Consolidated Answer of Delta Air Lines

BEFORE THE
DEPARTMENT OF TRANSPORTATION
WASHINGTON, D.C.
)
Application of )
)
JAT AIRWAYS A.D. BELGRADE ) Docket DOT-OST-2013-0177
)
for an Exemption pursuant to )
49 U.S.C. § 40109 )
)
)
Application of )
)
ETIHAD AIRWAYS P.J.S.C. ) Docket DOT-OST-2013-0178
)
for a Statement of Authorization )
pursuant to 14 C.F.R. Part 212 )
)
CONSOLIDATED ANSWER OF DELTA AIR LINES, INC.
Communications with respect to this document should be addressed to:
Alexander Van der Bellen
Managing Director, Government Affairs
& Associate General Counsel
Christopher Walker
Regional Director, Government Affairs
DELTA AIR LINES, INC.
1212 New York Avenue, N.W.
Washington, D.C. 20005
(202) 842-4184
sascha.vanderbellen@delta.com
chris.walker@delta.com
October 4, 2013

BEFORE THE
DEPARTMENT OF TRANSPORTATION
WASHINGTON, D.C.
)
Application of )
)
JAT AIRWAYS A.D. BELGRADE ) Docket DOT-OST-2013-0177
)
for an Exemption pursuant to )
49 U.S.C. § 40109 )
)
)
Application of )
)
ETIHAD AIRWAYS P.J.S.C. ) Docket DOT-OST-2013-0178
)
for a Statement of Authorization )
pursuant to 14 C.F.R. Part 212 )
)
CONSOLIDATED ANSWER OF DELTA AIR LINES, INC.
Delta Air Lines, Inc. (“Delta”) hereby files this Consolidated Answer to the
Application of Jat Airways a.d. Belgrade (“JAT”) for an exemption from 49 U.S.C. §
41301 to provide scheduled foreign air transportation of persons, property, and mail
between Serbia and the United States on a codeshare-only basis and the Application of
Etihad Airways P.J.S.C. (“Etihad”) for a Statement of Authorization permitting Etihad to
display the designator code of JAT on flights Etihad operates between Abu Dhabi, on
the one hand, and various points in the United States, on the other hand, that connect

Delta Air Lines Consolidated Answer
Page 2
with JAT-operated services between Belgrade and Abu Dhabi. 1
Delta opposes, and
urges the Department to reject, both applications.
JAT and Etihad’s proposed codeshare services are highly circuitous,
commercially implausible, and are likely to cause consumer confusion. Moreover, JAT
and Etihad have not been candid with the Department in their characterization of the
facts concerning Etihad’s ownership interest in and effective control of JAT. JAT and
Etihad bear the burden of addressing these issues in a forthright manner, particularly
given that the proposed services would be the product of market-distorting, anticompetitive
state subsidies from which both Etihad and JAT benefit. The proposed
codeshares are not in the public interest and, accordingly, the Department should deny
both JAT’s exemption request and Etihad’s application for a statement of authorization.
I. The proposed codeshare routes are irrational and do not serve the public
interest
While Delta believes that codeshare arrangements are typically in the public
interest where they increase opportunities for travel and expand air service networks for
the benefit of consumers, the codeshare services proposed by JAT and Etihad are not
1 To the extent necessary, Delta hereby moves for leave to file an answer to the Application of
Etihad for a Statement of Authorization, dated September 19, 2013, pursuant to 14 C.F.R. §
302.9. The Etihad and JAT applications are inextricably interrelated because the Department
must approve both applications before JAT and Etihad may implement their proposed U.S.
codeshare services. Thus, Delta’s answer inevitably raises issues affecting the Department’s
consideration of the Etihad application as well as the JAT application, thereby establishing good
cause for Delta to submit a single, consolidated answer to both applications.

