stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

Total 100% 100% 100% 100% 100% 100%

Source: Market reconstruction

(i) Manchester-Las Vegas

(225) In the Winter 2011 and Summer 2012 IATA seasons, [100 000-200 000]

passengers

141

travelled by air between Manchester and Las Vegas (McCarran

International Airport - LAS).

(226) [60-70]% of the passengers on this route travelled via non-stop services. Both in

Winter 2011 and in Summer 2012 IATA seasons, [80-90]% of the passengers

travelled on non-premium services between Manchester and Las Vegas.

(227) Virgin offers two weekly non-stop services between Manchester and Las Vegas

142

(228) Delta for its part offers only one weekly one-stop services between Manchester and

Las Vegas (LAS) via Atlanta (ATL).

(229) Other scheduled airlines active on this route only offer one-stop services. BA / AA

offer between three and four daily one-stop services from Manchester (MAN) to Las

Vegas (LAS) via London Heathrow, London Gatwick, New York (JFK) and Chicago

(ORD). United

143

and US Airways

144

also offer one-stop services from Manchester

(MAN) to Las Vegas (LAS) via respectively New York (EWR) and Washington

(IAD) and Philadelphia (PHL).

140

Virgin also offers one-stop flights on both routes via Manchester through a code share agreement with BA/AA.

However, the number of passengers carried on this route is insignificant.

141

Including dry seats sold by charter airlines.

142

Virgin entered the route in Summer 2011.

143

Between one and two daily services.

144

2 daily services.

(230) In addition, the charter company Thomas Cook Airlines offers non-stop services on

this route.

(231) As regards the UK end of this route, Manchester has only one airport, namely

International Manchester Airport (MAN)

145

(232) As concerns the Las Vegas end, there is only one airport, namely McCarran

International Airport (LAS). As a consequence, the Commission's assessment will

focus on the Manchester - Las Vegas (LAS) route.

(233) Table 12 displays the market shares of the Parties and their competitors on all-

passengers, premium and non-premium air services markets on the Manchester – Las

Vegas (LAS) route:

Table 12: Market shares on Manchester - Las Vegas

Winter 2011/2012 Summer 2012

Premium Non-

Premium

All

passenger

Premium Non-

Premium

All

passenger

Virgin (non-

stop)

[70-80]% [60-70]% [60-70]% [70-80]% [60-70]% [60-70]%

Delta (one-stop) [0-5]% [5-10]% [5-10]% [5-10]% [5-10]% [5-10]%

Virgin+Delta [80-90]% [60-70]% [70-80]% [80-90]% [60-70]% [70-80]%

BA / AA (one-

stop)

[10-20]% [5-10]% [10-20]% [10-20]% [5-10]% [5-10]%

United (one-

stop)

[0-5]% [0-5]% [0-5]% [0-5]% [5-10]% [5-10]%

US Airways

(one-stop)

[0-5]% [10-20]% [10-20]% [0-5]% [10-20]% [10-20]%

Total 100% 100% 100% 100% 100% 100%

Source: Market reconstruction

(234) The Parties argue that charter carriers provide a meaningful competitive constraint on

certain routes, specifically on leisure routes with a preponderance of non-premium

passengers on which charter operators sell seats directly to the public, without

requiring the public to purchase other services such as accommodation (i.e. dry seats

only). Some competitors and travel agents indicated in the market investigation that

charter companies in particular offering dry seats are credible alternatives to

scheduled airlines for non-premium passengers on this route.

145

In the case COMP/M.4439 - Ryanair/Aer Lingus, the Commission has considered that flights between Dublin and

Manchester may be considered substitutable to flights between Dublin and Liverpool or Leeds airports. However,

in the present case, there are no relevant non-stop services from these airports on any of the relevant affected

markets (Manchester-Orlando and Manchester-Las Vegas). Therefore, the Commission will focus its assessment on

Manchester International Airport only.

