15-Feb-2010 8:48 AM

DoT: Draft approval of oneworld antitrust immunity application. Four Heathrow slot pairs condition

US Department of Transportation (DoT) proposed (13-Feb-2010) to grant antitrust immunity to American Airlines and four oneworld alliance partners (British Airways, Iberia Airlines, Finnair and Royal Jordanian) to form a global alliance. If the decision is made final, the oneworld carriers would be able to more closely coordinate international operations in trans-Atlantic markets. Under the proposal, the airlines must agree to conditions to protect consumers and preserve competition. The DoT noted that the alliance could harm competition on select routes between between the US and London Heathrow (oneworld’s primary hub), due to the limited availability of landing and takeoff slots and proposed that the applicants make four pairs of slots available to competitors for new US-Heathrow services. The DoT would also require changes to the agreement to ensure capacity growth and require the carriers to submit traffic data and implement the proposed alliance within 18 months of a final decision. The DoT noted the proposed alliance would enhance competition around the world by creating competition with the existing Star Alliance and the SkyTeam alliance, which already have immunity. Interested parties have 45 days to object and answers to objections will take a further 15 days. [more - US DoT]

American Airlines and British Airways stated (13-Feb-2010) the tentative approval is a key step in the alliance process and would allow them to compete more effectively with rival alliances. The carriers plans to review the DoT’s tentative order and will respond in the comment period. In addition, the oneworld alliance members are continuing discussions with the European Union Competition Directorate. [more - American Airlines]

American Airlines: "American and its oneworld partners are looking forward to competing for business over the Atlantic on a level playing field. Meanwhile, over the Pacific, we will continue to focus on ensuring that competition among alliances remains as robust as it is today," Will Ris, Senior VP - Government Affairs. Source: American Airlines, 13-Feb-2010.

Virgin Atlantic Chairman, Sir Richard Branson, responded by labelling the preliminary ruling a “complete joke”, as the slot restrictions are a quarter of those that the British Airways and American Airlines were subject to in their previous application for anti-trust immunity (Financial Times/BBC, 13-Feb-2010). He also called on the EU to take a “more consumer-focused approach” in relation to its upcoming ruling on the proposed alliance. Branson cited the Dec-2009 US Department of Justice (DoJ) statement that the request for antitrust immunity would result in competitive harm on “certain transatlantic routes serving 2.5 million passengers” p/a and could increase fares by up to 15% on six transatlantic routes. The DoJ recommended the DoT impose conditions on the expanded alliance, as the carriers involved had not shown that immunity was necessary to achieve their stated benefits. Affected routes included services from London to Boston, Chicago, Dallas, Miami and New York.

Virgin Atlantic: “Four slots pairs is a complete joke and those responsible for this decision should hang their heads in shame. Millions of transatlantic travellers will be adversely affected if the alliance receives final approval…[Approval will] blatantly harm competition and the consumer. The US Department of Justice, who are the experts in competition issues, called for strict remedies to protect the public interest, because the alliance will blatantly harm competition and the consumer. The Department of Transportation has chosen to stick two fingers up at them,” Sir Richard Branson, Chairman. Source: Financial Times/BBC 13-Feb-2010.

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