Members of the Star Alliance and Continental Airlines seeking antitrust immunity are taking issue with a request by the US Department of Justice that the government should grant a more limited form of immunisation.
Ten Star members excluding US Airways in May won tentative approval from the Department of Transportation (DOT) for antitrust immunity while Air Canada, Continental, Lufthansa and United won preliminary approval for their proposed transatlantic joint venture. Continental is relinquishing its current membership in the SkyTeam Alliance to join Star in October.
Justice weighed in on 27 June, cautioning DOT that granting blanket antitrust immunity would weaken competition in city pairs from the US to Hong Kong and Beijing, transborder flights to Canada and several transatlantic routes from the New York metropolitan area.
Filing a joint response with DOT the applicants argue more than two months after the department issued tentative approval, "DOJ disputes the Department's well-reasoned conclusions on the issue of consumer benefits".
Furthermore, the Star partners argue that open skies negotiations between the EU and US "included a Memorandum of Consultations that specifically promised prompt action on applications for expanded immunity such as that sought by the joint applicants here".
The Star members are refuting all of DOJ's arguments over decreased competition in all the markets Justice brought into question.
Characterising DOJ's concern over compromised competition in the US-Hong Kong market as "particularly perplexing", the Star members argue Cathay Pacific and other foreign flag carriers operate 70% of all nonstop US-Hong Kong flights, while United and Continental account for roughly 28% of all nonstop seats on flights between the two destinations.
Airlines seeking the antitrust immunity also believe DOJ's concern over competition between the US and Beijing "is difficult to comprehend" as several airlines currently offer nonstop and one-stop service from the US to Beijing including Air China, Hainan, China Eastern, Delta, Korean and Japan Airlines. Additionally American plans to launch Beijing-Chicago flights in 2010 followed by the debut of flights by US Airways from Philadelphia to Beijing in 2011.
DOJ also expressed particular concern over eroding competition between Continental and SAS, Swiss and TAP on flights from New York to Stockholm, Copenhagen, Geneva, Zurich and Lisbon.
Citing substantial New York market presence by both American and Delta, the Star members believe those carriers have the capability to add service quickly in those markets should the Star partners attempt to raise prices or reduce output if ATI is granted.
Those carriers also argue that Star incumbents operate roughly one daily nonstop flight on those five transatlantic markets, "thus, for any of them, a reduction in service would effectively abandoning the route, a highly unlikely scenario given the importance of the New York/Newark [Continental's hub] market".
The Star members also emphasize Justice had full access to the proposed antitrust evidentiary record and held many meetings with the joint applications "and presumably with the Department's [DOT] staff".
"Nothing in the record of this proceeding," say the Star members, "where the principal issue is whether Continental, which offers 3% of worldwide scheduled seats, can be added to the current global antitrust immunized Star Alliance and participate in a transatlantic joint venture with Air Canada, Lufthansa and United, justifies such an abrupt reversal of international aviation policy".
Source: Air Transport Intelligence news