(235) If sale of dry seats were included in the relevant market the Parties' and their

competitors' market shares on the non-premium segment would be as follows:

Table 12(a) Market shares including sale of dry seats by charter airlines

Winter 2011 Summer 2012

Non-Premium Non-Premium

Virgin (non-stop)

[60-70]% [50-60]%

Delta (one-stop)

[5-10]% [5-10]%

Virgin+Delta

[60-70]% [60-70]%

BA / AA (one-stop)

[10-20]% [5-10]%

United (one-stop)

[0-5]% [5-10]%

UA (one-stop)

[10-20]% [10-20]%

Charters (non-stop) 0% [5-10]%

Total 100% 100%

Source: Market reconstruction

(j) Manchester-Orlando

(236) In the Winter 2011 and Summer 2012 IATA seasons, [400 000-500 000]

passengers

146

travelled by air between Manchester (MAN) and Orlando (Orlando

International-MCO and Sanford International-SFB).

(237) [80-90]% of the passengers on this route travelled via non-stop services. Both in

Winter 2011 and in Summer 2012 IATA seasons, [80-90]% of the passengers

travelled on non-premium services.

(238) Virgin offers a between 1 and 2 daily non-stop services between Manchester and

Orlando (MCO).

(239) Delta for its part offers only one-stop services between Manchester and Orlando

(MCO) via Atlanta (ATL. It offers between one and 2 daily services with a UK

origin and between two and three daily frequencies with a US origin.

(240) Other scheduled airlines active on this route offer only one-stop services. BA / AA

offer two daily one-stop services between Manchester and Orlando (MCO) via New

York (JFK), Chicago (ORD) and London Gatwick (LGW). United offers between

two and three daily one-stop services between Manchester and Orlando (MCO) via

New York (EWR), Frankfurt (FRA) and Washington (IAD). US Airways offers a

daily service between Manchester and Orlando (MCO) via Philadelphia (PHL).

Finally, Aer Lingus and Air Transat offer weekly services between Manchester and

Orlando (MCO) via respectively Dublin (DUB) and Toronto (YYZ).

(241) In addition, charter companies Thomson Airways, Thomas Cook Airlines and

Monarch also offer non-stop flights between Manchester and Orlando (SFB).

(242) As regards the UK end of this route, Manchester has only one airport, namely

International Manchester Airport (MAN)

147

146

Including dry seats sold by charter airlines.

147

In the case COMP/M.4439 - Ryanair/Aer Lingus, the Commission has considered that Manchester may be

considered substitutable by Liverpool and Leeds airports. However, in the present case, neither of these offer non-

(243) As concerns the Orlando end, as mentioned above in Section 4.1.4.3, Orlando has

two airports, namely Orlando International (MCO) and Sanford International (SFB).

Both Delta and Virgin fly solely to Orlando International (MCO). Looking at a

market for scheduled air passenger transport services between both airports in

Orlando and Manchester (excluding sale of dry seats by charter airlines) would lead

to a minor decrease of the Parties' combined market shares. As a consequence, the

Commission's assessment will focus on the Manchester – Orlando (MCO) route from

the premium passengers and all passengers segment and on Manchester-Orlando

(MCO and SFB) for the non-premium segment.

(244) Table 13 displays the market shares of the Parties and their competitors on all-

passengers, premium and non-premium air services markets on the Manchester –

Orlando (MCO)

148

Table 13: Market shares on Manchester - Orlando

Winter 2011/2012 Summer 2012

Premium Non-

Premium

All

passengers

Premium Non-

Premium

All passengers

Virgin (non-

stop)

[90-100]% [90-100]% [90-100]% [90-100]% [80-90]% [80-90]%

Delta (one-

stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

Virgin+Delta [90-100]% [90-100]% [90-100]% [90-100]% [90-100]% [90-100]%

BA / AA (one-

stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

United (one-

stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

US Airways

(one-stop)

