As Washington's aviation community became distracted by the tentative signing of open skies between the US and Germany; then the immediate application for anti-trust immunity by United-Lufthansa; then other aeropolitical concerns like the US-Japan cargo imbroglio, Delta Air Lines waited. Just as it has been doing for close to six months.
By mid-March Delta's application for anti-trust immunity for its code-sharing alliances with Austrian, Swissair and Sabena had become anything but the simple deal it was thought to be at the outset. Though officials at the US Department of Transportation have indicated a willingness to approve the application, the Justice Department, which only has the authority to analyse concentration of competition, has come back to Delta and its partners with some concerns.
Though DOJ has had a variety of problems with the Delta group's application - from competition beyond gateways to participation by the airlines in the International Air Transport Association's tariff-setting cartel - DOJ's main complaints focus on between-gateway competition. For Delta, this means nine hub-to-hub markets: from strongholds in Atlanta, Cincinnati and New York/JFK to Zurich, Vienna and Brussels.
In analysing the potential impact of reduced competition on business fare traffic in these markets - full fare passengers were considered because economy travellers generally have the flexibility of routing their travel via competing hubs - DOJ determined that, with immunity, the Delta grouping would result in a concentration just above acceptable levels.
How this will be resolved is the subject of much debate in Washington. Most see the Delta group's application as closely linked to the United-Lufthansa immunity application and, less directly, the American Airlines-Canadian Airlines anti-trust application. But, odd as it may seem, Delta's may be the most problematic: in a hub-to-hub comparison, this grouping of carriers covers smaller markets than Lufthansa-United, which fly 'wingtip-to-wingtip' in only two markets, Chicago-Frankfurt and Washington-Frankfurt. Says a Lufthansa official: 'The US-Germany markets are bigger, and there is greater volatility in, say, the Frankfurt markets, where eight US carriers fly.'
What puzzles many is that DOT has the full authority simply to approve the immunity applications, and that such approval would dovetail perfectly with transportation secretary Federico Peña's year-and-a-half old international aviation policy statement that hailed alliances as a means to liberalise markets. DOT's common response is that it is waiting for DOJ to be completely satisfied with its competition analysis. This could end in the Delta group getting only a limited immunity that could cripple the alliance.
But, critics counter, DOT and Peña have not been given independence to approve - or disapprove - the stalled applications, and Peña is not willing to make a decision without the backing of DOJ. The result, says one industry official close to the Delta immunity application, is that 'Justice may be in the process of sinking the entire North Atlantic open skies policy.'
Source: Airline Business
