Following closely on the heels of Continental, Delta and Northwest airlines' decision to implement their trilateral codeshare pact with or without the U.S. government's blessing, the Delta-led SkyTeam alliance today announced a new expansion program. Meanwhile, published reports from Europe this morning indicated KLM Royal Dutch Airlines is progressing in discussions to join SkyTeam, as had been recently indicated by KLM CEO Leo van Wijk
(BTN, Nov. 11).SkyTeam beginning in 2004 will welcome "associate members that would expand customer benefits to additional regions of the world." SkyTeam lags behind the 14-member Star Alliance in certain geographical areas.
SkyTeam said associate members must meet certain operational and service standards and would benefit from the SkyTeam brand without incurring full membership costs. Details still are being worked out among existing members.
The announcement did not specifically mention Continental and Northwest, nor their common European partner KLM. All three carriers are likely SkyTeam participants--though to which degree remains unclear--now that Continental and Northwest stated their intentions to begin alliance development with SkyTeam co-founder Delta.
As for the Continental-Delta-Northwest partnership, challenged by the U.S. Department of Transportation, Northwest president Doug Steenland this week said the carriers' stated commitments "show the extent to which we are really trying to bend over backwards and look to do things that ease DOT concerns."
One such commitment eliminates traffic originating in 50 cities dominated by the carriers from joint bids for corporations and agencies based in those cities. DOT's conditions completely excluded joint bids to companies in those cities.
Eliminating local-originating traffic from joint bids may prove to be not much of a concession considering many companies in those 50 cities have no choice in many cases but to use Continental, Delta or Northwest. "We would agree that no condition in this area is necessary at all," Steenland said.
Additionally, the three carriers said it would not make contractual discounted fares or commissions dependent on the satisfaction of minimum purchase or booking requirements for specific city pairs unless requested by the corporation or travel agent, or in a good faith effort to respond to a competitive bid. DOT stipulated that carriers could not in any circumstance offer such contract terms.
The three carriers also objected to other terms set by DOT, setting the stage for legal battle. Should DOT choose to begin an enforcement action, the first step would be a proceeding before an administrative law judge within the department.
"DOT took an aggressive approach to the federal statute they are relying on and is looking to regulate airline behavior above and beyond what antitrust law would require," Steenland said. "The Justice Department lets airlines be vigorous, robust competitors and lets consumers benefit." The three carriers last week said they had accepted specific conditions suggested by DOJ, including hub-to-hub route carve-outs.
The National Business Travel Association voiced its support for the alliance, saying it "has the potential to help all three carriers survive these difficult times," but also stated competitive concerns. "NBTA urges the DOT to monitor the alliance partners to ensure that consumers will not be subject to anticompetitive pricing or tactics and that this new alliance will not hurt low-fare, new-entrant carriers," said NBTA president Kevin Iwamoto.
Meanwhile, US Airways, which last year received DOT's approval for a partnership with United, in a statement said, "By announcing their intent to ignore the Department of Transportation's conditions, it looks like Delta, Northwest and Continental have decided they want to be known as the Outlaw Alliance."