[0-5]% [0-5]% [0-5]% [0-5]% [0-5]% [0-5]%

Total 100% 100% 100% 100% 100% 100%

Source: Market reconstruction

6.1.4.3. Competitive assessment

(a) London-Washington, London-Chicago, London-Los Angeles, London-San Francisco,

London-Cancun and London-Miami

(245) Tables 4 to 8 above show that on the London-Washington, London-Chicago,

London-Los Angeles, London-San Francisco, London-Cancun, the Parties' combined

market shares are below 50% and on each of these routes the increment is very low

i.e. [0-5]%. The combined market shares of the Parties on the these non-stop/one-

stop services on any of the relevant affected markets (Manchester-Orlando and Manchester-Las Vegas). Therefore,

the Commission will focus its assessment on Manchester International Airport only.

148

If flights from Orlando SFB were included on the non-premium and all passenger segments, the ranges would be

the same.

stop overlap routes do not exceed [40-50]% for the premium segment, [40-50]% for

the non-premium segment and [40-50]% for the all-passengers segment during the

Summer 2012 IATA season and the Winter 2012 IATA season

149

(246) On the London-Miami route (Table 9), the Parties' combined market shares for the

Summer 2012 IATA season

150

are [30-40]% on the premium segment with an

increment below 5% while on the non-premium segment the Parties' combined

market shares are up to [40-50]% with an increment of up to [5-10]%. Post

Transaction Virgin and Delta will however continue to face a significant competitive

constraint from other non-stop carriers among them BA / AA and United Airlines on

all these six routes. Indeed BA / AA which offers non-stop services on these routes

will enjoy quite high market shares on the routes. In addition, as discussed above,

Virgin and Delta are not considered to be close competitors.

(247) The Commission notes that the replies to the market investigation did not reveal any

substantiated competition concerns with respect to these routes.

(248) The Commission considers that the Transaction does not raise serious doubts as to its

compatibility with the internal market on the premium segment and on the non-

premium segment on these routes. Therefore, it does not raise serious doubts with

respect to the "all-passengers" market on these routes.

(249) Considering all the above and the other available evidence, the Transaction does not

raise serious doubts as to its compatibility with the internal market on the London-

Washington, London-Chicago, London-Los Angeles, London-San Francisco,

London-Cancun, London-Miami routes, under any possible market definition.

(b) London-Orlando

(250) On the segment for premium passengers on London-Orlando (MCO) route, Virgin

had a market share of [50-60]% in Winter 2011 and Summer 2012 while Delta had a

market share below 10% in both these seasons. On the segment for non-premium

passengers on the London -Orlando (MCO and SFB) route, Virgin has a market

share of [60-70]% for both IATA seasons while Delta has a market share below 10%

in both these seasons. Post transaction, the Parties will reach a combined market

share up to [70-80]%.

(251) However the increment brought about by the Transaction is limited and the Parties

will continue to face a significant competitive constraint from BA / AA. Indeed, in

both the premium and the non-premium segments, BA / AA had a significant market

share [10-20]% on the premium segment and and [30-40]% on the non-premium

segement in Winter 2011 and Summer 2012 with its non-stop services. In addition,

BA / AA, United, and US Airways also offer one-stop services on the route.

(252) As explained above in Section 6.1.4.1 relating to closeness of competition on non-

stop/one stop routes, as Delta operates one-stop services and Virgin non-stop

services they are not each other's closest competitors on the London-Orlando route.

149

The market shares pertaining to the Winter 2011 IATA season on London-Chicago and London-Cancun are not

taken into account as Virgin did not provide non-stop services during that season. The market shares pertaining to

the Winter 2011 IATA season on London-Miami are also not taken into account as Delta offered non-stop services

during that season, which it stopped as of April 2012 and therefore do not reflect the current market situation.

150

Delta stopped its non-stop service between London and Miami in April 2012 so that the. Winter

2011/2012 data do not reflect the current market situation.