Delta Air Lines Consolidated Answer
Page 3
in the public interest because they have no market or consumer service based rationale
and would only create confusion and complexity for consumers. 2
JAT and Etihad are proposing codeshare services on routings from Belgrade
(BEL) to New York (JFK), Washington (IAD), and Chicago (ORD) via Abu Dhabi (AUH).
These routes are so extraordinarily circuitous (nearly 5,000 miles of additional circuity in
each direction) that one must question why any consumer would regard their addition to
the marketplace to constitute a rational service option or to offer any consumer benefit.
Currently, there is robust competition for travel between Belgrade and
destinations in the United States via European hubs, where convenient, non-circuitous
codeshare and interline connections are available. JAT already codeshares with six
European airlines that connect on to the U.S., and has interline agreements with dozens
of other airlines with transatlantic service. At least eight different transatlantic carriers
serve Belgrade. For example, connecting services between Belgrade and Chicago via
Amsterdam, Munich, Vienna, or Frankfurt, involve journeys of approximately 5,000
miles. By contrast, a routing from Belgrade to Chicago via Abu Dhabi is nearly twice as
long: approximately 9,640 miles. Such an extremely circuitous itinerary would add
nearly 5,000 miles to a consumer’s journey from Belgrade to the United States.
2 In order for the Department to approve the JAT and Etihad applications, it must find that the
services proposed are in the public interest See 49 U.S.C. § 40109(c); 14 C.F.R. § 212.11.
Moreover, as JAT concedes in its application, the Department is not subject to any obligation
imposed by a bilateral air service agreement to approve the JAT application. JAT Application at
2.

Delta Air Lines Consolidated Answer
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Accordingly, it is highly unlikely that a rational consumer would seek out itineraries via
Abu Dhabi unless fares were artificially low, i.e., unless JAT and Etihad plan to engage
in capacity dumping at below-market fares.
We note that the JAT/Etihad proposal does not comply with IATA fare rules on
maximum permitted miles (MPM). MPM on the JFK-Belgrade route is 5,404 miles,
which the JAT/Etihad routing via Abu Dhabi exceeds by a whopping 2,469 miles.
Thus, not only would the proposed codeshare routes not satisfy any new or
currently unmet consumer demand; they would cause confusion and complexity in the
marketplace (e.g., by cluttering schedule and fare displays and obscuring the
consumer-facing availability of superior itineraries and service options).
Accordingly, the Department should reject JAT’s and Etihad’s applications
because their proposed codeshare arrangements are not in the public interest.
II.
The proposed codeshare arrangements are ripe for market abuse in light of
Etihad’s and JAT’s receipt of state subsidies
The proposed codeshare involves two state-owned airlines and one, Etihad, that
is heavily state-subsidized. The Department has, previously, expressed concern about
state subsidies in its consideration of the “public interest.” 3
Moreover, the Department
has specifically stated that among its core policy objectives is to “[e]nsure that
3 See, e.g., Applications of Iberia, Lineas Aereas de Espana, S.A. and Carnival Air Lines, Order
94-9-23 at 4 (“we share American’s concerns on the issue of subsidies. Indeed, Secretary Pena
has already written to Marcelino Aquirre, EU Commissioner for Transport and Energy,
specifically to express his serious concern regarding the European Commission’s policy on
state aid.”).

Delta Air Lines Consolidated Answer
Page 5
competition is fair and the playing field is level by eliminating marketplace distortions,
such as government subsidies ...”. 4
Here, both JAT and Etihad have benefitted from the
direct infusion of government capital, 5 and Etihad in particular has benefitted from unfair
tax advantages, subsidies for fuel and airport fees, and sizeable government
investments in infrastructure. 6
These subsidies have a market-distortive effect and are
inconsistent with U.S. international aviation policy.
In recent years, certain Gulf states have increasingly used their flag carriers “to
expand their services and widen their networks in support of national policies to develop
incoming tourism or local business activity and trade.” 7
This is the case in Abu Dhabi,
which has been using its vast oil wealth to rapidly expand Etihad’s network and fleet as
4 Statement of United States International Air Transportation Policy, 60 Fed. Reg. 21841, 21844
(Dep’t Transportation May 3, 1995).
5 See, e.g., “Etihad to Buy Stake in Serbia’s JAT as CEO Hogan Reworks Carrier,” Misha Savic,
Bloomberg.com (Aug. 1, 2013) (noting that “Serbia will match” Etihad’s $100 million investment
in JAT and that it will “assume liabilities of its flag carrier ‘so Air Serbia is a new company, a
clean sheet of paper”).
6 See, e.g., Hearing of the Terrorism, Nonproliferation and Trade Subcommittee of the House
Foreign Affairs Committee Subject: "The Abu Dhabi Pre-Clearance Facility: Implications for U.S.
Businesses and National Security", Statement by Representative Brad Sherman (D-CA) (July
10, 2013); “Air France-KLM chief urges Europe to restrict Gulf carriers,” Claire Valdini,
ArabianBusiness.com (Apr. 1, 2013); “Jobs on a wing and a prayer,” Paul Howes, Sunday
Telegraph (Sydney) (Apr. 1, 2012); “Abu Dhabi Airports Company Receives Executive Council
Approval to Build the Midfield Terminal Complex,” Press Release, Abu Dhabi Airports Company
(Feb. 1, 2012).
7 Rigas Doganis, Flying Off Course: Airline Economics and Marketing, p. 322 (Routledge Taylor
& Francis Group, 4th ed. 2010).

