U.S. Delays Decision On Star Airlines' Antitrust Immunity Request

The United States Attorney General last week recommended U.S. authorities not grant antitrust immunity to Star Alliance members United Airlines, Lufthansa, Air Canada and incoming member Continental Airlines until review of transatlantic airline competition is complete.

The U.S. Department of Transportation has yet to issue a final order on the antitrust immunity application after missing its May 31 statutory deadline for a final decision. A DOT spokesperson said, "we intend to issue a final decision as soon as possible."

U.S. Attorney General Eric Holder during a Senate Judiciary Committee hearing last week said the U.S. Justice Department "did ask the Transportation Department to allow our antitrust division to have input into the decision," noting that U.S. Transportation Secretary Ray LaHood "agreed to allow us to participate in that."

Holder noted, "It's regrettable that the deadline has passed, but I don't think this will extend to a matter of months or beyond a few weeks," he noted during a June 17 hearing. "I expect this determination will be made by the Secretary of Transportation after having consulted with the lawyers in our antitrust division."

In a letter sent to Holder and LaHood this month, Senate Judiciary Committee members Patrick Leahy (D-Vt.), Herb Kohl (D-Wis.) and Orrin Hatch (R-Utah) said, "It remains our view the DOT should only grant antitrust immunity to airline alliances sparingly and only upon a determination that the immunity sought will not harm competition."

The letter notes U.S. and EC authorities have yet to complete a joint study on airline competition, requesting DOT halt final decisions until the analysis is complete and "adopt any proposed conditions recommended by the DOJ which are intended to serve the interests of competition." The senators did not disclose a timeline for a final report.

In addition to the tentatively approved Star Alliance application, the request also addresses the pending immunity application from Oneworld members American Airlines, British Airways and Iberia. Those carriers, not as far along in the approval process, hope for a nod from DOT later this year.

Five other U.S. senators-Frank Lautenberg (D-N.J.), Sherrod Brown (D-Ohio), George Voinovich (R-Ohio), Kay Bailey Hutchison (R-Texas) and John Cornyn (R-Texas), all representing states where Continental Airlines operates hubs-asked LaHood to issue a final order on the application, noting DOT was bound to put forth a decision by May 31.

"Unfortunately, the DOT has surpassed the statutory deadline pertaining to ATI approval," their letter said. "The lack of finality on this application has real effects on the competitive landscape of the airline industry."

As Star and Oneworld antitrust requests are tied up in Washington, Delta Air Lines and Air France-KLM already are cooperating as one carrier across the Atlantic and reaping the benefits of their May 2008 immunity approval. Delta president Ed Bastian, speaking this month at the Bank of America-Merrill Lynch 2009 Global Transportation Conference in New York, said that the joint venture in the next two years would net "$200 million in incremental profitability to our company."

Bastian said of the Air France-KLM joint venture, "The scale of this entity is unmatched" as the carriers manage 25 percent of all transatlantic capacity as a single entity, "whether it be managing capacity, schedule coordination or pricing with full antitrust immunity."

Bastian said the carriers now operate with "metal neutrality," meaning the carriers fully align economic interests, including costs and revenue. "We have the full benefit of the Air France-KLM sales force in Europe selling Delta metal, just as the French and Dutch have full benefit of the Delta sales force here in North America being completely metal-neutral," Bastian said.