While some respondents to the market investigation identified Delta or Virgin as the

other one's closest competitor, the majority of respondents to the Commission's

market investigation indicated that BA / AA or United are a closer substitute to each

of Virgin and Delta on the London-Orlando routes irrespective of the passenger

segmentation into premium or non-premium.

(253) Some competitors and travel agents indicated that charter companies in particular

offering dry seats are credible alternatives to scheduled airlines for non-premium

passengers. If such sales of dry seats by charter airlines were included, the Parties'

combined market shares would decrease to [70-80]% in Winter 2011 on this segment

on London - Orlando (MCO and SFB) while in Summer 2012 they would decrease to

[60-70]%. Charter operators reached with their sale of dry seats a share of [0-5]% in

Winter 2011 and a higher share of [5-10]% in Summer 2012.

(254) Furthermore, [80-90]% of the non-premium passengers preferred non-stop services

over one-stop services on this route. BA / AA compete head-to-head with Virgin's

non-stop services from London-Gatwick on London-Orlando.

(255) The Commission notes that the replies to the market investigation did not reveal any

substantiated competition concerns with respect to the London-Orlando route.

(256) The Commission considers that the Transaction does not raise serious doubts as to its

compatibility with the internal market on the premium segment and on the non-

premium segment on this route. Therefore, it does not raise serious doubts with

respect to the "all-passengers" market on this route.

(257) Considering all the above and the other available evidence, the Commission considers

that the Transaction does not raise serious doubts as to its compatibility with the

internal market on the London-Orlando route, under any possible market definition.

(258) On the segment for premium passengers on the London – Las Vegas route, Virgin

had a market share of [50-60]% in Winter 2011 and Summer 2012 while Delta had a

market share below 10% in both these seasons. On the segment for non-premium

passengers on the London – Las Vegas route, Virgin had a market share of [60-70]%

in Winter and Summer 2012 while Delta had a market share below 10% for both

IATA seasons. Post transaction, the Parties will reach a combined market share up to

[70-80]%.

(259) However the increment brought about by the Transaction is limited and the Parties

will continue to face a significant competitive constraint from BA / AA which held,

operating non-stop services, a significant share of [10-20]% on the non-premium

segment and up to [30-40]% on the premium segment.

(260) As explained above in Section 6.1.4.1 relating to closeness of competition on non-

stop/one stop routes, as Delta operates one-stop services and Virgin non-stop

services they are not each other's closest competitors on the London-Las Vegas route.

While some respondents to the market investigation identified Delta or Virgin as the

other one's closest competitor, the majority of respondents to the Commission's

market investigation indicated that BA / AA or United are a closer competitor to

each of Virgin and Delta on the London-Las Vegas route irrespective of the

passenger segmentation into premium or non-premium.

(261) Furthermore, [80-90]% of the non-premium passengers preferred non-stop services

over one-stop services on this route. BA / AA only recently started (November 2012)

to operate a non-stop service from London-Gatwick to Las Vegas and competes

head-to-head with Virgin's non-stop services from London-Gatwick on this route.

(262) In addition, BA / AA also offer one-stop services from London-Heathrow. Moreover,

there are also other carriers which offer one-stop services. United achieved market

shares up to [0-5]% in Winter 2011 and up to [5-10]% in Summer 2012. In addition,

US Airways operate one-stop services on this route.

(263) The Commission notes that the replies to the market investigation did not reveal any

substantiated competition concerns with respect to the London-Las Vegas route.

(264) The Commission considers that the Transaction does not raise serious doubts as to its

compatibility with the internal market on the premium segment and on the non-

premium segment on this route. Therefore, it does not raise serious doubts with

respect to the "all-passengers" market on this route.

(265) Considering all the above and the other available evidence, the Commission considers

that the Transaction does not raise serious doubts as to its compatibility with the

internal market on the London-Las Vegas route, under any possible market

definition.

(d) Manchester-Las Vegas

(266) On the segment for premium passengers on the Manchester – Las Vegas route,

Virgin had a market share of [70-80]% in both Winter 2011 and in Summer 2012

while Delta had a market share below 10% in both Winter 2011 and Summer 2012.

