DOT Delays Oneworld ATI Decision

Headwinds against American Airlines' proposed antitrust-immune joint venture with British Airways and Iberia persisted as the U.S. Department of Transportation on Oct. 31 failed to meet its statutory deadline for approval. Undeterred, the chief executives at American Airlines and British Airways this month said they were confident Oneworld carriers would get the same rights as competitors in the Star and SkyTeam alliances, though neither was willing to say when.

"We're disappointed that DOT has missed the statutory deadline at the end of October," British Airways CEO Willie Walsh said this month, "but we remain confident of a positive outcome," allowing the airlines to jointly set pricing, plan service and share transatlantic revenues.

The two carriers in January 2002 retracted their second application for antitrust immunity after regulators demanded they surrender 224 weekly slots at London Heathrow Airport, following a failure in 1999 to obtain acceptable terms for antitrust immunity.

A lot has changed, American Airlines CEO Gerard Arpey said this month, citing last year's U.S.-EU Open Skies enactment, the relaxation of operating restrictions at London Heathrow and a competitive transatlantic environment, with antitrust immune competitors. Arpey shrugged off the missed deadline, noting DOT has "exceeded that statutory time period in previous alliance considerations."

Meanwhile, the European Commission's competition directorate informed American, British Airways and Iberia in late September the joint venture "may be in breach of European rules on restrictive business practices." The Commission has been examining their submission since April, while it also continues to investigate similar joint ventures by members of rival alliances Star Alliance and SkyTeam.

Walsh on Nov. 9 said BA would "file our response probably this week." That correspondence, like the details of the EC's objections, is confidential. Still, Walsh gave a peek into the regulatory approaches on either side of the Atlantic.

"DOT and the Commission approach this from a slightly different analytical point of view in that the DOT tends to look at network benefit, whereas the Commission still remains focused on citypairs," according to Walsh. "We believe the European Commission's approach has followed the line of analysis that they adopted with regard to the other alliance applications. The SkyTeam alliance statement of objection was issued more than two years ago."

SkyTeam carriers, chiefly Delta and Air France-KLM, operate with transatlantic antitrust immunity.

Any route-specific objections to BA and America likely would focus on London Heathrow, where competitors—most vocally Virgin Atlantic—note the two carriers would command 62 percent of the London Heathrow-New York JFK market, the world's busiest long-haul route. They also would have a 100 percent share of services from Heathrow to Dallas/Fort Worth, 80 percent to Boston and 70 percent to Miami.

"Every U.S. carrier that has wanted access to Heathrow, to my knowledge, has gotten it," Arpey said. "It's a very competitive, very robust market. If the DOT uses the same criteria that they've used to judge the other alliances, we should get this thing across the goal line and we hope sooner rather than later."