The proposed alliance between Continental, Delta and Northwest Airlines is moving ahead again albeit in a modified form after US regulators agreed to a compromise put forth by the three majors. A limited codeshare pact between American Airlines and British Airways has also been cleared.
The Department of Transportation's (DoT) approval of a compromise version of the proposed alliance between the three US majors comes after weeks of intense negotiations begun when the agency prepared litigation to block the plan unless the three accepted a complex set of restrictions.
The DoT's defiant stance was in sharp contrast to the rapid approval announced by antitrust lawyers at the Department of Justice (DoJ). The three carriers, which together hold about 35% of the domestic market, said the DoT conditions were onerous and that its demands so much at odds with the DoJ's positive view that they would take the battle to the courts.
Instead they negotiated, and the DoT regulators moved away from their approach of detailing specific remedies and instead said they would rely on their oversight powers "to undertake a new review of the competitive effects of the alliance at any time we believe that such a review is warranted". The three carriers promised that they would act independently on fares and capacity, and that will be the focus of the monitoring.
In addition, the three allies would yield gates at New York LaGuardia and Boston Logan airports if the airports seek them to increase competition. That is scaled down from the DoT's January demand of gates at four hubs and Logan. Instead of barring most joint marketing to corporate travel departments and to travel agencies, the DoT now will allow much joint bidding, but said that if travel departments or agencies are subjected to unlawful pressure to accept a joint bid, they would "report to us, and we encourage them to do so. We would take very seriously any such reports."
Business Travel Coalition chairman Kevin Mitchell said that even though he would have preferred that the alliance not be formed, the DoT had taken proper steps to protect competition. Mitchell added: "The alternative was a long, drawn-out court battle with appeal after appeal. But when the industry starts to come back and rebound, what were once fierce competitors will be friendly collaborators." The alliance could generate as much as $475 million in revenues a year, but the three will not share revenue on shared flights.
The DoT also moved to clear a straightforward codesharing plan between American Airlines and British Airways, leaving the two still short of the antitrust immunity they have sought for almost a decade as US/UK open skies talks sputtered. The approval does not apply to flights on transatlantic gateway routes that both serve, but the partners will share flights beyond gateways. Because AA and BA already co-operate in the oneworld alliance and because their codeshare does not enjoy antitrust immunity, its benefits to travellers will be limited, said EClipse Advisors consultant Ed Tobin.
Source: Airline Business
