Conditions attached to approval for American Airlines' alliance with the Taca Group and for its proposed alliance with British Airways are making celebrations ring hollow.
The Department of Transportation finally gave its blessing to the AA-Taca alliance almost two years after the partnership was first proposed. The DOT has decided that the opportunities for competition now outweigh the serious competitive concerns expressed by the Department of Justice about the AA-Taca alliance. But there are still serious caveats. Conditions on the non-immunised alliance include a ban on codesharing beyond Mexico City; separate pricing and yield management on services from Miami to key Central American cities; and quarterly origin-and-destination reports from the Taca carriers. The DOT's argument in favour of the alliance seems to be supported by Continental Airlines taking a 49 per cent stake in Copa of Panama - a Taca airline - and a 19 per cent stake in Aces Colombia.
Within days of the Taca approval came comments from the DOJ on American's proposed alliance with British Airways, making it clear that the alliance would not get the go-ahead under antitrust laws. 'The Department would seek to block the proposed arrangement because the alliance would significantly reduce airline competition between the US and the UK,' says the DOJ. To balance the competitive scales, adds the DOJ, an open skies treaty would be essential and at least 24 additional daily roundtrip slots between the US and London/Heathrow would have to be made available to competitors. Certain hub-to-hub routes would also have to be carved out of the alliance. 'This is a troubling alliance and, therefore, only a very strong remedy could possibly justify its approval,' says assistant attorney general of the antitrust division Joel Klein.
Despite such severe words, American claims to be 'pleased' with the DOJ's review and says the approval procedure has moved forward.
But any hopes of progress were crushed by remarks from European Commission competition commissioner Karel Van Miert, when speaking in Washington DC in June. Van Miert mostly agrees with the DOJ's thoughts on the alliance, but adds, 'I would point out that only interesting slots should be given up. We are not naive. And those slots should be given in time so that competitors can use them.' Van Miert agrees that hub-to-hub routes should be carved out but feels even this condition would not be sufficient to keep certain transatlantic markets open to competition. 'We have a problem with the fact that on these few routes they are supposed to compete, while on all others they are partners.' Van Miert hopes to issue a ruling on the BA-AA alliance by the end of June.
Source: Airline Business
