US DOT 'not persuaded' by DOJ, grants ATI to CO/Star with limited carve-outs
Monday July 13, 2009
Largely overruling last-minute objections by the US Dept. of Justice, the Dept. of Transportation on Friday gave final approval for antitrust immunity to Continental Airlines for its participation in Star Alliance and also granted ATI to the carrier's entry into Atlantic Plus-Plus, the transatlantic joint venture with Air Canada, Lufthansa and United Airlines.
DOT's decision, which confirmed a tentative decision, was welcomed by the affected airlines and the industry at large and signaled that its approach to regulating global airline alliances is unlikely to change under President Barack Obama's administration.
CO Chairman and CEO Larry Kellner said ATI "greatly benefits our customers, employees and shareholders. It ensures global competition with other antitrust-immunized alliances while encouraging the retention and growth of open skies between the US and other nations."
UA Chairman, President and CEO Glenn Tilton added that "United, Continental and the Star Alliance carriers will be able to compete more effectively in an increasingly global air travel market." US Air Transport Assn. President and CEO James May said the "decision will increase current levels of service while preserving jobs for thousands of airline employees."
DOT did impose a number of route "carve-outs" that are "anticipated to be temporary" in response to concerns expressed by DOJ. But in the main, it was "not persuaded" by DOJ's argument that granting ATI would bring significant harm to consumers, saying that "the full depth and breadth of consumer benefits" could not be realized absent ATI. DOT also noted that these benefits "are not available [to the airlines] through other means," since "ownership restrictions preclude truly integrated joint ventures or mergers similar to those pursued in other industries."
In rejecting DOJ's concerns over a reduction in competition, DOT argued that "an alliance faces competitive pressure both from other carriers in particular city-pair markets and from other alliances offering global network connectivity." DOJ erred in only analyzing "nonstop routes" to reach its conclusions on competition, DOT said, noting that "the vast majority of transatlantic passengers use connecting services and benefit from the improved connecting products at lower fares that integrated alliances provide." Such "coordinated connecting services" on rival alliances "disciplines fares on nonstop routes."
The department did agree to remove a number of routes from the scope of ATI, but it "emphasize[d] that these carve-outs are anticipated to be temporary, lasting only until new entry introduces further competition." The CO/UA/AC/LH JV will not be granted ATI on routes from New York to Copenhagen, Geneva, Lisbon and Stockholm. Should a new entrant enter one of these markets with at least five weekly roundtrips for nine months, Atlantic Plus-Plus may seek ATI for that route.
In addition, DOT is restricting competition among CO, UA and AC on additional US-Canada routes. Also, UA and CO will not have ATI on nonstop service between the US and Beijing, a restriction that will remain "until additional competing service is introduced," DOT said.
by Aaron Karp
ATWOnline
Monday July 13, 2009
Largely overruling last-minute objections by the US Dept. of Justice, the Dept. of Transportation on Friday gave final approval for antitrust immunity to Continental Airlines for its participation in Star Alliance and also granted ATI to the carrier's entry into Atlantic Plus-Plus, the transatlantic joint venture with Air Canada, Lufthansa and United Airlines.
DOT's decision, which confirmed a tentative decision, was welcomed by the affected airlines and the industry at large and signaled that its approach to regulating global airline alliances is unlikely to change under President Barack Obama's administration.
CO Chairman and CEO Larry Kellner said ATI "greatly benefits our customers, employees and shareholders. It ensures global competition with other antitrust-immunized alliances while encouraging the retention and growth of open skies between the US and other nations."
UA Chairman, President and CEO Glenn Tilton added that "United, Continental and the Star Alliance carriers will be able to compete more effectively in an increasingly global air travel market." US Air Transport Assn. President and CEO James May said the "decision will increase current levels of service while preserving jobs for thousands of airline employees."
DOT did impose a number of route "carve-outs" that are "anticipated to be temporary" in response to concerns expressed by DOJ. But in the main, it was "not persuaded" by DOJ's argument that granting ATI would bring significant harm to consumers, saying that "the full depth and breadth of consumer benefits" could not be realized absent ATI. DOT also noted that these benefits "are not available [to the airlines] through other means," since "ownership restrictions preclude truly integrated joint ventures or mergers similar to those pursued in other industries."
In rejecting DOJ's concerns over a reduction in competition, DOT argued that "an alliance faces competitive pressure both from other carriers in particular city-pair markets and from other alliances offering global network connectivity." DOJ erred in only analyzing "nonstop routes" to reach its conclusions on competition, DOT said, noting that "the vast majority of transatlantic passengers use connecting services and benefit from the improved connecting products at lower fares that integrated alliances provide." Such "coordinated connecting services" on rival alliances "disciplines fares on nonstop routes."
The department did agree to remove a number of routes from the scope of ATI, but it "emphasize[d] that these carve-outs are anticipated to be temporary, lasting only until new entry introduces further competition." The CO/UA/AC/LH JV will not be granted ATI on routes from New York to Copenhagen, Geneva, Lisbon and Stockholm. Should a new entrant enter one of these markets with at least five weekly roundtrips for nine months, Atlantic Plus-Plus may seek ATI for that route.
In addition, DOT is restricting competition among CO, UA and AC on additional US-Canada routes. Also, UA and CO will not have ATI on nonstop service between the US and Beijing, a restriction that will remain "until additional competing service is introduced," DOT said.
by Aaron Karp
ATWOnline