In each of these two seasons, BA / AA achieved a share of [10-20]% while United

and US Airways each had a share of [0-5]%. On the segment for non-premium

passengers, Virgin had a market share of [60-70]% in both Winter 2011 and in

Summer 2012 while Delta had a market share of [5-10]% in both seasons Winter

2011 and Summer 2012. The Parties reached a combined market share of [80-90]%

on the premium segment and of [60-70]% on the non-premium segment in both

IATA seasons.

(267) The Parties will continue to face a significant competitive constraint on this route (on

both the premium and the non-premium segments) from other carriers such as BA /

AA, United and US Airways. Indeed, BA / AA achieved a market share higher than

or equal to the increment in both seasons and on both the premium and the non-

premium segments while US Airways and United also achieved market shares

between [0-5]% and [10-20]% depending on the season and the passenger segment.

(268) The majority of respondents to the Commission's market investigation indicated that

other competitors such as BA / AA are a closer competitor to each of Virgin and

Delta on the Manchester-Las Vegas route.

(269) If sale of dry seats by charter airlines were included the Parties would reach a

combined market share of [60-70]% in both IATA seasons on the non-premium

segment. Charter operators were only active in Summer 2012 and their share reached

[5-10]%. In addition, Thomas Cook has its largest operations from Manchester

airport and where it has its maintenance base. Thomas Cook intends to include one

extra non-stop frequency to Las Vegas during the summer seasons and starting with

Summer 2014 (to three per week instead of the current two per week). Dry seats on

services on these routes will be available through the in-house websites of

Flythomascook.com, Thomascook.com and Condor.com, as well as on GDS systems

and websites of the travel agents around the world who sell Thomas Cook flights.

Considering the specificities of the route at stake and in particular the fact that it is

almost entirely a non-premium route and that the majority of non-premium

passengers preferred non-stop services over one-stop services on this route ([50-

60]%), the Commission is of the view that sales of dry seats by charter carriers will

provide some constraint on the combined entity post Transaction.

(270) In addition, other competitors offer non-stop services from Manchester to their

respective hubs in the United States such as AA (to New York and Chicago), United

(to New York and Washington) and US Airways (to Philadelphia). Air Transat also

offers non-stop services from Manchester to its hubs in Canada (to Toronto,

Vancouver and Calgary).

(271) The Commission notes that the replies to the market investigation did not reveal any

substantiated competition concerns with respect to the Manchester-Las Vegas route.

(272) The Commission considers that the Transaction does not raise serious doubts as to its

compatibility with the internal market on the premium segment and on the non-

premium segment on this route. Therefore, it does not raise serious doubts with

respect to the "all-passengers" market on this route.

(273) Considering all the above and the other available evidence, the Commission considers

that the Transaction does not raise serious doubts as to its compatibility with the

internal market on the Manchester-Las Vegas route, under any possible market

definition.

(e) Manchester-Orlando

(274) On the segments for premium and non-premium passengers on the Manchester-

Orlando route, Virgin had a market share of [90-100]% in Winter 2011. In Summer

2012 Virgin had a market share of [90-100]% on the premium segment and of [80-

90]% on the non-premium segment. In both these seasons and on both passenger

segments Delta had a market share of [0-5]%. The Parties' combined market shares

would be [90-100]% on both segments of the Manchester-Orlando route in both

seasons. BA / AA, United and US Airways each held a share of [0-5]% in both

Winter 2011 and Summer 2012 and on both passenger segments.

(275) The increment brought about by the Transaction is very small as Delta had a market

share of [0-5]% in both seasons and on both passenger segments. US Airways, BA /

AA and United reached market shares similar to the ones of Delta.

(276) The majority of respondents to the Commission's market investigation indicated that

other competitors such as AA/BA are a closer competitor to each of Virgin and Delta

on the Manchester-Orlando route.

