Flightglobal ha pubblicato un paio di approfondimenti molto interessanti su due aspetti delle alleanze globali: il caso del nord-Atlantico e l'influenza delle autorità anti-trust dei vari paesi.
DATE:25/08/11
SOURCE:Airline Business
Alliances stymied in solving transatlantic riddle
By Lori Ranson
The alliance groups' much-sought joint ventures across the north Atlantic are up and running, but the challenge of achieving year-round profitability in the market remains
Sir Freddie Laker's wit and wisdom accumulated in the transatlantic market more than 30 years ago was resurrected recently by one of the biggest players over the Atlantic to capture the dismal performance displayed by the industry during the first quarter.
Hammered by analysts over Delta Air Lines' weak results, carrier head of network planning Glen Hauenstein simply deferred to the late British aviation pioneer, and channelled the Sir Freddie's famous quote: "Any idiot can make money in the transatlantic market during the summer, it's the winter months that count."
Delta did not exactly challenge Sir Freddie's philosophy during the first quarter. "We had little success as the industry capacity increase of 11% put significant pressure on yields," surmised Delta chief executive Richard Anderson. The result was that Delta took a hammering as roughly $150 million of the $200 million erosion in its first quarter pre-tax profits was attributable to weak transatlantic performance.
Delta led the industry's double-digit transatlantic capacity increase during the winter by pumping 16% more seats into the *markets year over year, which is "way too high", says Craig Jenks of aviation consultancy Airline/Aircraft Projects, which carefully monitors transatlantic trends.
A portion of the capacity increase was the restoration of pull-downs by Delta during the 2008-09 season to combat sinking demand and soaring fuel prices.
Hauenstein admits that in hindsight: "There was excess capacity from the industry and from us." Part of the capacity dump could be attributed to the relatively young joint ventures created by the three large airline alliances in the Atlantic market and their acclimation to joint network planning.
Relative to the transatlantic joint venture partners in the SkyTeam tie-up - Delta, Air France and Alitalia - Hauenstin says: "I think this has been a learning process for us as we go through the first two years of our joint venture." Delta and its SkyTeam partners applied lessons learned and have moved to assure that the joint venture's collective transatlantic capacity, which entails routes between North America and Europe, is falling by 7-9%, or 15 points, during the winter season, versus previous growth projections of 7-8%.
Members of the Star Alliance camp transatlantic joint venture have followed suit, as United-Continental, Lufthansa and Air Canada plan a six-point capacity reduction during the fourth quarter, which should keep joint venture capacity flat against the last three months of 2010. Oneworld members are evaluating their transatlantic operations for the upcoming winter season, and "anticipate making seasonal route and day-of-week flying adjustments to early 2012 flying to improve our performance", says American Airlines chief executive Gerard Arpey. The adjustments in winter capacity by the three immunised groupings show alliances "have made no real difference to the transatlantic dilemma of how to be profitable in the winter as well as summer", says Jenks.
He says although some theorise that the capacity push during the winter was the result of a propensity for immunised alliances to boost capacity since those tie-ups allow for the spreading of risk across multiple carriers is not a philosophy guiding alliance strategy.
"We believe the 16% boost by Delta last winter was more of a special case, the tendency over time is for alliances to prioritise profitability over growth."
US carriers moderated their capacity growth in transatlantic markets in the second quarter, and strengthened demand helped bolster performance as the summer season got underway.
United-Continental saw its transatlantic yields jump 8.3% as overall transatlantic revenues of $1.6 billion represented 47% of the *carrier's recorded $3.4 billion in international passenger revenues.
The carrier had to make a payment to its transatlantic joint venture partners due to its outperformance. But United-Continental chief revenue officer Jim Compton remains bullish on the value of the Star joint venture.
"Our partnership with Lufthansa to Germany is quite significant, and the amount of connections that are new to the network that were not there before. So, I think there is tremendous value coming from the JV," says Compton. Delta also rebounded from its dismal first quarter *performance, growing its transatlantic yields 10% year over year in the second quarter, and recording a 16% rise in revenues in those *markets to $1.57 billion.
