Airline Participation Agreement and General Agreement [Amendment] - priceline.com Inc., PriceLine Travel Inc. and Delta Air Lines Inc.
AMENDMENT TO THE AIRLINE PARTICIPATION AGREEMENT AND THE GENERAL AGREEMENT
December 31, 1998
Ms. Brenda Barnes
Vice President,
Pricing & Revenue Management
Delta Air Lines, Inc.
1030 Delta Boulevard
Hartsfield Atlanta International Airport
Atlanta, GA 30320
Dear Brenda:
The following provisions shall be deemed an amendment to the Airline
Participation Agreement and the General Agreement between and among Delta Air
Lines, Inc. ("Delta") and priceline.com Incorporated and PriceLine Travel, Inc.
(collectively, as applicable, "Priceline"), where indicated, in each case,
effective as of December 31, 1998. Unless otherwise defined herein, capitalized
terms shall have the meanings set forth in the Airline Participation Agreement
and the General Agreement, as applicable.
1. The following provision replaces Section 7.11 of the General Agreement in
its entirety:
7.11 PRICELINE TICKET ALLOCATION METHODOLOGY
(a) All airlines participating in the Priceline Service will be
given the first opportunity to fill a customer ticket request based
on a formula [**] except for offers originating or terminating in
the following markets where the [**] rule will not apply: [**]
The operation of this first look methodology is reflected in the
example attached hereto as Exhibit 7.11, and incorporated by
reference herein.
(b) Priceline shall, within 60 days of the implementation of the
allocation system described in Section 7.11 (a) (which is scheduled
for completion at the end of February), and thereafter as requested
by Delta, [**] will apply to all O&D markets including, without
limitation, the top 2,500 domestic O&D markets and the top 1,000
international O&D markets.
[**] = Confidential treatment requested for redacted portion.
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(c) The first opportunity to fill a customer ticket request [**] in
the event Delta's market share (as measured in RPMs) increases
versus the rest of the Participating Carriers [**].
(d) Until technology is developed to implement the proposed first
look allocation method discussed above [**].
(e) Section 7.11 (a)-(d) as set forth above shall no longer be in
effect if Delta's rights under Section 3.1-3.4 of the General
Agreement are terminated pursuant to Section 3.5 of the General
Agreement. In such event, the following provision shall be
substituted for Section 7.11 of the General Agreement:
7.11 All Participating Carriers will be given the first
opportunity to fill a customer ticket request based on a
formula [**]. If a Participating Carrier fails to respond to a
ticket request on its designated first look, then Priceline
will allocate the request through a second round of preferred
looks [**] for each O&D requested (but excluding the
Participating Carrier that failed to fulfill the ticket request
on the first look).
2. The following provision is added as a new section 7.14 of the General
Agreement:
7.14 DETERMINATION OF REASONABLE DEMAND
Beginning at the end of February of 1999, and thereafter on a
mutually agreed schedule, Priceline will review with Delta the
methodology used by Priceline to establish reasonable demand that
Priceline elects to process for both domestic and international O&D
offers.
3. The following provision replaces Section 3.1 of the General Agreement in
its entirety:
3.1 Subject to Section 3.5 below, Delta and Priceline agree that, during
the term of the PCA:
(a) (i) all airlines which have signed an agreement with Priceline
to participate in the Priceline Service as of the date of the
Agreement (as identified in the attached Schedule 3.1 hereof) may
continue such participation; (ii) Delta consents to participation by
the following airlines: [**] or such other U.S. domestic airline(s)
which are acceptable to Delta (as reflected by Delta's consent) with
a goal of including in the Priceline Service a total number of
domestic airline participants so that the sum total domestic market
share of all such participating airlines will, in an annual
measuring period, not exceed [**] of all U.S. domestic RPMs (the
"Range"); (iii) the following carriers will constitute "Delta
Connection Carriers": [**]; and "Delta Connection Carriers" may file
Priceline fares (x) under the "DL" code and (y) to/from markets in
their local O&D's not served by Delta; (iv) Priceline may include
[**] as a participant subject to the restrictions set forth in
Section 3.1 (b) below; (v) Priceline may add the following carriers
on international markets: (x) [**] (the "Atlantic Excellence
Partners") (y)[**] (the "Delta Partners") and
[**] = Confidential treatment requested for redacted portion.
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(z)[**] (the carriers referred to in subsections (x), (y) and (z)
being collectively referred to as the "New International Carriers");
and (vi) such other international carriers as Delta shall approve in
writing, provided that Delta agrees to negotiate in good faith with
respect to the addition of international carriers serving markets in
which Priceline's rate of satisfying reasonable offers ("bind rate")
is materially below Priceline's international average bind rate as
measured over a period of not less than a calendar quarter.
(b) Priceline agrees that it will not issue tickets (i) on [**] in
the following markets: (x) to or from ATL, BOS, DFW, CVG and SLC
(the "Delta Key Markets"), except for offers originating from MSP,
DTW and MEM or O&D markets not served by Delta or a carrier
operating a flight under Delta's two letter ("DL") designator code
and (y) to, from or in the State of Florida, except for flights from
MSP, DTW or MEM or O&D markets not served by Delta or a carrier
operating a flight under Delta's two letter ("DL") designator code;
(ii) on any carrier operating a flight under [**] two letter
designator code flights except for [**] commuter carriers; or (iii)
on the New International Carriers in the Delta Key Markets except
(x) in markets not served by Delta (either directly or on a
code-share basis), or (y) in markets where Priceline's rate of
satisfying reasonable offers ("bind rate") is materially below
Priceline's international average bind rate as measured over a
period not less than one calendar quarter.
