The US Department of Transportation (DoT) gave all parties until 20 May to show cause why it should not approve the LanChile-American codeshare and grant their alliance anti-trust immunity. Barring some compelling new argument, the DoT will give its final approval.
This represents a breakthrough for American, which has seen its South American alliance strategy thwarted by loud opposition from rival US carriers as well as DoT preoccupation with the proposed American-British Airways alliance. Washington's ruling on this application, pending since December 1997, could pave the way for action on American's other Latin American requests, including its pact with Colombia's Avianca.
Washington's decision also breaks a logjam with Santiago over an open-skies bilateral. Negotiators initialled a pact in 1997, but Chile made its approval contingent on Washington's anti-trust immunity for the LanChile-American alliance.
In an earlier interview, LanChile's chief executive Enrique Cueto told Airline Business: "If we are to compete with strong carriers who work with alliance partners, such as the Star Alliance or KLM-Northwest, we require the same immunity. We are competing with airlines that are multiples of our size."
US negotiators are in talks with neighbouring Argentina over a proposed open-skies bilateral. deal Implementing the Chile-USA accord could add impetus to those talks and lead to an open-skies regime between the USA and South America's entire southern cone. Kryl Acton, LanChile's senior vice-president for planning and development, predicts: "This could bethe first open-skies agreement between the USA and South America. This is something like the Dutch agreement, the start of genuine deregulation."
Continental Airlines, Delta Air Lines and United Airlines are less effusive. They opposed the LanChile-American pact on the grounds that, combined with American's dominance at Miami and its alliances with other Latin carriers, the pact would give American a strangle-hold on South America.
In partial response to those concerns, the DoT has attached conditions to its approval. It has forbidden American and LanChile from exclusivity in their alliance, barred joint ownership of computer reservation systems, blocked their participation in International Air Transport Association tariff discussions on US-Chile fares or through fares with rivals in those markets, required LanChile to provide traffic data, and carved out from its approval certain Miami-Santiago fares. The DoT will review its approval in three years.
The key issue is how much other carriers exploit the new bilateral and neutralise the dominance of LanChile and American with flights and alliances of their own. Because of that prospect, Swissair's chief executive Jeffrey Katz told a recent aviation conference that anti-trust immunity adds, at most, 20% to the value of any alliance.
Source: Airline Business