American's performance was vastly different in the second quarter as its transatlantic yields plunged by 4.7% on a 9% capacity increase.
During the quarter, American introduced flights from its New York Kennedy and Chicago O'Hare "cornerstone" markets to Budapest and Helsinki, respectively, the hubs of Oneworld partners Malev and Finnair, which don't generate the traffic flows of some hub-to-hub markets covered under rival immunised joint ventures established by SkyTeam and Star.
American chief executive Arpey admits *perhaps the carrier anticipated getting traction from joint sales with transatlantic joint venture partners British Airways and Iberia "a little too soon", after the 6 October launch of their partnership.
Carrier CFO Isabella Goren cautions that the full effect of American's antitrust immunity agreement with British Airways and Iberia "will not be in place until the end of next year because there is considerable coordination involved". She stresses that because of the cycle of contract renewals, "it will be some time before we see the full benefit of joint deals".
American has stated the bulk of an estimated $500 million annualised gain in revenue would stem from its transatlantic joint venture with British Airways and Iberia and the transpacific antitrust tie-up with Japan Airlines. Goren has previously stressed American expects to reach that revenue milestone at the end of 2012.
SUMMER VERSUS WINTER
While continuing to struggle with profitability in the winter, the summer is shaping up to be strong, as "all available evidence" of an estimated 5.5% Europe-USA capacity increase coupled with fare increases should compensate for higher fuel costs should and be "easily absorbed by demand", Jenks says.
He also concludes that while alliances are leading growth across the Atlantic, the point can be exaggerated. Of the net 18.5 daily flights being introduced, nine and a half are hub to hub or *mini hub, while nine are hub to spoke or point to point.
The percentage of new routes this summer representing hub-to-hub or hub-to-mini-hub markets is just over half, says Jenks, compared with an average from 200311 of 32%.
Calculations by the Airline/Aircraft Projects consultancy show that the number of hub-to-hub markets is higher than usual, but "it is not a stampede", says Jenks. "In fact, looking at the historical data, hub to hub has tended to outperform in early upturn years." Spanish Oneworld carrier Iberia appears pleased with the performance of its new routes introduced in March from its Madrid hub to American's cornerstone market of Los Angeles, and from Barcelona to Miami. Overall, Iberia is increasing its US seat inventory by 13% this year, says carrier US country manager Jose Alvarado, with bookings during the peak summer months on the Airbus A340-300-operated flights running in the 70% load range earlier this year, with the hub-to-hub performance of Miami-Barcelona showing *similar results.
BA appears equally satisfied with interest in the resumption of flights from its Heathrow hub to San Diego in June. Just prior to the launch, the carrier stated it was pleased with bookings on the route. The head of BA parent International Airlines Group Willie Walsh believes London's strength and the carrier's position in the market allows BA to be shielded from some of the cyclical transatlantic challenges faced by other carriers.
"What is clear to us at this stage is London is a stronger market, and I think that is true over the past number of years, so where we have heard a number of our competitors and our partners talk about some capacity and demand issues, I think that relates more to the wider European markets than to the specific markets we operate in," Walsh said during IAG's second quarter results call.
As all three major alliances bolster hub-to-hub markets, Jenks sees "an interesting trend this summer" of EU carriers with histories of shunning transatlantic service from secondary cities now introducing such service in conjunction with their US partners. Virgin Atlantic is adding Manchester while United-Continental is teaming with Lufthansa to introduce a New York Newark-Stuttgart flight. SAS is also re-entering the Oslo-Newark market.
The North American transatlantic market during the summer is also seeing a rise in average seat count, driven by Air France and Lufthansa expanding their US A380 operations, Jenks notes. Average aircraft size has risen from 252.4 seats in 2010 to 255.8, underpinned by the addition of a total of five new A380 frequencies introduced during the summer. Lufthansa has added A380 flights from Frankfurt to New York Kennedy, Miami and San Francisco while Air France expanded its Paris-Atlanta A380-operated service introduced last year with the addition of Paris-Washington DC and San Francisco. Despite the rise in seats, Jenks says that pending equipment orders do not suggest a large capacity expansion in the transatlantic market in the summer of 2012, and the alliances overall are attempting to reverse market overcapacity in the winter of 2011.
