Officials at the US Department of Transportation have givena nod to concerns expressed by the country's Justice Department about new antitrust immunity among members of the Star Alliance. In an attempt to ease Justice's anxiety DoT has opted to expand the number of city pairs, or carve outs, exempt from the immunised agreement.
DoT in April gave its tentative support to antitrust immunity among 10 Star carriers including prospective member Continental Airlines. It also awarded preliminary endorsement to a transatlantic joint venture proposed by Air Canada, Continental, Lufthansa and United.
DoT in its tentative grant required virtually no carve-outs, and reversed existing limits on flights from Chicago/Washington Dulles to Frankfurt once the joint venture was launched. Restrictions for using antitrust immunity on flights from Chicago/San Francisco to Toronto remained intact. But the Department of Justice balked at DoT's approval, arguing the broad immunity intended for the Star members would erode competition in some transatlantic, Asian and US transborder Canadian markets. The Justice Department also raised questions regarding the underlying analysis used by DoT to conclude no carve-outs were necessary.
Taking DoJ's concerns into account, the DoT has concluded additional carve outs are appropriate "to render the grant of immunity no broader than necessary to achieve substantial benefits", the Transportation Department explains.
New carve outs required by DoT in its final antitrust approval include transatlantic flights from New York to Copenhagen, Geneva Lisbon and Portugal. After determining competition in some transborder markets would fall from two carriers to one, DoT is requiring restrictions in Houston-Calgary/Toronto, Cleveland-Toronto and New York-Ottawa. In both the transatlantic and transborder markets, the exclusions from antitrust immunity disappear if a new entrant operates five weekly roundtrips in the city pairs for nine consecutive months.
DoT has also required a new carve-out in the US-Beijing market until a carrier with no Star immunity launches service on the route. Both Delta Air Lines and US Airways have chosen to postpone new service to Beijing due to the economic crisis.
No Star carrier has criticised the new restrictions, and Continental says it is comfortable "we will be able to compete effectively within these parameters". Other arguments that no evidence exists to dissolve the current Chicago/Frankfurt-Washington restrictions were ignored by DoT.
While the DoT has given some concessions to the Justice Department the agency dismisses arguments by Justice that less anticompetitive measures other than antitrust are available. "We are not persuaded to alter our fundamental initial assessment of the Joint Applicants [Star members] request," DoT explains.
Source: Airline Business
