The addition of LanChile to American Airlines' growing list of Latin American alliance partners has merely poured oil on the fiery debate over US aviation policy in the region.
LanChile joins Aerolineas Argentinas, Colombia's Avianca, and Central America's Taca Group awaiting government approval for links with American that range from reciprocal codesharing and frequent flyer programmes to antitrust immunity.
American and LanChile agreed in early September to codeshare between Chile and the US, and on domestic routes behind or beyond gateways within each country. 'The agreement is fully reciprocal,' says Arnold Grossman, American's vice president for international affairs.
But Grossman rules out any chance of American taking a stake in its prospective partner. LanChile plans to offer about 25 per cent of its shares in an IPO and the Dallas-based carrier's recent agreement to buy a 10 per cent stake in Aerolineas Argentinas raised speculation it might do the same with LanChile.
American is hopeful, however, of gaining antitrust immunity for its LanChile alliance. Grossman says the parties intend to seek that immunity if the US and Chile enter into an open skies agreement. US and Chilean officials were set to meet in late October, following a mini-deal in March which led to an increase in frequencies and designated carriers. Chile's National Airlines plans to launch US flights in November, while three US carriers, including Continental Airlines, have applied to serve Chile from mid-December.
US officials have targeted Chile as their first open skies target in South America. Chile already has liberalised aviation pacts with most neighbouring countries, and Washington is optimistic that Santiago will accept the US open skies model.
But a drive by Washington to achieve full liberalisation of the US-Chile bilateral is not what other US carriers want to hear, while the American-LanChile alliance is still on the table. Incumbent United Airlines and Continental both label the proposed alliance as 'anti-competitive.' One US airline official notes: 'Even under an open skies agreement this deal would be anti-competitive because of the market shares.' Continental claims approval of the link-up would give American and LanChile control of 81 per cent of all seats in the market.
Approval of American's alliances with both Aerolineas and LanChile would give the carrier a stranglehold on the southern part of the continent. 'They're pinning down the entire Southern Cone,' complains one official.
But the opponents may yet take some comfort from the US Department of Transportation's equivocal position on whether open skies would yield antitrust immunity. According to Mike Gerchick, DOT's deputy assistant secretary for aviation and international affairs, it certainly would not be automatic. Commenting generally on open skies and antitrust immunity, Gerchick warns that besides an open skies bilateral, 'competitively effective access' is required before DOT will grant immunity.
American declines to discuss possible synergies between its alliances with LanChile and neighbouring Aerolineas Argentinas. Its proposed stake in Aerolineas and both the codeshare agreements still need government approval. In view of these hurdles, Grossman believes talk of any Southern Cone synergies is 'very premature.'
Source: Airline Business