"As we pull out of the high demand season post Labour Day," says Hauenstein of Delta, "we are going to make with our partners those necessary adjustments, so that we do not return all the profits we make over the next several months in the winter months".
Notes: Flights based on Europe-USA Sep 2011; capacity based on ASKs for some criteria. Source: Innovata.
---------------------------------------------------------------
Oneworld camp
Members: British Airways, Iberia and American Airlines
Estimated revenues: $7-8 billion
Weekly flights: 1,222
Capacity share: 20.0%
Capacity plans: Will evaluate winter flying and anticipates making seasonal route and day of week adjustments to improve performance
----------------------------------------------------------
SkyTeam camp
Members: Air France-KLM, Alitalia, Delta Air Lines
Estimated revenues: $11 billion
Weekly flights: 1,632
Capacity share: 28.7%
Capacity plans: Cutting capacity 7-9% in the fourth quarter in response to higher fuel prices and seasonal changes in demand
--------------------------------------------------------------
Star Alliance camp
Members: Air Canada, United-Continental, Lufthansa, Austrian Airlines, Brussels Airlines, Swiss and LOT
Weekly flights: 2,095
Capacity share: 34.5%
Capacity plans: Will reduce planned transatlantic fourth-quarter capacity by six points, resulting in the JV capacity remaining flat over the same period in 2011
http://www.flightglobal.com/article...-stymied-in-solving-transatlantic-riddle.html
-------------------------------------------------------------------------------------------------------
DATE:25/08/11
SOURCE:Airline Business
Alliances: differing takes on the immune system
By David Knibb
As liberalisation creeps along at a snail's pace, alliances with anti-trust immunity have become the answer for many airlines anxious to move beyond restrictive aviation policies. The EU's approval in June for Star Alliance members Lufthansa and All Nippon Airways to co-operate closely in the Japan-Europe market is only the latest example. Anti-trust immunity is the key to these deals. Despite its benefits, there are growing concerns it may change the very nature of global alliances.
US aviation lawyer Paul Mifsud raised flags in an article in the Air and Space Law Journal earlier this year. Within an alliance, he writes, airlines that lack anti-trust immunity can still participate in alliance networks and marketing programmes but "are prohibited from even discussing price, route allocation or anything else that would make them less aggressive competitors with their partners". A two-tier system is emerging, with some alliance members sharing anti-trust immunity while other members do not. The result, Mifsud says, is "the alliances are made up of partners who can legally co-operate and partners who are required to compete with each other". Alliance membership is becoming more complicated because competition regulators do not use the same criteria in granting immunity, and questions have emerged over how much one country will recognise immunity granted in another.
The US Department of Transportation has long insisted, for example, that a foreign nation must have open skies with the USA before it will consider granting antitrust immunity to its airline. By contrast Singapore's competition body grants exemptions from Singapore's anti-trust law for airline alliances, has no such requirement. Alan Khee-Jin Tan, law professor at the National University of Singapore and a close observer of Asian aviation, points out that when Singapore's regulator approved the British Airways-Qantas joint operating agreement in early 2007, the UK did not have an open skies agreement with Singapore. Singapore, Tan says, looks instead at the level of competition and barriers to entry. "The presence or absence of an open skies bilateral will be relevant but will not be the sole factor."
