The U.S. Department of Transportation (DOT) has given initial approval for the application by American Airlines and four of its international partners for anti-trust immunity ― that is, immunity from monopolies prosecution ― to form an international joint venture.
DOT approval represents one of two major hurdles the five airlines ― American, British Airways (BA), Iberia Airlines, Finnair and Royal Jordanian Airlines ― must clear for their proposed joint venture to become reality. As the other party in the U.S.-European Union ‘Open Skies’ air services agreement governing the regulation of the proposed joint venture, the European Union (in the form of its legislative body, the European Commission) must also give its blessing to the five airlines. The EU has yet to decide on their application.
Should the joint venture receive final approval from both sets of governments, the five oneworld airlines would be able to coordinate management of seat and cargo capacity and fares on transatlantic routes. Normnally this would be subject to monopolies scrutiny both in Europe and in the U.S. , in the latter case under the antir-trust Sherman Act originally passed in the early 20th century to prevent cartel activity among large U.S. railway companies.
The DOT and EU have already approved similar international joint ventures involving several U.S. and major European members of the rival Star Alliance and SkyTeam alliances, so to have disallowed the application by American, BA and their partners could have led to allegations of favoritism from the oneworld carriers.
However, proposed passenger-protection legislation introduced in the U.S. Congress by Representative James Oberstar would, if passed, require all airlines to re-apply for anti-trust approval for their international joint ventures every three years ― with no certainty of their applications being approved again by the DOT if market conditions or the regulatory environment changes in the interim.
The DOT’s approval for the proposed international joint venture among the five oneworld carriers came in the form of a “show-cause order”. The finding’s name refers to the fact that in its initial decision on the proposed joint venture among the five oneworld airlines the DOT invited interested parties to show cause why the proposed decision should not be made final.
Objections are due in 45 days from the date of the DOT’s initial February 13 decision, and answers to objections 15 days afterward. Following the comment period, the DOT will review all filings and then issue a final decision.
Under the DOT proposal, the five airlines ― all of them existing members the oneworld alliance ― would have agree to conditions to protect consumers and preserve competition. Key among them is a DOT requirement that American and British Airways make four pairs of landing and take-off slots at London Heathrow Airport to other competitors on London-United States service.
In the February 13 show-cause order, the DOT 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 DOT 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 anti-trust immunity.
However, the DOT also noted that the alliance could harm competition on select routes between 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 DOT 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 DOT says it 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.
Sir Richard Branson, president of Virgin Atlantic Airways, immediately criticized the preliminary decision by the U.S. Department of Transportation to allow British Airways and American Airlines’ alliance to go ahead.
Branson ― whose airline is not a member of any airline alliance but which has increasingly close ties with both Delta Air Lines (a founder of the SkyTeam Alliance along with Air France-KLM) and BMI and Lufthansa (members of the Star Alliance) has always been a vocal opponent of the proposed Americen-British Airways joint venture,
“In recent months two competition authorities have cited grave concerns about this anti-competitive alliance which makes it all the more unbelievable that the DOT has given it the go-ahead, with what can only be described as token slot divestments,” said Virgin Atlantic.
See Page 2 for more on Virgin Atlantic’s reaction and on AA-Japan Airlines’ anti-trust immunity bid