Antitrust questions dog airline alliances
by: D.R. STEWART World Staff Writer
Saturday, March 14, 2009
3/14/2009 3:51:51 AM
A congressman, concerned about the growing power of global airline alliances and their effect on air fares, has introduced legislation calling for a federal study of alliances and the antitrust immunity they receive.
An airline industry trade group, however, says withdrawing antitrust immunity from airline alliances would carry a heavy price tag and cost the industry 15,000 jobs.
"Arbitrarily terminating antitrust immunity will have a harsh impact on airline employees and cause a ripple effect across the travel and tourism industry at a time when U.S. employment is escalating rapidly," said James C. May, chairman of the Air Transport Association, in a letter last week to Rep. James Oberstar, D-Minn.
In February, Oberstar introduced H.R. 831, "A Bill to Ensure Adequate Airline Competition." Its provisions have since become attached to the FAA Reauthorization Bill, which is being considered by the House.
"I have become increasingly concerned with the decline of competition in international markets, particularly between the United States and Europe," Oberstar said. "These markets used to be served by independent carriers from most European countries and by a number of U.S. carriers. Increasingly, the market has come under the control of three alliances composed of one or more U.S. carriers and several European carriers."
Oberstar, chairman of the House Transportation and Infrastructure Committee, said three major airline alliances have come to dominate world airline service. They include the Star Alliance led by United Airlines, the SkyTeam alliance formed by Delta Air Lines and the oneworld alliance, whose members include American Airlines.
Alliance members, Oberstar said, have shifted from cooperating on ticketing and terminal lounges to asking the government to grant members of the alliance antitrust immunity to jointly plan services and fares across international markets.
Star and SkyTeam have been granted both U.S. and European Union antitrust immunity. An application for immunity by oneworld's American Airlines, British Airways and Iberia was filed last August, and a decision is expected this year.
Oberstar's legislation calls for a study of airline alliances by the Government Accountability Office. The GAO study would investigate:
- The legal requirements and policies followed by the Department of Transportation in deciding whether to approve alliances and grant antitrust exemptions.
- Whether there should be changes to the legislative authority under which DOT determines whether to grant antitrust immunity.
- Whether the DOT should exercise the right it has reserved to amend, modify or revoke any antitrust immunity previously granted.
"These alliances have strong market power," Oberstar said. "Combined, the Star, SkyTeam and oneworld alliances account for almost 80 percent of the total world airline capacity, 78 percent of world revenue passenger kilometers and 73 percent of passengers carried. These three alliances control over 87 percent of the traffic between the United States and Europe."
Michael Boyd, president of the Boyd Group International, an Evergreen, Colo., airline consultant, said alliances enhance passenger traffic and are "generally" beneficial.
"When American Airlines code shares with oneworld's Japan Airlines and Cathay Pacific, it gives them access to places they would never get to. That's fine," Boyd said. "The question is, when does an airline become a lift provider and lose its individuality? If Iberia flies a route and shares the revenue as if American flew it, it's going to hurt American jobs."
Greg Overman, spokesman for American's Allied Pilots Association, which represents 13,000 pilots, said Oberstar's legislation makes sense.
"In principle, the idea of a GAO study is in keeping with what we have been saying all along, which is: Let's take a long look at this," he said.
D.R. Stewart 581-8451
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