(c) Priceline will continue to use its best efforts to pursue the
participation of [**] in the Priceline Service.
(d) Priceline agrees that for tickets sold by its international
Participating Carriers (i) it will only issue tickets for
international travel on flights operated by its international
Participating Carriers and not on flights marketed by its
international Participating Carriers but operated by other
carriers except for (x) grandfathered participants under their
current partner agreements listed in Schedule 3.1, (y) [**] code
share partners under its current participation agreement (as
identified in Schedule 3.1 hereof), and (z) tickets issued on the
code share partners of international Participating Carriers
providing Priceline with net fares that are calculated off of
published fares that retain all of the published fare rules of
that fare; provided, however, that in the event that
international tickets sold through Priceline by international
Participating Carriers (excluding Delta) under the international
Participating Carriers' two letter designator code on flights
operated by other carriers exceed [**] of the total international
tickets sold through Priceline (excluding Delta) for a
consecutive 30-day period, Priceline will take action to reduce
this percentage below [**]; (ii) it will no issue tickets for
international travel on [**] originating from the Delta Key
Markets; and (iii) it will not issue tickets for international
travel on any of the "Atlantic Excellence Partners" or "Delta
Partners" if the airline in question ceases to participate in a
qualifying marketing program with Delta (as identified by Delta),
which will be effected by not extending the term of any
participation agreement with such a carrier once the term
expires, not to exceed one year from the time Delta provides
written notice to Priceline of such a cessation of participation.
In the event that Priceline is obligated to take action under
this Section 3.1 (d) to reduce the
[**] = Confidential treatment requested for redacted portion.
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percentage of tickets below [**], then Priceline shall use its
reasonable best efforts to develop software programs to restrict
this amount below the [**] threshold.
(e) As to domestic travel, in the event that the percent of domestic
tickets sold under the [**] code on flights operated by carriers
other than [**] exceeds [**] of total Priceline sold domestic
tickets for a consecutive 30-day period, Priceline will take action
to reduce this percentage below [**] during any subsequent 30 day
period of this Agreement. In the event that Priceline is obligated
take action under this Section 3.1 (e) to reduce the percentage of
tickets below [**], then Priceline shall use its reasonable best
efforts to develop software programs to restrict this amount below
the [**] threshold.
(f) Delta may sell Priceline tickets under Delta's two letter
designator code on flights operated by other carriers.
4. The following provision replaces Article III of the Airline Participation
Agreement in its entirety:
III. Priceline Ticket Allocation Methodology
Priceline shall establish an allocation methodology that determines
when participating airlines will be given the first opportunity to
fill a customer ticket request, and may give preference to one or
more participants in establishing such methodology. Priceline will
work in good faith with each participating airline to assist such
airline in achieving its objectives for the Priceline Service within
the context of the allocation system.
5. The following provision is added as a new Section 7.15 of the General
Agreement.
7.15 Priceline agrees to provide Delta the following weekly reports:
a. Total Delta revenue and tickets issued broken down by entity
(domestic and international);
b. Total Priceline tickets issued (in order to determine Delta's
ticketing share);
c. Total O&D's ticketed on Delta - broken down by market including
the following information: revenue, travel dates and length of
stay;
d. Total Priceline demand data - ranked by O&D; and
e. Bind rate information (i.e. number of tickets issued divided by
the number of offers)
6. Except as provided herein, all other terms and conditions of the Airline
Participation Agreement and the General Agreement shall remain in full
force and effect. In the event any term or provision of the Airline
Participation Agreement or the General Agreement is contrary to or
inconsistent with this letter, the terms of this letter shall control.
If the above language is acceptable, please acknowledge your consent by signing
where indicated below and returning this letter to me for execution. In such
case, the terms set forth herein shall be deemed effective as of December 31,
1998.
[**] = Confidential treatment requested for redacted portion.
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Sincerely,
Tim Brier
cc. P. Francis
P. Miles
J. Varley
E. West
J. Walker
ACCEPTED AND AGREED To:
PRICELINE TRAVEL, INC. DELTA AIR LINES, INC.
/s/ Brenda A. Barnes
-------------------------------- ------------------------------------
By: Timothy G. Brier By: Brenda Barnes
Title: President Title: Vice President - Pricing &
Revenue Management
PRICELINE.COM
INCORPORATED
----------------------
By: Timothy G. Brier
Title: Executive Vice President
[**] = Confidential treatment requested for redacted portion.
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SCHEDULE 3.1
<TABLE>
<CAPTION>
Grandfathered Carriers Current Partner Agreements*
---------------------- ---------------------------
<S> <C>
Aer Lingus
Air France
Air New Zealand
America West
Cathay Pacific
Iberia
Icelandair
Lufthansa
Malaysian Airlines
SAS
Singapore Airlines
TWA
Varig
Virgin Atlantic
South African Airways
</TABLE>
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Carrier Current Code-Share Partners*
----------- ----------------------------
<S> <C>
Qantas
</TABLE>
*Delta and Priceline agree to cooperate in good faith to complete this schedule
within 60 days of the date hereof.
[**] = Confidential treatment requested for redacted portion.
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EXHIBIT 7.11
PRICELINE FIRST LOOK ALLOCATION METHODOLOGY
[**]
[**] = Confidential treatment requested for redacted portion.
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