Monday, February 15, 2010

AA/JAL Seek Antitrust Immunity

Last Friday, on the eve of the oneworld Alliance receiving tentative approval and antitrust immunity for its transatlantic joint venture, alliance partner American Airlines applied for further antitrust immunity to deepen its cooperative relationship with JAL in the transpacific market.  See Joint Application for Antitrust Immunity, Dkt. No. OST-2010-XXXX (Feb. 12, 2010).  From the filing:

This proposed alliance will create metal neutrality between two of oneworld’s core transpacific members – American and JAL. These agreements will provide for revenue sharing and closer integration, giving oneworld the ability to offer consumers an effective competitive alternative to Star and SkyTeam in Asia, and will maximize the benefits that the US-Japan Open Skies Agreement will make possible. American and JAL will implement their bilateral alliance agreement immediately upon approval, and will implement the JBA within 18 months of the Department’s final order granting antitrust immunity consistent with the precedent set in [the DOT's immunization order for the SkyTeam Alliance].

Approval of the Joint Application will facilitate the implementation of a new US-Japan Open Skies agreement, will link two complimentary networks and give oneworld its first truly integrated transpacific hub network to compete with Star and SkyTeam, and involves overlaps on just three city-pairs accounting for less than a million bookings per year where there will be no less than two nonstop post-transaction competitors on each route.

Interestingly, AA and JAL are seeking to consolidate their docket with the recently opened United Airlines/Continental/ANA application for a similar immunization grant.  Both parties appear to be hoping that their applications will be approved before October when the U.S./Japan open skies deal is supposed to come into effect.  That may be wishful thinking, particularly in the case of AA/JAL.  With the Japanese carrier in the midst of bankruptcy, it will be difficult for the DOT to undertake a thorough market analysis of its planned arrangement with AA until after JAL's reorganization is complete.  That could take years.  On the other hand, the DOT may feel pressured to sidestep such an analysis altogether.  Failure to bestow antitrust immunity on AA/JAL could sour aeropolitical relations with Japan--an unwelcome prospect given the time and energy expended by U.S. negotiators to establish an open skies agreement in the first place.

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