You don't need to be well acquainted with the esoteric world of aeropolitics to realise how ridiculous this example really is. Leaving alone the fact that the US and UK are as far apart on the issue of Heathrow access as they are geographically, and even admitting that in the past the UK has been able to extract one or two gains from the US in international aviation negotiations, who could ever believe the US would go along with approving antitrust immunity before achieving open skies?
The answer to the question lies in a few words: German air transport officials. The recent agreement between the US and Germany establishing open skies (a year-and-a-half before the two sides had previously agreed to just sit down and talk about complete liberalisation) is historic in many ways, not least because it could push the other EU countries into agreeing to open skies with the US. But it is also important for what the US gave up: its control of the open skies process. At the end of the months-long negotiation to quicken the establishment of open skies between the two countries, German officials made it clear that if the US does not give the United Airlines-Lufthansa alliance an antitrust exemption (à la KLM-Northwest Airlines), there will be no open skies agreement.
This is something new and holds US transportation officials up for critical review from the airline community. In the most recent open skies deal, between the US and nine smaller European countries, US officials made it clear from the start that, though airlines from any of the countries were free to apply for immunity for their partnerships with US carriers, such applications were totally independent of the liberalised agreements. In other words: 'You agree to open skies. Later - maybe - we'll grant immunity.'
But with Germany it is different. Though US officials say that there is no promise of immunity - 'our position is that the immunity review will be separate,' says Patrick Murphy, Department of Transportation deputy assistant secretary. What they only hesitantly admit is that they have agreed to an open skies protocol that German negotiators have said can only be formalised if Lufthansa-United get antitrust immunity. Now things have changed: 'You agree to immunise, then you'll get open skies.'
It should be pointed out that the US's strategic manoeuv- rings have, over the past year especially, worked well with regard to pushing complete liberalisation. Also, open skies agreements between the US and its major trading partners are a relatively new event and there really are no rules as to how the US applies its negotiating offers. One official terms the nine-country deal as, simply, 'strategy' in an attempt to net a bigger catch. 'Bigger' is the key word. 'We much preferred open skies to stand alone, but the Germans made it clear that it was a make or break proposition,' the source says. 'Larger countries have more ability to negotiate what they want.'
Critics, however, argue that what was until recently the carrot of antitrust immunity is now being taken away by the opponent and used as a baton to cudgel the US into submission. 'We allowed them to do a risk-free deal,' complains a government affairs executive at a US carrier, who adds that, in its long-standing effort to secure open skies deals DOT will feel compelled to grant immunity to United-Lufthansa.
This US-Germany agreement has precipitated a debate in Washington on the merits of antitrust immunity and whether the liberalisation of aviation accords is actually furthered with its use. Key to this discussion is the definition of competition - that is, competition in specific markets affected by any alliance with antitrust immunity and competition in a more global sense. This has brought to the fore a long-standing source of tension between the DOT and the Department of Justice, as recently evidenced at an American Bar Association conference. To a crowd of aviation officials who favour immunity for, among other things, protecting alliances from charges of collusion, Anne Bingaman, head of the DOJ's antitrust division, expressed her categorical opposition to antitrust immunity: 'If we told every industry that wants to enter a joint venture that they can have immunity if they're worried about private lawsuits, we would have antitrust immunity all over the economy.'
Bingaman's uncompromising stance against granting immunity was, most observers believe, simply stating DOJ's long-held abhorrence of immunity under almost any circumstance. Though the DOJ rules on the 'competitiveness' of any given application for immunity, the transportation department has complete authority over granting immunity. Still, questions remain about whether DOT is applying the right test. Stephen Kaplan, who negotiated the Canada-US bilateral, warned at the same conference that 'airlines will be able to claim that they must have immunity. The question will not be whether their alliance will be pro-competitive, but whether they can remain competitive without immunity.'
Under these circumstances, it will become increasingly difficult to say 'no' to an immunity application - even if it is BA-USAir. Though this could be good or bad - eventually, it should create a level playing field - the US has added an unnatural element to the process in its dealings with Germany on aviation. Some worry that the threat of open skies failing if immunity is not granted is a negotiating tack that may encourage the DOT to approve the Lufthansa-United application.
Mead Jennings
Source: Airline Business