DOT Proposes Approval Of oneworld Antitrust Immunity Application

Tue, 16 Feb '10

"Interested Parties" Have An Opportunity To Comment

The U.S. DOT proposed to grant antitrust immunity to American Airlines and four international partners to form a global alliance, the Department said Saturday in a news release. Under the proposal, the airlines must agree to conditions to protect consumers and preserve competition.

If the decision is made final, American and its "oneworld" alliance partners British Airways, Iberia Airlines, Finnair and Royal Jordanian Airlines would be able to more closely coordinate international operations in transatlantic markets.

In Saturday's show-cause order, the Department tentatively found that granting antitrust immunity to the oneworld alliance would provide travelers and shippers with a variety of benefits, including lower fares on more routes, increased services, better schedules and reduced travel and connection times. The Department also said the proposed alliance would enhance competition around the world by creating competition with the existing Star Alliance and the SkyTeam alliance, which already have been granted immunity.

However, the Department also noted that the alliance could harm competition on select routes between the United States and London's Heathrow Airport, oneworld's primary hub, where the availability of landing and takeoff slots is limited. As a condition of approval, the Department is proposing in its show-cause order that the applicants make four pairs of slots available to competitors for new U.S.-Heathrow service. The Department also would require changes to the agreement to ensure capacity growth, and require the carriers to submit traffic data and implement the proposed alliance within 18 months of a final decision.

Interested parties are invited to show cause why the proposed decision should not be made final. Objections are due in 45 days, and answers to objections 15 days afterward. Following the comment period, the Department will review all filings and then issue a final decision.

"We appreciate the thorough review that our request received from DOT and the U.S. Department of Justice," said Will Ris, American's Senior Vice President - Government Affairs in a statement following the announcement. "We are pleased that DOT has agreed that it is in the best interest of the traveling public if American and other oneworld alliance carriers have an immunized relationship."

Ris added, "American also wants to publicly acknowledge the support that its proposal received from Sen. Kay Bailey Hutchison (R-TX), the Ranking member on the Senate Commerce Committee; Sen. Majority Whip Dick Durbin (D-IL); House Transportation and Infrastructure Aviation Subcommittee Chairman, Rep. Jerry Costello (D-IL); the members of the Texas congressional delegation; and dozens of other U.S. Senators and U.S. Representatives, local elected officials, airport officials, business and community leaders, and tourism industry experts.

FMI: www.dot.gov
 

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ONEWORLD, the smallest of the three "alliances" that together carry around 60% of airline passengers, received a big helping of good news on Saturday: American regulators at the Department of Transportation (DoT) have tentatively approved a grant of antitrust immunity to the alliance. oneworld partners, including American Airlines, British Airways and Iberia, will now be able to sell seats on each other's flights, co-ordinate marketing efforts and even share revenues without fear of prosecution. Proponents of the decision hope that means oneworld will be able to compete more effectively with Star and SkyTeam, two larger alliances that already enjoy antitrust protection.

The Business Travel Coalition, an advocacy group that represents corporate travel departments, praised the decision:

Upon final approval, consumers and corporate travel departments will finally have three fully competitive alliance networks battling it out for their business. With the Star and SkyTeam alliances having been operating with antitrust immunity for their ventures for some time, business travelers no doubt have been paying higher fares than necessary with oneworld’s inability to provide effective competitive discipline to the other two immunized alliances.

The two main oneworld partners, American Airlines and British Airways, play a dominant role in transatlantic travel. So that's where business travellers are most likely to see the impact of the DOT's decision. The main condition of the grant of antitrust immunity is that oneworld give up four daily landing slots at London's Heathrow airport. Regulators hope that forcing American and BA out of some of their valuable Heathrow slots will help other airlines compete for valuable US-Heathrow business travellers.

Not everyone thinks that's a fair deal. Richard Branson, the president of Virgin Atlantic Airways, has told just about everyone that it's a "kick in the teeth" to non-aligned carriers like Virgin. And as the Wall Street Journal explains, the draft decision is certainly better for oneworld than previous proposals:

The DoT's requirement that oneworld give up four daily pairs of Heathrow slots is far less onerous than the 16 it proposed in 2002 after a previous application, reflecting efforts to liberalize the transatlantic market and a relative lack of opposition. It also eschewed "carving out" any routes from the alliance, a remedy suggested by the U.S. justice department.

A free-market solution would be to require airport authorities to simply auction off landing slots each year (or every few years). That won't happen, of course: In America, regulators and airlines couldn't even agree on who actually owns the slots.