Delta Air Lines Consolidated Answer
Page 6
part of a strategy to develop Abu Dhabi as a hub and economic center. 8
These policies
– which include the introduction of excess capacity on routes and place network
expansion above all else, including profitability – are highly disruptive and traderestrictive,
depressing fares and cargo yields and destabilizing global markets. 9
In support of Abu Dhabi’s broader aviation strategy, Etihad has acquired a 40
percent stake in Air Seychelles; a 29.2 percent stake in Air Berlin; a 9 percent stake in
Virgin Australia; and around a 3 percent stake in Aer Lingus. 10
Etihad is also in the final
stages of a $379 acquisition of a 24 percent stake in Jet Airways of India as part of its
“acquisition binge.” 11
The JAT acquisition, while the most aggressive in terms of the
size of Etihad’s equity stake and the control that Etihad will exercise over JAT, is part of
this pattern of rapid network expansion.
Beyond Etihad’s acquisition of JAT, its activities are all closely connected to Abu
Dhabi’s broader industrial policy for the aviation sector. For example, earlier this year,
Etihad acquired three companies – Abu Dhabi Airport Services, Abu Dhabi In-Flight
Catering, and Abu Dhabi Cargo Company – from the Abu Dhabi Airports Company
8 See “UAE’s Etihad to buy 49 percent stake in Serbian airline,” Ivana Sekularac, Reuters (Aug.
1, 2013) (“Backed by oil wealth, Etihad has aggressively expanded its global reach through
codeshares and minority stakes.”).
9 Doganis at 322.
10 “The Aussies Behind the Best Airline You’ve Never Flown,” Kenneth Rapoza, Forbes (March
12, 2013).
11 “Etihad Close To Taking Minority Stake in India’s Jet Airways,” Kenneth Rapoza, Forbes
(Sept. 19, 2013).

Delta Air Lines Consolidated Answer
Page 7
(“ADAC”), a state-owned and operated entity. 12
In 2012, ADAC announced that it would
begin construction of a new Midfield Terminal Complex at Abu Dhabi International
Airport for the primary benefit of Etihad. 13
Such coordination between Etihad and ADAC
is emblematic of the Abu Dhabi government’s aviation industrial policy, which is
dependent in large part on ensuring Etihad’s global competitiveness. As Ulrich Schulte-
Strathaus, then-president of the Association of European Airlines said of Etihad and
other Gulf carriers in 2011, “[they] are owned by their respective governments and
operated as an instrument of national strategy ... and they are integrated vertically
across commerce, tourism and foreign policy.” 14
Etihad’s receipt of subsidies makes the proposed codeshare arrangements with
JAT ripe for market distortion and abuse. These routes, as discussed above, are highly
circuitous, not responsive to any market demand, and thus unlikely to be profitable in
their own right. In order to attract any consumer to utilize these proposed codeshare
services, JAT and Etihad would have to price at below-market fares. The Department
should scrutinize the proposed JAT/Etihad codeshare to better understand how the
carriers intend to offer competitive service without artificially dumping capacity. Insofar
as the proposed codeshare is enabled through the airlines’ receipt of state subsidies or
12 “Etihad to acquire Abu Dhabi airport services firms,” Trade Arabia (May 19, 2013).
13 “Abu Dhabi Airports Company Receives Executive Council Approval to Build the Midfield
Terminal Complex,” Press Release, Abu Dhabi Airports Company (Feb. 1, 2012).
14 See “Gulf Carriers Push For Long-Haul Corporate Business,” Amon Cohen,
BusinessTravelNews (Feb. 14, 2011).

