The Department of Justice (DOJ) has come out in opposition to the planned addition of Continental to the Star Alliance that includes United Airlines. Their objections are focused on the antitrust immunity provisions that would be applied to international routes.
This finding by the DOJ stands in opposition to a Department of Transportation (DOT) initial approval of the alliance issued back earlier this year. Finally, a “go slow” approach seems to be taking hold in Washington when it comes to considering antitrust provisions of these airline alliances.
Antitrust chief Christine Varney and her deputies recommended approval of limited immunity, saying the bid as proposed would eliminate competition between United and Continental for transpacific and Latin American service. Varney said full immunity would “substantially lessen” competition between US cities and Beijing where United and Continental provide substantial connecting service.
“A (Transportation Department) grant of immunity for two US carriers to coordinate their international operations outside of an explicit joint venture with foreign carriers would be unprecedented,” Varney wrote.
The ramifications of this DOJ letter may be profound even though the DOT has no legal requirement to take the DOJ comments in to account when it makes its final ruling. However, the delay in issuing a final DOT ruling indicates that finding a middle ground with between the DOJ and DOT positions will take some time.
The DOT in a response to a letter from the leaders of the Senate Judiciary Committee and its Antitrust Subcommittee agreed to take full consideration of the DOJ opinion when making a final decision on pending antitrust immunity applications.
Currently, Continental is applying to join the Star Alliance and American Airlines is seeking antitrust immunity in an alliance with British Airways and Iberia and other carriers. All of these agreements will be reexamined in light of this DOJ comment.
The Justice Depart focused on the non-transatlantic facets of the deal where United and Continental have far more overlap and an ability to influence the market with antitrust exemption such as routes to Asia and South America.
Business groups, travel associations and members of the Consumer Travel Alliance have been working since last December to force a closer look at the ramifications of the expanded antitrust immunity airlines were being given in the enhanced alliance agreements.
Current alliances will not be dismantled, however, the unprecedented move toward the creation of airline oligopolies that can control international travel will be severely limited and new forms of joint ventures are sure to be reviewed in light of these DOJ comments.