Major airlines resent proposed US legislation to limit antitrust immunity for airline partnerships

The Bill that Representative James Oberstar (Democrat- Minnesota), chairman of the United States House of Representatives Transportation and Infrastructure Committee, introduced a few days ago requiring the US Department of Transportation to renew airline alliances’ antitrust immunity (ATI) every three years has invited protests from many major airlines.

The legislation would make it more difficult for airline alliances to receive antitrust immunity.

The proposed Bill would require the US Government Accountability Office to study the legal requirements and policies adopted by the Department of Transportation when approving antitrust immunity status and deciding whether they should be changed. Besides, the legislation could result in the airlines which already enjoy the ATI status losing that privilege from three years after the Bill is passed in case the ATI is not re-approved under the new policies and standards adopted.

The US media quoted James Oberstar as declaring that he is “increasingly concerned with the decline of competition in international markets, particularly on trans-Atlantic routes.”

Oberstar said his legislation would mandate the US Government Accountability Office to conduct a study to determine how much consumers benefit from antitrust immunity of alliances.

At present, airline alliances such as SkyTeam and Star Alliance enjoy antitrust immunity, while members of Oneworld alliance like American Airlines, British Airways and Iberia are seeking immunity. The United States-based Continental Airlines, which plans to switch from SkyTeam to Star Alliance later in 2009, is seeking immunity for its dealings with Star carriers, the media reported.

In defence of his legislation, James Oberstar stressed that since antitrust immunity works as a “de facto merger,” it should expire after a period of three years, making airlines to reapply and justify the protection they enjoyed.

The website money.cnn.com quoted Oberstar as saying that trans-Atlantic competition will be largely reduced to just the three alliances if immunity is given to Oneworld alliance. He added: “I believe the time has come to reassess the wisdom of allowing the continuation of the reduced level of competition and further legislation on alliances may be necessary following completion of the study by the US Government Accountability Office.”

In 1990, Oberstar added, there were 6 airlines competing on the route between Paris and New York’s John F Kennedy International Airport. But, today, there are only 3 airlines on that route, with SkyTeam alliance partners Air France and Delta Air Lines controlling 75% of the market.

British Airways, the national flag-carrier airline of the United Kingdom, said James Oberstar’s legislation, if enacted, would harm “very large airlines based in the United States and their employees.”

According to aviation analysts, Oberstar’s legislation, if it becomes law, could upset British Airways’ hopes of gaining antitrust immunity approval for closer partnerships with the United States-based American Airlines and Spain’s Iberia airline. If British Airways, American Airlines and Iberia get ATI status, it would let the three carriers work together on scheduling, pricing and share revenue.

In a press release, Continental Airlines expressed fears that the proposed legislation might delay its application to gain the ATI status granted to members of Star Alliance prior to its expected entry to the airline group later in 2009.