25 March 2009 - Following February's proposed U.S. legislation to further scrutinize and limit antitrust immunity for airline alliances, airline and travel trade groups are fighting back. Five groups on 23 March sent a letter to U.S. Department of Transportation Secretary Ray LaHood explaining that the proposal would sacrifice thousands of jobs and harm the travel and tourism industry.
Meanwhile, five members of the oneworld alliance on 13 March submitted their response to DOT's request for more information on the allies' plans to immunize from antitrust regulation their partnership and to create a three-way joint venture between American Airlines, British Airways and Iberia.
Rhetoric for and against immunized airline alliances has increased in the wake of
U.S. Rep. James Oberstar's (D-Minn.) proposal to require tougher examination of new immunity requests and to "sunset all immunity grants three years after the date of enactment."
Leaders of the Air Transport Association, the Association of European Airlines, the International Air Transport Association, the National Air Carrier Association and the U.S. Travel Association argued against Oberstar's provisions. "Arbitrarily terminating antitrust immunity will have a harsh impact on airline employees and cause a ripple effect across the travel and tourism industry at a time when U.S. unemployment is escalating rapidly," they told LaHood. "Based on data from ATA-member airlines, this bill could cost as many as 15,000 U.S. airline jobs alone, not to mention the indirect effect on employment at other U.S.
companies.
"Existing ATI provisions have led to benefits for both European and U.S. customers and airlines, and for both European and U.S. consumers, acting as a driver for increased traffic and employment levels," the letter continued, noting more frequent and convenient flight itinerary options, "enhanced interalliance competition" and "more competitive" fares. "The emergence of global alliances--which are defined by their core European/U.S. airline partnerships--have eliminated inefficiencies, promoted best practices and fostered vigorous competition in an unparalleled range of citypair markets."
According to the text of a speech posted to the International Aviation Club's Web site, Oberstar said, "The opponents of my bill claim that the provision means the end of alliances. That is alarmist nonsense. Of course, it does not. If members of the alliances can show that ATI provides net benefits to the public, my bill permits DOT to reissue the grant of antitrust immunity."
Also serving as the chairman for the U.S. House of Representatives Committee on Transportation and Infrastructure, Oberstar reiterated his concern that if immunized alliances "are allowed to proceed unchecked, the end result may be trading government control in the public interest for private monopoly control in the interests of the industry." That, he said, would hamper competition and lead to higher fares.
Oberstar's proposed legislation now is included in a bill to reauthorize the Federal Aviation Administration, currently being debated by Congress.
Oneworld Responds
As the debate over antitrust-immunized airline alliances continues, DOT still is assessing two pending ATI applications: a Star Alliance request to add Continental Airlines to a pre-existing group of immunized partners, and the oneworld request encompassing AA, BA, Iberia, Royal Jordanian and Finnair.
On the latter, the five airlines submitted additional information as requested and urged DOT to quickly complete its review. "It is in the public interest for DOT to promote interalliance competition given the Star/SkyTeam duopoly's continuing exercise of market power," the carriers wrote.
A heavily redacted public version of the oneworld submission included the carriers' explanation on how immunity would "eliminate the commercial disincentives" for AA and BA to allow passengers to "earn or redeem miles on transatlantic flights operated by the other carrier;" foster joint international product development; and allow for complete fare combinability. They also asserted that their intended immunized alliance and joint venture would neither diminish competition for corporate and travel agency contracts nor squelch competition at London Heathrow Airport.
"In every suitable hour there are slots not used for North American services [from Heathrow] that could be, and these slots are held by airlines in the Star and SkyTeam alliance groups, and almost 90 daily suitable slots are held by unaligned airlines," they wrote. "In fact, there has been so much new capacity added to U.S.-London routes that it is not at all clear that there is even a current need for more new entry. To the contrary, Airport Coordination Limited [the entity responsible for allocating Heathrow slots] has told DOT that a lack of unmet demand--not slots--is the greatest constraint on further new entry at Heathrow."
The oneworld allies also told DOT they "do not contemplate any commercial changes to their interline practices and policies with non-oneworld carriers." For example, "despite the contentious nature of Virgin Atlantic's relationship with British Airways, Virgin is British Airways' biggest source of interline bookings." Oneworld airlines claimed their position on relationships with carriers outside oneworld differs from that of Star Alliance, which "is known to have a 'hygiene policy' forbidding its members from engaging in code sharing or frequent flyer program relationships with current and prospective members of other alliances."
They also told DOT that Delta Air Lines in August 2008 "blocked all British Airways' fares from interlining across the Delta network. British Airways asked Delta to explain its action, but received no response. Accordingly, British Airways blocked Delta fares from the British Airways network in September 2008."
Oneworld also wrote that it is discussing with the European Commission "the compatibility of the proposed transaction with the EC Treaty," and that they are "hopeful" the EC review would be completed "by mid-2009."
