Officials at the US Department of Justice (DOJ) have filed objections to widespread antitrust immunity sought members of the Star Alliance with prospective member Continental Airlines.
The Transportation Department in April granted tentative approval to antitrust immunity of ten members of the alliance excluding US Airways. Air Canada, Continental, Lufthansa and United Airlines also won a preliminary endorsement for their proposed transatlantic joint venture.
In comments filed to the Transportation Department the DOJ urges DOT to "deny the broad requested immunity and instead grant a more limited immunity".
Specific concerns voiced by DOJ include elimination of competition between Continental and United on transpacific and Latin American markets where access is limited by restrictive bilateral agreements.
DOJ believes the proposed antitrust will weaken competition in city pairs from the US to Beijing, where both United and Continental provide substantial connecting service.
Justice also argues erosion of competition is likely on transborder flights between Continental and Air Canada, and competitive alternatives in those markets would be limited.
The proposed antitrust immunity would have similar effects on transatlantic markets from New York as DOJ argues competition between Continental and Star members SAS, Swiss and TAP would erode on several routes including Stockholm, Copenhagen, Geneva, Zurich and Lisbon.
DOJ also reasons an easing of some restrictions in the current antitrust immunity between United and Lufthansa would likely lead to higher fares on routes from Washington Dulles and Chicago to Frankfurt.
A final concern raised by DOJ is the effects on US domestic competition if Continental and United are allowed to deepen their ties. "A sweeping grant of immunity raises significant concerns about harm to domestic competition," says DOJ, "a risk that cannot be completely mitigated through confidentiality guidelines".
Quantifying its concerns DOJ says: "Our empirical work indicates that fares are likely to increase by 15% on routes where the number of nonstop competitors decreases from two to one, and roughly 6% on routes where the number of nonstop competitors decreases from three to two."
Furthermore DOJ argues that its research shows "that carriers in non-immunized alliances offer lower prices than those in immunized ones".
Contending the applicants have not justified the antitrust immunity request, DOJ suggests that DOT should amend its order granting the joint application.
Source: Air Transport Intelligence news
