The US Department of Transportation (DOT) has tentatively approved Aer Lingus’ entry to an existing joint business that includes American Airlines, British Airways, Iberia and Finnair.
The tentative approval would extend the partnership’s immunity from anti-trust laws to the Irish flag carrier.
It will “not substantially reduce competition, is not adverse to the public interest, and should therefore be approved”, the DOT says in a show-cause order published on 16 November.
The joint venture is called the Oneworld Immunized Alliance, and its partners are members of the broader Oneworld marketing partnership.
“With Aer Lingus’ addition, over time the carriers are expected to expand capacity on some existing routes while introducing services on several new routes, allowing more options for travel to and from Ireland and the rest of Europe,” the DOT says. Aer Lingus will be integrated into the joint venture’s network planning, pricing, and sales activities, giving customers more options to collect miles and exercise other benefits.
The joint venture partners had applied to have the Irish airline join the venture in 2018.
Aer Lingus currently has 44% of market share between the United States and Ireland, which, when the joint business proposal is finally approved, will rise to 60%, DOT says.
But despite this high number, the DOT says it does not consider this a competition block, due to other factors that make operating routes across the North Atlantic easier than in the past. The extended range and high efficiency of newer aircraft such as the Airbus A321neo or the Boeing 737 Max may lure low-cost carriers (LCC) to attempt more of these routes as well.
In addition to British and American, Delta Air Lines and Norwegian also currently offer direct non-stop service between the United States and Ireland.
“These aircraft offer the capability of transatlantic flying with relatively fewer seats and lower trip costs,” the DOT says. “Given the presence of an LCC with substantial market share pre-Covid, the relatively low barriers to entry that will be further reduced, and the presence of three other competitors to Aer Lingus, the Department anticipates ample competition will exist to thwart any potentially anticompetitive behaviour.”
As Aer Lingus carries only 3% of travellers between the United States and continental Europe, the DOT does not expect the proposed venture would significantly impact competition on US-Europe routes.
SLOT RULE COMPLIANCE
One conditions of the tentative approval, however, is the carriers’ continued compliance with slot rules at London airports imposed in 2010, when the alliance’s joint business agreement was initially approved.
In September, the UK’s Competition and Markets Authority (CMA) extended the terms of the 2010 commitment for another three years – until March 2024 – to give the airline sector the chance to stabilise following the coronavirus crisis, and to allow for better assessment of the competition situation.
The 10-year binding commitment had been set to expire at the end of the year.
Earlier this year, British Airways and American Airlines had proposed to release slots for transatlantic service at Heathrow and Gatwick. However, a consultation on the proposal generated suggestions that, given the exceptional disruption from the pandemic, the authority should prolong the expiry deadline for the 2010 commitments and suspend the investigation until the air transport sector recovers.
“The Department tentatively finds that such ongoing remedies are a necessary condition of the grant of antitrust immunity for an expanded joint business,” DOT says.
The agency says it will review the joint business agreement in five years’ time.