Monday, August 17, 2009

Sigh of Relief?

Air Transport World has a new editorial online concerning the Department of Transportation's steadfast refusal to cave to the Justice Department's objections to the expanded Star Alliance.  See Perry Flint, Editorial, Sigh of Relief, Air Transp. World, Aug. 17, 2009 (available here).  The piece concludes by noting:

[The DOT] acknowledged something too quickly dismissed by DOJ (and some members of Congress): "Were [DOT] to suddenly change our antitrust immunity and public interest approach, as DOJ suggests, the credibility of the US government with its international aviation partners would be significantly compromised and our ability not only to reach new Open-Skies agreements but also to maintain those agreements that we have already achieved would be undermined." Still, it appears that the industry may be reaching a saturation point where regulators on both sides of the Atlantic begin to limit the future growth of alliances. DOJ may have lost this battle but it is unlikely to give up the field. Meanwhile, across the pond the European Commission is taking a very close look at Atlantic Plus Plus and the proposed joint venture among American Airlines, British Airways and Iberia. Those unaligned airlines that are sitting on the fence may find the alliance gate is swinging closed to them just as the economic storm drives them to seek shelter.

Even though the author recognizes the challenges ahead for alliances, the situation appears more dire than he lets on.  First, the DOJ is definitely not giving up its quest for vigorous antitrust enforcement and is fully expected to attack the pending oneworld Alliance application.  Second, the Senate Judiciary Committee remains steadfast in its criticisms of airline alliances and will be holding hearings on them in the near future.  And last, but not least, the 2009 FAA Reauthorization Act could sunset all of the alliances' antitrust immunity and potentially lead to the DOT losing its immunization powers altogether.  While it is true that the European Commission has kept its eye on the expanding alliance networks, there no evidence that they have departed from their generally positive view of the ventures.  In an operating environment where the nationality rule still dominates, alliances remain the "second best" option available.

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