Thursday, November 5, 2009

Delta and American Continue to Court JAL

The Wall Street Journal is reporting that both American Airlines and Delta Air Lines are intensifying their efforts to forge a deepened alliance relationship with Japan's JAL.  See Mariko Sanchanta, American, Delta Step Up JAL Lobbying, Wall St. J., Nov. 5, 2009 (available here).  The story outlines the proposals made by both carriers to JAL, along with surveying the troubled Japanese airline's plans to return to financial health.  There are a few important points the story missed, however.

First, both American and Delta are hanging their alliance hopes on a potential U.S./Japan open skies deal being reached.  As of last week, however, no such deal was attained.  News reports also indicated that Japan is seeking to limit slots for U.S. airlines at Tokyo's two international airports.  Such restrictions cut against the open market ethos of the open skies template.  If the U.S. signs an agreement with Japan that still allows the latter to impose these discriminatory restrictions, there is no guarantee that it will meet the Department of Transportation's longstanding requirement for an open skies agreement to be in place before it bestows the boon of antitrust immunity to an alliance. 

Second, with the oneworld Alliance antitrust immunity application delayed due to objections from the Justice Department, it's unclear how liberal the DOT will be in the future with respect to bestowing immunity.  There is significant public pressure on the DOT to scale-back its immunization grants or to apply more stringent criteria when determining whether immunization is in the public interest.  Even if a U.S./Japan open skies deal is reached, it may no longer be enough to win blanket antitrust immunity.

Last, the 2009 FAA Reauthorization Act, though on hold while Congress attempts to pass health care reform legislation, still contains a provision which would sunset all antitrust immunity for alliances within three years after taking effect.  While the alliances could reapply for immunity after the sunset, Rep. James Oberstar--the provision's Congressional champion--has indicated that further reforms to the DOT's immunization authority may be in order.

In short, no matter how enticing the American and Delta pitches to JAL are, upheavals in international trade and regulatory policy could lay waste to their best laid plans. 

http://lawprofessors.typepad.com/aviation/2009/11/delta-and-american-continue-to-court-jal.html

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