(277) The Commission notes that the replies to the market investigation did not reveal any

substantiated competition concerns with respect to the Manchester-Orlando route.

(278) The Commission considers that the Transaction does not raise serious doubts as to its

compatibility with the internal market on the premium segment and on the non-

premium segment on this route. Therefore, it does not raise serious doubts with

respect to the "all-passengers" market on this route.

(279) Considering all the above and the other available evidence, the Commission considers

that the Transaction does not raise serious doubts as to its compatibility with the

internal market on the Manchester-Orlando route, under any possible market

definition.

6.1.4.4. Conclusion

(280) In light of the above and of the other available evidence, the Commission considers

that the Transaction does not raise any serious doubts as to its compatibility with the

internal market on the following routes: London-Washington, London-Chicago,

London-Los Angeles, London-San Francisco, London-Cancun, London-Miami,

London-Orlando, London-Las Vegas, Manchester-Orlando, and Manchester-Las

Vegas, under any possible market definition.

6.1.5. Overall conclusion air transport of passengers

(281) In the light of all the above and of the other available evidence, the Commission

concludes that the Transaction does not raise any serious doubts as to its

compatibility with the internal market on the two non-stop/non-stop overlap routes

and on the ten non-stop/one-stop overlap routes under any possible market definition.

6.2. Air transport of cargo

(282) The Parties' air cargo operations are restricted to cargo carried in the belly-hold space

of their passenger aircraft. Neither Delta nor Virgin has dedicated cargo-only

freighters on any routes.

(283) Delta also provides air transport of cargo services in the context of the Air

France/KLM/Alitalia joint venture and is a member of the SkyTeam Cargo alliance.

[Information regarding the scope of Delta's joint venture with Air

France/KLM/Alitalia].

151

(284) As indicated in Section 5.2, the Commission will assess the effects of the Transaction

on the cargo routes operated directly by Delta as well as by Delta's joint venture

partners to the extent that they fall within the scope of the joint venture revenue-

sharing arrangements, [Information regarding the scope of Delta's joint venture with

Air France/KLM/Alitalia].

(285) The Transaction gives rise to four affected markets with respect to air transport of

cargo, namely on the routes from: (i) Europe (EEA) to North America (the United

States and Canada); (ii) North America to Europe; (iii) Europe to Mexico; and (iv)

Mexico to Europe.

(286) The Parties submit that their combined market shares in any of the relevant air cargo

market do not give rise to competition concerns in that they are generally below

25%. The Parties also submit that, even when their combined market shares would be

above 25%, this is mainly due to the activities of Delta's joint venture partners and, in

any event, the increment arising from the Transaction regarding the affected cargo

markets is small. Moreover, the competitive characteristics of the air cargo markets

151

[Information regarding the scope of Delta's joint venture with Air France/KLM/Alitalia]

are such that the Transaction will not give rise to any competition concerns, in

particular because of the low switching costs, the lack of closeness of competition,

the expected future market growth and the constraint exercised by other airlines post

Transaction.

(287) Table 14 below shows the Parties' and their main competitors' estimated market

shares on the affected routes in 2012.

Table 14: Air transport of cargo market share estimates based on RTMs

152

Europe to North

America

North America to

Europe

Europe to Mexico Mexico to Europe

YE May 2012 YE May 2012 YE May 2012 YE May 2012

Virgin

[0-5]% [0-5]% * *

SkyTeam JV

(including Delta)