Delta Air Lines Consolidated Answer
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to further commercial or foreign government policy objectives that do not relate to the
U.S. public interest, the Department should deny the JAT and Etihad applications.
III.
JAT and Etihad have mischaracterized Etihad’s ownership and effective
control of JAT, which are significantly more extensive than suggested
The Department’s policy requires that a foreign air carrier be substantially owned
and effectively controlled by citizens of its homeland in order to qualify to receive a
foreign air permit or exemption authority to serve the United States. 15
JAT states in its
application that it is “owned and controlled by Serbian citizens.” 16
Then, in a footnote,
JAT states that it is “in negotiations” for Etihad to acquire a 49 percent stake in JAT, but
that in any event “JAT will remain substantially owned and effectively controlled by
Serbian citizens.” 17
However, according to recent press reports that (to the best of
Delta’s information) have not been contradicted by Etihad or JAT, Etihad’s investment in
JAT and the steps Etihad is taking to exert control over JAT, are much more definite; in
fact, it seems clear that JAT/Etihad’s proposed codeshare services to the United States
via Abu Dhabi are predicated on the consummation of Etihad’s plans to own and control
JAT.
15 See, e.g., Notice of Action Taken (Corrected Copy), issued March 13, 2013, Docket DOT
OST-2013-0021 (granting exemption to Boliviana de Aviacion (BoA)).
16 JAT Application at 4.
17 JAT Application at 4, n. 7.

Delta Air Lines Consolidated Answer
Page 9
According to recent press reports, Etihad has agreed to acquire a 49 percent
stake in JAT, JAT Catering, and JAT’s handling division SU-PORT. Etihad’s
relationship with JAT extends far beyond its equity investment, however; newly branded
“Air Serbia” Airbus A319 aircraft will be operated by Etihad crew; Etihad will negotiate
with Airbus over the terms of previously ordered A319s; Etihad will invest in upgrades at
Belgrade Airport Terminal 1; and, through the operation of four agreements between
Etihad and the Republic of Serbia, Etihad will provide immediate equity infusions into
the Serbian airline. 18
Moreover, although the Republic of Serbia will maintain a majority
ownership interest, Etihad will acquire de facto control over JAT. Indeed, JAT’s CEO
reportedly will work under a five-year management contract with Etihad. 19
In short, JAT
will be a wholly controlled (even if not wholly owned) subsidiary of Etihad.
Etihad itself has acknowledged the true nature of its plans for control of JAT. In a
briefing to JAT staff, Etihad CEO James Hogan explained that “Etihad Airways has
been appointed to a five-year management contract, effective 1 August”; in other words,
Etihad views itself as the management of JAT. 20
Etihad envisions “shared resources”
between the airlines; the “insourcing” or ground handling, catering, and line
18 “South East Europe: Etihad Takes Over JAT,” International Meetings Review (Sept. 2, 2013),
available at http://www.internationalmeetingsreview.com/south-east-europe/south-east-europeetihad-takes-over-jat-96727.
19 “Etihad to Acquire 49% Of New Serbian Airline,” Jens Flottau, Aviation Week (Aug. 1, 2013).
20 Air Serbia Staff Briefing (Aug. 1, 2013), available at
http://new.livestream.com/etihad/AirSerbiaStaffBriefing (minute 4:48).

