As liberalisation creeps along at a snail's pace, alliances with anti-trust immunity have become the answer for many airlines anxious to move beyond restrictive aviation policies. The EU's approval in June for Star Alliance members Lufthansa and All Nippon Airways to co-operate closely in the Japan-Europe market is only the latest example. Anti-trust immunity is the key to these deals. Despite its benefits, there are growing concerns it may change the very nature of global alliances.
US aviation lawyer Paul Mifsud raised flags in an article in the Air and Space Law Journal earlier this year. Within an alliance, he writes, airlines that lack anti-trust immunity can still participate in alliance networks and marketing programmes but "are prohibited from even discussing price, route allocation or anything else that would make them less aggressive competitors with their partners". A two-tier system is emerging, with some alliance members sharing anti-trust immunity while other members do not. The result, Mifsud says, is "the alliances are made up of partners who can legally co-operate and partners who are required to compete with each other". Alliance membership is becoming more complicated because competition regulators do not use the same criteria in granting immunity, and questions have emerged over how much one country will recognise immunity granted in another.
The US Department of Transportation has long insisted, for example, that a foreign nation must have open skies with the USA before it will consider granting antitrust immunity to its airline. By contrast Singapore's competition body grants exemptions from Singapore's anti-trust law for airline alliances, has no such requirement. Alan Khee-Jin Tan, law professor at the National University of Singapore and a close observer of Asian aviation, points out that when Singapore's regulator approved the British Airways-Qantas joint operating agreement in early 2007, the UK did not have an open skies agreement with Singapore. Singapore, Tan says, looks instead at the level of competition and barriers to entry. "The presence or absence of an open skies bilateral will be relevant but will not be the sole factor."
Joint venture pacts, such as Oneworld partners American Airlines, British Airways and Iberia's North Atlantic tie-up, are increasingly part of the alliance world
Immunity, or the lack of it, may not become an issue in some parts of the world. US anti-trust authorities, for example, are unlikely to question the immunity granted by Singapore, Australia and UK regulators to joint BA-Qantas operations because those operations are on the opposite side of the world.
Yet, the recent air cargo price-fixing cases with fines and even jail terms, serve as a warning about how far a nation's anti-trust laws can reach beyond its borders. The trigger for anti-trust enforcement is some direct link or effect. Havel explains: "Though the USA will apply its anti-trust laws extraterritorially, it still demands some link to the United States." So for example non-US carriers could fix prices on routes between China and Japan without the USA getting involved, unless there was some spillover with effects on US/China or US/Japan routes." Havel says that if this happened via a transpacific tie-up between a Chinese carrier and global alliance partners, you might see the US Department of Justice step in and open an anti-trust investigation against the Chinese, Japanese and US partners.
Air China's non-immunised membership in Star illustrates Mifsud's concern about global alliance haves and have-nots. So far, Air China has not sought anti-trust immunity for a joint venture. Until China and the USA ink an open skies bilateral, an unlikely prospect, it would not waste its time asking for US immunity.
Tan says Air China and other international Chinese carriers may do well in their global alliances without anti-trust immunity because none of their immunised alliance partners can co-operate with each other to the detriment of the Chinese carriers on routes the latter serve. "One could say that Air China might lose out because it doesn't have immunity from the USA and cannot engage in closer co-operative arrangements with, say, United, while the likes of Lufthansa or Air Canada can. But these other airlines don't fly the China-USA market. As long as the other Chinese airlines in other alliances - China Southern and China Eastern in SkyTeam, for example don't enjoy the same privilege with Delta (or Cathay with American), Air China should be fine," Tan says.
However, Tan sees a more serious threat for the Chinese carriers - the combination of anti-trust immunity by other Asian airlines and their significant sixth-freedom operations. For example, All Nippon-United enjoy anti-trust immunity across the Pacific, and Korean Air could conceivably seek similar immunity with its SkyTeam partner, Delta.
These immunised ventures "could suck up a whole lot more China-USA traffic with their sixth-freedom operations" Tan says, and "the Chinese carriers could conceivably end up as the non-immunised 'have-nots' outside the inner circle". These same issues could arise anywhere and pose the same questions about how anti-trust immunity could change global alliances in ways as yet unclear.
JOINT VENTURES SPREAD THEIR WINGS
Airline joint venture partnerships initially focused on the transatlantic but have since ventured wider, notably in Asia, with a string of recent developments including: