Monday, March 23, 2009

The ATA on Antitrust Immunity

The Air Transport Association (ATA) released a public statement today urging the Obama Administration to resist the recent amendment to the 2009 FAA Reauthorization Act which would sunset the antitrust immunity for existing airline alliances.  See previous discussion on the blog here, here, and here.  According to the ATA, the legislation could result in the loss of 15,000 U.S. airline jobs and have a ripple effect across the travel and tourism industry.  The statement also observed:

International alliances are a vital element of a global economy and produce enormous benefits for travelers, businesses, shippers and others. The U.S. Department of Transportation (DOT) has historically approved international airline alliances because of the substantial benefits that they provide both to passengers, and to European and U.S. airlines.  [The legislative proposal] could destroy important service and public benefits such as competitive fares and new routes by withdrawing previously granted rights for carriers to participate in alliances.

In addition to the ATA's comments, it is important to take cognizance of the fact that the extension of antitrust immunity for airline alliances has been crucial to persuading countries to sign open skies agreements with the U.S.  For example, the full implementation of the 1996 U.S./Germany Air Transport Agreement was preconditioned on U.S. antitrust immunity for an expanded Lufthansa/United Airlines alliance.  Likewise, the DOT's 1996 refusal to extend antitrust immunity to the proposed British Airways/American Airlines alliance was due to a breakdown in negotiations for a liberal U.S./UK agreement to replace the highly restrictive Bermuda II treaty.  This practice was explicitly referenced in Paragraph 48 of the Memorandum of Consultations to the 2007 U.S./EC Air Transport Agreement where the U.S. assured EU Member States that that the Agreement "will satisfy the DOT requirement that, to consider . . . an application from foreign airlines for antitrust immunity or to continue such immunity, an Open Skies agreement must exist between the United States and the homeland(s) of the applicant foreign airline(s)." 

The proposal to sunset current antitrust immunity for airline alliances comes with the risk that the DOT will lose the authority to grant it altogether.  If that happens, the U.S. will be deprived of an important bargaining chip for future air transport negotiations, particularly with crucial markets such as Japan, China, Mexico, and Brazil.  More problematic is the possibility that the U.S. will lose the confidence of EU Member States during the ongoing negotiations for a second stage air transport agreement, leading to a possible suspension of some (if not all) of the traffic rights acquired for U.S. carriers in 2007.  The result could be not just a loss of 15,000 U.S. jobs, but the forfeiture of two decades' worth of aerodiplomacy which has helped rid the transatlantic market of inefficient protectionism.

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