Delta Air Lines Consolidated Answer
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maintenance; the “consolidation of some key tasks in Abu Dhabi”, such as scheduling
and revenue management; an “identical in-flight product” on Air Serbia and Etihad
narrow-body fleets; joint training of pilots and crews; and joint procurement of services
and supplies. 21
Etihad’s management and commercial co-opting of JAT demonstrate a
level of effective control by Etihad that is not reflected in JAT’s misleading
characterization of the Etihad acquisition.
Thus, despite JAT’s assertion in its application, Etihad’s investment in the airline
raises important questions about whether JAT is (or will remain) “effectively controlled
by Serbian citizens.” Delta urges the Department to require clarification from JAT and
Etihad with respect to Etihad’s ownership and control over JAT.
IV.
The lack of a U.S.-Serbia aviation bilateral agreement requires JAT to
demonstrate clear public benefit
In the absence of an aviation bilateral agreement, the Department should
carefully examine JAT’s proposal to ensure public benefit. Rather than proposing an
analogous codeshare agreement to those currently serving the U.S.-Serbia market,
where United Airlines and US Airways operate routings with partners that have less
than 1% circuity, 22 JAT is proposing routes with 100% circuity, which would be highly
21 Air Serbia: New Era, New Direction, presentation by James Hogan to Air Serbia staff (Aug. 1,
2013), available at http://exyuaviation.blogspot.com/2013/08/jat-airways-takeover.html.
22 JAT Application at 2.

Delta Air Lines Consolidated Answer
Page 11
susceptible to capacity dumping and state-subsidy market distortions. As discussed
above, such service is not in the public interest.
V. The Department should discourage the abuse of TSA pre-clearance in Abu
Dhabi
In April, 2013, ABAC signed an agreement with U.S. Customs and Border
Protection to open a pre-clearance screening facility at Abu Dhabi International
Airport. 23
The preclearance infrastructure, like the Abu Dhabi International Airport itself,
would be financed by the Government of Abu Dhabi for the benefit of Etihad. 24
U.S.
airlines, including Delta and other members of Airlines for America, have vigorously
objected to this agreement as being inimical to the interests of U.S. airlines and contrary
to U.S. international aviation policy. 25
The proposed JAT/Etihad codeshare raises
additional concerns that the Government of Abu Dhabi and Etihad intend to use preclearance
at Abu Dhabi to distort competition for international air travel by driving air
traffic to Abu Dhabi under circumstances in which such preclearance offsets the obvious
disadvantages of the proposed codeshare routes’ circuity. Such an abuse of preclearance
is inconsistent with the interests of the U.S. aviation industry and U.S.
international aviation policy objectives.
* * *
23 “Where the Short Customs Lines Are,” Scott McCartney, The Wall Street Journal (July 31,
2013).
24 Id. (noting that Abu Dhabi “has agreed to cover most of the costs.”).
25 “Lawmakers Hear Strong Arguments Regarding Abu Dhabi Preclearance,” Michael Bruno,
Aviation Week (July 10, 2013).

Delta Air Lines Consolidated Answer
Page 12
For the foregoing reasons, Delta objects to the above-captioned applications of
JAT and Etihad and urges the Department to deny them both.
Respectfully submitted,
_____________________________
Alexander Van der Bellen
Managing Director, Government Affairs
& Associate General Counsel
DELTA AIR LINES, INC.

CERTIFICATE OF SERVICE
A copy of the foregoing Answer has been served this 4 th day of October, 2013, upon the
following persons via email:
anita.mosner@hklaw.com
Jennifer.Nowak@hklaw.com
robert.wirick@aa.com
francis.heil@aa.com
anbird@fedex.com
sllunsford@fedex.com
dan.weiss@united.com
howard.kass@usairways.com
rsilverberg@sgbdc.com
jjohnson@sgbdc.com
tom.fosko@airtransport.com
jcanny@amerijet.com
jrichardson@johnlrichardson.com
rpommer@atlasair.com
john.palo@evergreenairlines.com
charters@evergreenairlines.com
matwood@cozen.com
mlbenge@zsrlaw.com
kevin.montgomery@polaraircargo.com
peter.beckett@polaraircargo.com
john.allen@faa.gov
Russell.Bailey@alpa.org
dberg@airlines.org
kglatz@airlines.org
paul.gretch@dot.gov
todd.homan@dot.gov
Peter.Irvine@dot.gov
info@airlineinfo.com