Joint venture pacts, such as Oneworld partners American Airlines, British Airways and Iberia's North Atlantic tie-up, are increasingly part of the alliance world
Even if open skies are required before immunity, what does "open skies" really mean? As Brian Havel, director of DePaul University's International Aviation Law Institute in Chicago and author of Beyond Open Skies: A New Regime for International Aviation, notes: "There is an open debate about whether the recently signed US/Japan Open Skies Agreement 'counts' since it contains tight regulations on airport slots." The question of how much one country recognises another's immunity was recently underscored when Canada's Competition Bureau investigated an Air Canada and United-Continental joint venture. USDoT had specifically considered Canada-US competition when it granted anti-trust immunity to the Star Alliance "Atlantic ++" joint venture two years ago involving these same airlines. Canada wants to review it.
Immunity, or the lack of it, may not become an issue in some parts of the world. US anti-trust authorities, for example, are unlikely to question the immunity granted by Singapore, Australia and UK regulators to joint BA-Qantas operations because those operations are on the opposite side of the world.
Yet, the recent air cargo price-fixing cases with fines and even jail terms, serve as a warning about how far a nation's anti-trust laws can reach beyond its borders. The trigger for anti-trust enforcement is some direct link or effect. Havel explains: "Though the USA will apply its anti-trust laws extraterritorially, it still demands some link to the United States." So for example non-US carriers could fix prices on routes between China and Japan without the USA getting involved, unless there was some spillover with effects on US/China or US/Japan routes." Havel says that if this happened via a transpacific tie-up between a Chinese carrier and global alliance partners, you might see the US Department of Justice step in and open an anti-trust investigation against the Chinese, Japanese and US partners.
Air China's non-immunised membership in Star illustrates Mifsud's concern about global alliance haves and have-nots. So far, Air China has not sought anti-trust immunity for a joint venture. Until China and the USA ink an open skies bilateral, an unlikely prospect, it would not waste its time asking for US immunity.
Tan says Air China and other international Chinese carriers may do well in their global alliances without anti-trust immunity because none of their immunised alliance partners can co-operate with each other to the detriment of the Chinese carriers on routes the latter serve. "One could say that Air China might lose out because it doesn't have immunity from the USA and cannot engage in closer co-operative arrangements with, say, United, while the likes of Lufthansa or Air Canada can. But these other airlines don't fly the China-USA market. As long as the other Chinese airlines in other alliances - China Southern and China Eastern in SkyTeam, for example don't enjoy the same privilege with Delta (or Cathay with American), Air China should be fine," Tan says.
However, Tan sees a more serious threat for the Chinese carriers - the combination of anti-trust immunity by other Asian airlines and their significant sixth-freedom operations. For example, All Nippon-United enjoy anti-trust immunity across the Pacific, and Korean Air could conceivably seek similar immunity with its SkyTeam partner, Delta.
These immunised ventures "could suck up a whole lot more China-USA traffic with their sixth-freedom operations" Tan says, and "the Chinese carriers could conceivably end up as the non-immunised 'have-nots' outside the inner circle". These same issues could arise anywhere and pose the same questions about how anti-trust immunity could change global alliances in ways as yet unclear.
Read more about the impact of ownership rules on airline relationships
JOINT VENTURES SPREAD THEIR WINGS
Airline joint venture partnerships initially focused on the transatlantic but have since ventured wider, notably in Asia, with a string of recent developments including:
ANA and United-Continental: launched their trans-pacific joint venture in April
ANA and Lufthansa: in June secured antirust immunity to launch a strategic joint venture on routes between Japan and Europe
JAL and Amercian Airlines: the oneworld partners began their joint business on routes between Asia and the US in April
Qantas and American Airlines: applied in May for approval of coordinated sales and marketing in the Dallas-Sydney market. Australia granted interim approval in June. Request awaits final approval in both the USA and Australia
Delta-Virgin Australia: received antitrust immunity approval from the US DOT in June for their proposed trans-Pacific alliance. The airlines hope to have the joint venture set up by year-end
Singapore Airlines and Virgin Australia: in June the carriers unveiled plans for an alliance seeking to co-ordinate schedules on services between Australia and Singapore. Awaiting regulatory approval
Virgin Australia-Air New Zealand: joint venture on trans-Tasman flights begins in November
United-Continental and Air Canada: proposed trans-border joint venture, currently facing opposition from Canada's Competition Commissioner
http://www.flightglobal.com/article...ces-differing-takes-on-the-immune-system.html
DATE:25/08/11
SOURCE:Airline Business
Alliances stymied in solving transatlantic riddle
By Lori Ranson
The alliance groups' much-sought joint ventures across the north Atlantic are up and running, but the challenge of achieving year-round profitability in the market remains
Sir Freddie Laker's wit and wisdom accumulated in the transatlantic market more than 30 years ago was resurrected recently by one of the biggest players over the Atlantic to capture the dismal performance displayed by the industry during the first quarter.
