Consumer and corporate benefits including reduced fares and more choice in flight schedules and services would result from expanded transatlantic cooperation by airline alliance partners, according to an antitrust immunity filing with the U.S. Department of Transportation by six SkyTeam carriers.
Air France, Alitalia, CSA Czech Airlines, Delta Air Lines, KLM Royal Dutch Airlines and Northwest Airlines in their application late last month said this year's historic transatlantic Open Skies treaty, set to take effect in March, and the recent approval of a separate antitrust application for nine Star Alliance carriers earlier this year should pave the way for approval. Several air analysts expect the Open Skies agreement to ease further hurdles toward immunity
(BTNonline, June 28).Meanwhile, Star Alliance partners United Airlines and British Midland Airways at press time were awaiting approval of an antitrust immunity application filed this spring with DOT, and SkyTeam in a DOT filing said it expects Oneworld to expand carrier cooperation.
SkyTeam applicants in a filing with DOT said, "The new EU-U.S. Open Skies agreement now provides a predicate for American and British Airways—and perhaps other Oneworld partners—to file for antitrust immunity again, since an Open Skies agreement with the U.K.—now achieved as part of the EU-U.S. Open Skies agreement—was a prerequisite for the department's consideration of their earlier request."
SkyTeam carriers in the filing also said, "American and Iberia have indicated that they would seek antitrust immunity in the near future."
The six carriers proposed an additional level of cooperation in their request: a joint venture agreement "between Air France, Delta, KLM and Northwest that would create a comprehensive and integrated partnership among the four SkyTeam members across the Atlantic," Delta said in a statement.
The SkyTeam application noted: "Although Alitalia and CSA are not parties to the joint venture agreement at this time, the grant of antitrust immunity among all six carriers is necessary to keep those carriers as partners in the SkyTeam Alliance and to avoid creating yet another immunity gap for these smaller airlines. Furthermore, the joint venture agreement opens the possibility for additional carriers to join this joint venture."
Through the joint venture, the four carriers are seeking to coordinate on "service and capacity, jointly plan schedules/routes, align economic incentives, work together toward common economic interests, jointly establish prices and fares, jointly determine inventory allocations, and share revenues, among other activities."
The carriers said they would further coordinate sales forces, standardize contracts, enhance coordination of frequent flyer programs and integrate "related systems" if the application is approved by the U.S. Department of Transportation.
"With this enhanced cooperation, consumers, corporate travel departments and travel agents will enjoy an expanded availability of discount fares and incentive programs," the airlines asserted in their antitrust application.
Although the three airline alliances tout the benefits that antitrust immunity brings to corporate travel buyers seeking multinational alliance deals, Charlotte, N.C.-based TCG Consulting senior consultant Barry Rogers said travel managers already could request nonimmunized carriers within an alliance to coordinate on a negotiating a corporate deal. He said that antitrust immunity "just makes it a little bit easier."
"When you go beyond carriers that have antitrust, then you have to go through writing a letter specifically requesting them," Rogers said. "It definitely smooths the whole thing out. It's hard to say whether it is in the airlines' interest or in the buyers' interest. It's not like airlines are out there struggling to figure how to give bigger discounts to their customers."
The three major airline alliances all claim growth in the number of corporate deals in recent years, but others have questioned the value that they bring to travel buyers
(BTN, Jan. 22)."Overall, the thing about alliances and alliance contracting is that you really can't generalize as to whether they are better or worse than contracting with each carrier individually," Rogers said. "The challenge is that you really don't know until you have proposals on the table whether it's going to be better one way or the other."
Rogers, who has worked with clients implementing alliance agreements, said some companies have made such agreements work for their companies, while others have seen them fail. Rogers noted that in some cases, joint contracting could take away a level of competition when carriers within an alliance are competing against each other for corporate business, as opposed to working together.
"Until you invite them to work together, they don't know what each other's bids are. When they're competing, they're competing against an unknown," Rogers said. "That's an environment where you can drive discounts up and that sort of thing. It's a complex process. Alliances really work best when you first put together a program that has the carriers in there individually, and then what you do is bring them together in an alliance."
However, the carriers in the application with DOT promised a number of consumer benefits that approval would yield. Delta said it would mean "more choice in flight schedules, travel times, services and fares."
In the application, SkyTeam members said the joint venture agreement "identifies new or expanded services on 24 transatlantic routes," as the carriers would add capacity and further coordinate schedules to allow for easier connections.
SkyTeam carriers in 2005 withdrew an earlier request for antitrust immunity following resistance from DOT. The alliance partners said they would, at a later date, pursue their request
(BTN, Jan. 23, 2006). However, in 2002 DOT gave antitrust immunity to SkyTeam carriers Air France, Alitalia, CSA Czech Airlines and Delta. Meanwhile, Northwest and KLM's joint venture already has antitrust immunity.
According to the filing with the DOT, the request does not include Continental Airlines or other SkyTeam members and only would apply to joint cooperation on transatlantic routes.
"Continental is not party to this joint application, and there are no plans to seek Continental's immunized admission to the SkyTeam ATI Alliance. The joint applicants will have the same relationship with Continental following approval of the joint application as they have today," the filing stated.
A Continental spokesperson said the carrier does not plan at this time to seek antitrust immunity partnerships with its SkyTeam partners.