Tuesday, October 27, 2009

Delay for oneworld Decision?

The Wall Street Journal is reporting that the Department of Transportation will likely miss its Oct. 31 deadline to render a decision on whether or not to grant approval and antitrust immunity to the oneworld Alliance.  See Daniel Michaels & Kaveri Niththyananthan, US to Miss Deadline on Airline Antitrust Ruling, Wall St. J., Oct. 27, 2009 (available here).  The reason?  Inter-agency tensions between the DOT and the Justice Department.

This scenario played itself out once already this year.  After granting preliminary approval and antitrust immunity for Continental Airlines to join the Star Alliance, the DOT delayed its final order pending a late filing by the DOJ's Antitrust Division which requested limiting the scope of immunity.  Though the Star Alliance largely received the full immunity it was looking for, it had the luxury of avoiding the level of public scrutiny which has been paid to oneworld.  With everyone from members of the Senate Judiciary Committee to Sir Richard Branson raising voices of protest concerning the pending transatlantic link-up, the DOT is under pressure to heed the Justice Department's objections (regardless of what it might do to the DOT's longstanding international aviation policy).

It is worth noting that when the DOT decision is finally issued, it will come against the backdrop of negotiations between the U.S. and European Community for a "second stage" agreement to their landmark 2007 Air Transport Agreement.  With negotiators set to meet in early November to discuss concrete proposals for the second stage, the EU will certainly be interested in the outcome of the oneworld application.  The United Kingdom has been and remains particularly adamant that it will consider suspending rights granted under the 2007 Agreement if it is dissatisfied with U.S. second stage concessions.  Given that the U.S. is highly unlikely to yield on raising its foreign investment cap for airlines or granting EU carriers cabotage rights, a lot could hinge on the DOT's willingness to let the oneworld Alliance join Star and SkyTeam with full antitrust immunity.   


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