Hammered by analysts over Delta Air Lines' weak results, carrier head of network planning Glen Hauenstein simply deferred to the late British aviation pioneer, and channelled the Sir Freddie's famous quote: "Any idiot can make money in the transatlantic market during the summer, it's the winter months that count."
Delta did not exactly challenge Sir Freddie's philosophy during the first quarter. "We had little success as the industry capacity increase of 11% put significant pressure on yields," surmised Delta chief executive Richard Anderson. The result was that Delta took a hammering as roughly $150 million of the $200 million erosion in its first quarter pre-tax profits was attributable to weak transatlantic performance.
Delta led the industry's double-digit transatlantic capacity increase during the winter by pumping 16% more seats into the *markets year over year, which is "way too high", says Craig Jenks of aviation consultancy Airline/Aircraft Projects, which carefully monitors transatlantic trends.
A portion of the capacity increase was the restoration of pull-downs by Delta during the 2008-09 season to combat sinking demand and soaring fuel prices.
Hauenstein admits that in hindsight: "There was excess capacity from the industry and from us." Part of the capacity dump could be attributed to the relatively young joint ventures created by the three large airline alliances in the Atlantic market and their acclimation to joint network planning.
Relative to the transatlantic joint venture partners in the SkyTeam tie-up - Delta, Air France and Alitalia - Hauenstin says: "I think this has been a learning process for us as we go through the first two years of our joint venture." Delta and its SkyTeam partners applied lessons learned and have moved to assure that the joint venture's collective transatlantic capacity, which entails routes between North America and Europe, is falling by 7-9%, or 15 points, during the winter season, versus previous growth projections of 7-8%.
Members of the Star Alliance camp transatlantic joint venture have followed suit, as United-Continental, Lufthansa and Air Canada plan a six-point capacity reduction during the fourth quarter, which should keep joint venture capacity flat against the last three months of 2010. Oneworld members are evaluating their transatlantic operations for the upcoming winter season, and "anticipate making seasonal route and day-of-week flying adjustments to early 2012 flying to improve our performance", says American Airlines chief executive Gerard Arpey. The adjustments in winter capacity by the three immunised groupings show alliances "have made no real difference to the transatlantic dilemma of how to be profitable in the winter as well as summer", says Jenks.
He says although some theorise that the capacity push during the winter was the result of a propensity for immunised alliances to boost capacity since those tie-ups allow for the spreading of risk across multiple carriers is not a philosophy guiding alliance strategy.
"We believe the 16% boost by Delta last winter was more of a special case, the tendency over time is for alliances to prioritise profitability over growth."
US carriers moderated their capacity growth in transatlantic markets in the second quarter, and strengthened demand helped bolster performance as the summer season got underway.
United-Continental saw its transatlantic yields jump 8.3% as overall transatlantic revenues of $1.6 billion represented 47% of the *carrier's recorded $3.4 billion in international passenger revenues.
The carrier had to make a payment to its transatlantic joint venture partners due to its outperformance. But United-Continental chief revenue officer Jim Compton remains bullish on the value of the Star joint venture.
"Our partnership with Lufthansa to Germany is quite significant, and the amount of connections that are new to the network that were not there before. So, I think there is tremendous value coming from the JV," says Compton. Delta also rebounded from its dismal first quarter *performance, growing its transatlantic yields 10% year over year in the second quarter, and recording a 16% rise in revenues in those *markets to $1.57 billion.
