Prompted by a U.S. Department of Justice filing in opposition to the proposed six-carrier antitrust immunity requested by the SkyTeam alliance, American, United and US Airways in recent weeks submitted filings that suggested the outcome—either for or against SkyTeam—would shape the competitive landscape of the aviation industry. Meanwhile, SkyTeam tweaked its application to include cooperation only for transatlantic routings. The U.S. Department of Transportation is expected to rule shortly on SkyTeam's request.
Justice Department opposition to the antitrust immunity request—which includes both Delta and Northwest airlines—centers on the potential spillover of anticompetitive developments in the domestic U.S. market
(BTN, Sept. 5).United and American echoed such concerns, and said they and their airline alliance partners should be afforded similar treatment should DOT approve SkyTeam's request.
Given recent events
(see story), American, in a filing late last week, said DOT should temporarily suspend consideration of SkyTeam's request. "The simultaneous bankruptcies of two of the largest U.S. carriers are unparalleled in U.S. aviation history," the carrier said, adding that the consequences would not be known for some time.
Previously noncommittal in its filings to DOT regarding proposed SkyTeam immunity, United Airlines said DOT's decision would "set an important precedent that will have a direct bearing on the future structure of the domestic airline industry." As a result, United urged DOT "to adopt a clear policy to prohibit immunity between domestic carriers absent evidence it would achieve important benefits not otherwise attainable."
United went on to suggest that Delta and Northwest have two options should DOT reject their antitrust immunity request. The first would be to decide which of the two would forego immunity but remain an active member of the SkyTeam alliance and, among other things, continue to share codes and "participate in joint alliance discount offers to corporate customers." Such is the case with US Airways, a non-immunized member of the Star Alliance.
The second option would be a merger. "Assuming that merger clearance was granted, the integrated entity could then seek immunity with the foreign members of the SkyTeam alliance," United said. "Domestic consolidation is sorely needed."
United domestic partner US Airways—itself immersed in consolidation by way of a merger with America West—reiterated it "takes no position" on the specifics of the SkyTeam application. US Airways said a blanket rejection of antitrust immunity for international operations sought by multiple U.S. carriers is "difficult to justify as a matter of public policy," given the potential consumer benefits and financial turbulence experienced by commercial carriers.
The airline suggested that U.S. departments of transportation and justice "are experienced at devising measures, including carve-outs" that permit carriers a degree of integration without jeopardizing competition. It also agreed that "the precedent set here will guide carrier and alliance strategic planning—including that of US Airways—for the foreseeable future."
Meanwhile, American told the Transportation Department, "The formation of an immunized alliance typically produces some degree of horizontal consolidation, which can reduce gateway-to-gateway competition between allied carriers to the detriment of consumers. This argues for caution on the part of regulatory officials."
American also suggested a potential remedy that would advance its own international partnerships. "DOT could mitigate the elimination of inter-alliance competition sought in this proceeding by simultaneously immunizing an American/British Airways/Iberia alliance," the airline said. "That would help place Oneworld on a equal footing with Star and SkyTeam."
To assuage Justice Department concerns, SkyTeam said that it is "willing to amend the alliance agreements and thereby accept a more narrowly tailored grant of immunity, limited only to foreign air transportation via transatlantic routings."
SkyTeam reiterated immunity is needed to preserve the benefit of ties between Northwest and KLM and between Delta, Air France, Alitalia and CSA Czech.