DOT Plans to Deny Antitrust Immunity to Delta-Virgin Blue Alliance

The U.S. Department of Transportation (DOT) is proposing to deny an application for antitrust immunity made by Delta Air Lines and affiliates of the Virgin Blue Group for joint services between the United States and Australia.

Antitrust immunity allows airlines to coordinate their international operations closely, in a manner that could otherwise cause anti-trust scrutiny by the U.S. Department of Justice and other countries’ anti-monopoly agencies.

In a show-cause order on September 8, 2010, the DOT tentatively concluded that Delta Air Lines and the Virgin Blue Group had not demonstrated that the alliance would produce sufficient public benefits to justify a grant of antitrust immunity.

The Virgin Blue Group includes V Australia, Virgin Blue, and Pacific Blue Airlines affiliates in both Australia and New Zealand. Delta and the Virgin Blue Group  filed a joint application on July 9, 2009 requesting approval of, and a grant of antitrust immunity for, a commercial alliance related to their services in the U.S.-Australia market.

Delta Air Lines operates Los Angeles-Sydney service with Boeing 777-200LRs

In the application, the applicants envisioned “that the scope of their cooperation will involve primarily transpacific service to and from the South Pacific region, including Australia initially, and potentially New Zealand in the future.” However, the DOT notes that, despite the limited geographic scope of the alliance, the applicants requested an unrestricted grant of immunity covering their potential cooperation in any market worldwide.

In reaching its tentative decision, the DOT says Delta and its partners have only recently entered the U.S.-Australia market. Additionally, they have not shown developed plans to operate as commercial partners and have limited their cooperation to a handful of routes, thereby limiting the public benefits their alliance might produce.

As a result, says the DOT, Delta and the Virgin Blue Group have failed to show that their alliance would have positive effects for consumers, such as lower fares or increased capacity.

Interested parties have 14 calendar days from the issuance of the DOT’s tentative decision to show cause why the proposed decision should not be made final.  Answers to objections are due seven days afterward.  Following the comment period, the DOT will review all filings and then issue a final decision.

The proposed decision, comments and other documents in the case are available on the Internet at www.regulations.gov, docket DOT-OST-2009-0155.

For more on what the DOT’s show-cause order said, see Page 2