American's performance was vastly different in the second quarter as its transatlantic yields plunged by 4.7% on a 9% capacity increase.
During the quarter, American introduced flights from its New York Kennedy and Chicago O'Hare "cornerstone" markets to Budapest and Helsinki, respectively, the hubs of Oneworld partners Malev and Finnair, which don't generate the traffic flows of some hub-to-hub markets covered under rival immunised joint ventures established by SkyTeam and Star.
American chief executive Arpey admits *perhaps the carrier anticipated getting traction from joint sales with transatlantic joint venture partners British Airways and Iberia "a little too soon", after the 6 October launch of their partnership.
Carrier CFO Isabella Goren cautions that the full effect of American's antitrust immunity agreement with British Airways and Iberia "will not be in place until the end of next year because there is considerable coordination involved". She stresses that because of the cycle of contract renewals, "it will be some time before we see the full benefit of joint deals".
American has stated the bulk of an estimated $500 million annualised gain in revenue would stem from its transatlantic joint venture with British Airways and Iberia and the transpacific antitrust tie-up with Japan Airlines. Goren has previously stressed American expects to reach that revenue milestone at the end of 2012.
SUMMER VERSUS WINTER
While continuing to struggle with profitability in the winter, the summer is shaping up to be strong, as "all available evidence" of an estimated 5.5% Europe-USA capacity increase coupled with fare increases should compensate for higher fuel costs should and be "easily absorbed by demand", Jenks says.
He also concludes that while alliances are leading growth across the Atlantic, the point can be exaggerated. Of the net 18.5 daily flights being introduced, nine and a half are hub to hub or *mini hub, while nine are hub to spoke or point to point.
The percentage of new routes this summer representing hub-to-hub or hub-to-mini-hub markets is just over half, says Jenks, compared with an average from 200311 of 32%.
Calculations by the Airline/Aircraft Projects consultancy show that the number of hub-to-hub markets is higher than usual, but "it is not a stampede", says Jenks. "In fact, looking at the historical data, hub to hub has tended to outperform in early upturn years." Spanish Oneworld carrier Iberia appears pleased with the performance of its new routes introduced in March from its Madrid hub to American's cornerstone market of Los Angeles, and from Barcelona to Miami. Overall, Iberia is increasing its US seat inventory by 13% this year, says carrier US country manager Jose Alvarado, with bookings during the peak summer months on the Airbus A340-300-operated flights running in the 70% load range earlier this year, with the hub-to-hub performance of Miami-Barcelona showing *similar results.
BA appears equally satisfied with interest in the resumption of flights from its Heathrow hub to San Diego in June. Just prior to the launch, the carrier stated it was pleased with bookings on the route. The head of BA parent International Airlines Group Willie Walsh believes London's strength and the carrier's position in the market allows BA to be shielded from some of the cyclical transatlantic challenges faced by other carriers.
"What is clear to us at this stage is London is a stronger market, and I think that is true over the past number of years, so where we have heard a number of our competitors and our partners talk about some capacity and demand issues, I think that relates more to the wider European markets than to the specific markets we operate in," Walsh said during IAG's second quarter results call.
As all three major alliances bolster hub-to-hub markets, Jenks sees "an interesting trend this summer" of EU carriers with histories of shunning transatlantic service from secondary cities now introducing such service in conjunction with their US partners. Virgin Atlantic is adding Manchester while United-Continental is teaming with Lufthansa to introduce a New York Newark-Stuttgart flight. SAS is also re-entering the Oslo-Newark market.
The North American transatlantic market during the summer is also seeing a rise in average seat count, driven by Air France and Lufthansa expanding their US A380 operations, Jenks notes. Average aircraft size has risen from 252.4 seats in 2010 to 255.8, underpinned by the addition of a total of five new A380 frequencies introduced during the summer. Lufthansa has added A380 flights from Frankfurt to New York Kennedy, Miami and San Francisco while Air France expanded its Paris-Atlanta A380-operated service introduced last year with the addition of Paris-Washington DC and San Francisco. Despite the rise in seats, Jenks says that pending equipment orders do not suggest a large capacity expansion in the transatlantic market in the summer of 2012, and the alliances overall are attempting to reverse market overcapacity in the winter of 2011.
