A North Atlantic Outlook: Are Metal Neutral JVs Good For The Industry, The Travelling Public And Airports?

When the US DoT and the EU Commission approved metal neutral joint ventures over the North Atlantic, among the major airlines of the three large global branded alliances, the justification was that they would be in the public interest. In a more rational aviation environment, they would allow for better capacity and frequency coordination and deliver a better product for consumers. There were some who disagreed; these included alliance members and other airlines who are excluded from the JVs, some corporate travel groups and some consumer groups. Five years on, the JVs have expanded a little. They have, by unanimous agreement among the JV partners, been profitable in a market which was previously treacherously fickle. And there has been a good variety of service to suit business travel needs. Yet issues remain about the standardisation of pricing – there is rarely more than a dollar or two difference among all the JV airlines from whatever alliance on a particular North Atlantic city pair. And, with four out of five seats operating inside this closed environment, arguments are growing that this represents excessively dominant market participation. The doubts are reinforced thanks to the various strenuous attempts to prevent any destabilisation of the “triopoly”. Perhaps most insidious is that the JVs have been the unspoken cornerstone of opposition to new entry, whether by Norwegian or the Gulf airlines. A cross-Atlantic coalition of opposition has formed against any airline that might divert sixth freedom traffic from beyond Europe away from the longer established hubs. Interestingly the bilateral air services system, with all its faults, was never intended to give any preference over sixth freedom traffic flows. Indeed some of the loudest protesters today were equally vociferous against any such form of transfer traffic when sixth freedom operators first started applying the concept back in the 1970s. Meanwhile, JVs are now appearing in other markets, such as across the Pacific and between Japan and Germany.

• Are the JVs proving beneficial to consumers, as anticipated by the regulatory authorities?
• How does traffic growth and pricing behaviour compare with other major markets?
• Are the JVs a constraint on new entry?
• Are they a useful model for extrapolation globally?
• How adequate are competition authorities outside the US and Europe in dealing with applications for similar antitrust immunity?