[10-20]% [10-20]% [20-30]% [20-30]%

Delta

[5-10]% [5-10]% ** **

Air France

[5-10[% [0-5]% [5-10]% [10-20]%

KLM

[5-10]% [0-5]% [10-20]% [10-20]%

Alitalia

[0-5]% [0-5]% - -

Combined

SkyTeam JV /

Virgin

[20-30]% [10-20]% [20-30]% [20-30]%

Lufthansa

[10-20]% [10-20]% [5-10]% [5-10]%

British Airways

[5-10]% [10-20]% [0-5]% [5-10]%

FedEx

[5-10]% [5-10]% - -

American Airlines

[5-10]% [5-10]% - -

United

[5-10]% [5-10]% - -

UPS

[5-10]% [5-10]% - -

Cargolux

[0-5]% [5-10]% [10-20]% -

AeroMexico

- - [5-10]% [10-20]%

Iberia

[0-5]% [0-5]% [5-10]% [10-20]%

Air Auropa

- - - [5-10]%

Thomson Airways

- - - [5-10]%

Other airlines

153

[20-30]% [30-40]% [40-50]% [20-30]%

Total

154

100% 100% 100% 100%

Source: Parties' estimates inter alia on the basis of data from the Unites States Department of Transportation

T100 data

* Virgin started operating passenger operations to Mexico in June 2012 and therefore the figures

based on T100 data do not show the increment arising from the transaction. However, according

to the Parties its share is no more than [0-5]% based on Seabury dataset and less than [0-5]% on

the basis of IATA CASS billing data.

** Delta only operates via the United States and therefore has no market share based on T100

data. Based on IATA CASS billing data, Delta's market share is below [0-5]%.

152

The estimated market shares are based on "revenue ton miles" (RTMs), the product of the weight of cargo carried

in US tons and the distance that the cargo was flown.

153

[Information regarding the scope of Delta's joint venture with Air France/KLM/Alitalia]

154

The figures may not sum to total due to rounding.

(288) As can be seen from Table 14, the Parties' combined market share will remain below

25% with small increments not higher than [0-5]% in all affected routes with the

exception of the Mexico to Europe route, where the Parties will have a combined

market share of [20-30]%.

155

However, the increment brought about by the

Transaction in this route would be very small (not more than [0-5]%). In addition, on

all affected routes, there are several credible and well-established competitors

capable of imposing a significant competitive constraint on the Parties post

Transaction, such as Lufthansa, British Airways, American Airlines, Iberia,

AeroMexico, Cargolux, FedEx, UPS, etc.

(289) The majority of respondents to the market investigation considered that neither Delta

nor Virgin is each other's closest competitor on any affected route.

156

(290) The majority of the respondents to the market investigation also indicated that

switching between air cargo service suppliers is easy, given the limited costs and

time frame required for a customer to switch to another cargo supplier and the fact

that cargo service contracts are normally concluded for one year and do not contain

exclusivity clauses.

157

(291) Moreover, respondents to the market investigation did not raise any material concern

as regards the effects of the Transaction in terms of prices or levels of services on the

four air transport of cargo markets.

158

(292) Therefore, the Commission concludes that, given the rather limited combined market

shares of the Parties and of the marginal increment arising from Virgin's transatlantic

cargo activities, the strong presence of other competitors, the easiness of switching

between air cargo service suppliers for customers, the lack of closeness of

competition as well as the absence of concerns on the part of market participants, the

Transaction does not raise serious doubts as to its compatibility with the internal

market with respect to the market for air transport of cargo services.

155

Regardless of the dataset used, for instance even using World ACD or IATA CASS data, the competitive

assessment would not change.

156

See responses to questions 15, 15.1 and 15.2 of Q8 – Questionnaire to Cargo Competitors and responses to

questions 14, 14.1 and 14.2 of Q9 – Questionnaire to Cargo Customers.

157

See responses to questions 16 and 21 of Q8 – Questionnaire to Cargo Competitors and responses to questions 15

and 16 of Q9 – Questionnaire to Cargo Customers.

158

See responses to question 24 of Q8 – Questionnaire to Cargo Competitors and responses to question 22 of Q9 –

Questionnaire to Cargo Customers.

7. CONCLUSION

(293) For the above reasons, the European Commission has decided not to oppose the

notified operation and to declare it compatible with the internal market and with the

EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the

Merger Regulation.

For the Commission,

(signed)

Joaquín ALMUNIA

Vice-President