"As we pull out of the high demand season post Labour Day," says Hauenstein of Delta, "we are going to make with our partners those necessary adjustments, so that we do not return all the profits we make over the next several months in the winter months".
Notes: Flights based on Europe-USA Sep 2011; capacity based on ASKs for some criteria. Source: Innovata.
---------------------------------------------------------------
Oneworld camp
Members: British Airways, Iberia and American Airlines
Estimated revenues: $7-8 billion
Weekly flights: 1,222
Capacity share: 20.0%
Capacity plans: Will evaluate winter flying and anticipates making seasonal route and day of week adjustments to improve performance
----------------------------------------------------------
SkyTeam camp
Members: Air France-KLM, Alitalia, Delta Air Lines
Estimated revenues: $11 billion
Weekly flights: 1,632
Capacity share: 28.7%
Capacity plans: Cutting capacity 7-9% in the fourth quarter in response to higher fuel prices and seasonal changes in demand
--------------------------------------------------------------
Star Alliance camp
Members: Air Canada, United-Continental, Lufthansa, Austrian Airlines, Brussels Airlines, Swiss and LOT
Weekly flights: 2,095
Capacity share: 34.5%
Capacity plans: Will reduce planned transatlantic fourth-quarter capacity by six points, resulting in the JV capacity remaining flat over the same period in 2011
http://www.flightglobal.com/article...-stymied-in-solving-transatlantic-riddle.html
-------------------------------------------------------------------------------------------------------
DATE:25/08/11
SOURCE:Airline Business
Alliances: differing takes on the immune system
By David Knibb
As liberalisation creeps along at a snail's pace, alliances with anti-trust immunity have become the answer for many airlines anxious to move beyond restrictive aviation policies. The EU's approval in June for Star Alliance members Lufthansa and All Nippon Airways to co-operate closely in the Japan-Europe market is only the latest example. Anti-trust immunity is the key to these deals. Despite its benefits, there are growing concerns it may change the very nature of global alliances.
US aviation lawyer Paul Mifsud raised flags in an article in the Air and Space Law Journal earlier this year. Within an alliance, he writes, airlines that lack anti-trust immunity can still participate in alliance networks and marketing programmes but "are prohibited from even discussing price, route allocation or anything else that would make them less aggressive competitors with their partners". A two-tier system is emerging, with some alliance members sharing anti-trust immunity while other members do not. The result, Mifsud says, is "the alliances are made up of partners who can legally co-operate and partners who are required to compete with each other". Alliance membership is becoming more complicated because competition regulators do not use the same criteria in granting immunity, and questions have emerged over how much one country will recognise immunity granted in another.
The US Department of Transportation has long insisted, for example, that a foreign nation must have open skies with the USA before it will consider granting antitrust immunity to its airline. By contrast Singapore's competition body grants exemptions from Singapore's anti-trust law for airline alliances, has no such requirement. Alan Khee-Jin Tan, law professor at the National University of Singapore and a close observer of Asian aviation, points out that when Singapore's regulator approved the British Airways-Qantas joint operating agreement in early 2007, the UK did not have an open skies agreement with Singapore. Singapore, Tan says, looks instead at the level of competition and barriers to entry. "The presence or absence of an open skies bilateral will be relevant but will not be the sole factor."
Joint venture pacts, such as Oneworld partners American Airlines, British Airways and Iberia's North Atlantic tie-up, are increasingly part of the alliance world
Even if open skies are required before immunity, what does "open skies" really mean? As Brian Havel, director of DePaul University's International Aviation Law Institute in Chicago and author of Beyond Open Skies: A New Regime for International Aviation, notes: "There is an open debate about whether the recently signed US/Japan Open Skies Agreement 'counts' since it contains tight regulations on airport slots." The question of how much one country recognises another's immunity was recently underscored when Canada's Competition Bureau investigated an Air Canada and United-Continental joint venture. USDoT had specifically considered Canada-US competition when it granted anti-trust immunity to the Star Alliance "Atlantic ++" joint venture two years ago involving these same airlines. Canada wants to review it.
