The U.S. Department of
Transportation on Wednesday tentatively denied an antitrust-immune joint
venture proposed in July 2009 between Delta Air Lines and the Australia-based
Virgin Blue Group, citing little public benefit to the proposed arrangement.
DOT in its tentative
decision concluded that "the applicants have not adequately shown that a
grant of antitrust immunity will allow the proposed alliance to produce
sufficient additional public benefits," such as the increased capacity,
reduced fares and more efficient services upon which the joint venture was
proposed.
Newcomers last year to
U.S.-Australia routes, Delta and the Virgin group announced plans to form their joint venture as a competitive alternative to Qantas Airlines and United
Airlines, the carriers with the highest marketshare between the two countries.
The carriers proposed immunity from antitrust laws so they could jointly
cooperate "in the areas of planning, revenue and pricing, yield
management, marketing and operations." The structure is similar to joint ventures that have grown prominent among alliance partners on the U.S.-EU
routes.
DOT said it accepting
comments from interested parties, and will accept objections to its tentative
decision over the next two weeks, after which it would issue a final decision.
"We strongly believe
our proposed alliance with the Virgin Blue Group will be good for
consumers," Delta said in statement. "We are reviewing the DOT's
tentative order and will respond within the comment period."
Even though the Australia
Competition and Consumer Commission last December approved the joint venture,
DOT in its tentative decision said there would be barriers to Delta integrating
with Virgin Blue carriers, which include V Australia, Virgin Blue and Pacific
Blue Airlines in Australia and New Zealand.
Among its objections, DOT
said, "the applicants have virtually no experience as commercial partners
and employ business processes that they admit are not compatible. In brief,
they have only just begun to explore the feasibility of arms-length
cooperation," which includes such activities as codesharing and joint
marketing, which do not require antitrust immunity.
Additionally, DOT argued,
Delta and the Virgin carriers "have elected to limit the scope of their
cooperation to focus primarily upon the 'trunk routes' between the U.S. and
Australia," which DOT said is too limited to realize public benefits.