Immunity, or the lack of it, may not become an issue in some parts of the world. US anti-trust authorities, for example, are unlikely to question the immunity granted by Singapore, Australia and UK regulators to joint BA-Qantas operations because those operations are on the opposite side of the world.
Yet, the recent air cargo price-fixing cases with fines and even jail terms, serve as a warning about how far a nation's anti-trust laws can reach beyond its borders. The trigger for anti-trust enforcement is some direct link or effect. Havel explains: "Though the USA will apply its anti-trust laws extraterritorially, it still demands some link to the United States." So for example non-US carriers could fix prices on routes between China and Japan without the USA getting involved, unless there was some spillover with effects on US/China or US/Japan routes." Havel says that if this happened via a transpacific tie-up between a Chinese carrier and global alliance partners, you might see the US Department of Justice step in and open an anti-trust investigation against the Chinese, Japanese and US partners.
Air China's non-immunised membership in Star illustrates Mifsud's concern about global alliance haves and have-nots. So far, Air China has not sought anti-trust immunity for a joint venture. Until China and the USA ink an open skies bilateral, an unlikely prospect, it would not waste its time asking for US immunity.
Tan says Air China and other international Chinese carriers may do well in their global alliances without anti-trust immunity because none of their immunised alliance partners can co-operate with each other to the detriment of the Chinese carriers on routes the latter serve. "One could say that Air China might lose out because it doesn't have immunity from the USA and cannot engage in closer co-operative arrangements with, say, United, while the likes of Lufthansa or Air Canada can. But these other airlines don't fly the China-USA market. As long as the other Chinese airlines in other alliances - China Southern and China Eastern in SkyTeam, for example don't enjoy the same privilege with Delta (or Cathay with American), Air China should be fine," Tan says.
However, Tan sees a more serious threat for the Chinese carriers - the combination of anti-trust immunity by other Asian airlines and their significant sixth-freedom operations. For example, All Nippon-United enjoy anti-trust immunity across the Pacific, and Korean Air could conceivably seek similar immunity with its SkyTeam partner, Delta.
These immunised ventures "could suck up a whole lot more China-USA traffic with their sixth-freedom operations" Tan says, and "the Chinese carriers could conceivably end up as the non-immunised 'have-nots' outside the inner circle". These same issues could arise anywhere and pose the same questions about how anti-trust immunity could change global alliances in ways as yet unclear.
Read more about the impact of ownership rules on airline relationships
JOINT VENTURES SPREAD THEIR WINGS
Airline joint venture partnerships initially focused on the transatlantic but have since ventured wider, notably in Asia, with a string of recent developments including:
ANA and United-Continental: launched their trans-pacific joint venture in April
ANA and Lufthansa: in June secured antirust immunity to launch a strategic joint venture on routes between Japan and Europe
JAL and Amercian Airlines: the oneworld partners began their joint business on routes between Asia and the US in April
Qantas and American Airlines: applied in May for approval of coordinated sales and marketing in the Dallas-Sydney market. Australia granted interim approval in June. Request awaits final approval in both the USA and Australia
Delta-Virgin Australia: received antitrust immunity approval from the US DOT in June for their proposed trans-Pacific alliance. The airlines hope to have the joint venture set up by year-end
Singapore Airlines and Virgin Australia: in June the carriers unveiled plans for an alliance seeking to co-ordinate schedules on services between Australia and Singapore. Awaiting regulatory approval
Virgin Australia-Air New Zealand: joint venture on trans-Tasman flights begins in November
United-Continental and Air Canada: proposed trans-border joint venture, currently facing opposition from Canada's Competition Commissioner
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