Wednesday, September 8, 2010

DOT Denies Delta/Virgin Blue Antitrust Immunity

In a surprising move, the Department of Transportation announced today that it plans to deny antitrust immunity to the Delta Air Lines/Virgin Blue alliance despite the existence of an "Open Skies" agreement between the United States and Australia.  From the press release:

The U.S. Department of Transportation (DOT) today proposed to deny an application for antitrust immunity made by Delta Air Lines and affiliates of the Virgin Blue Group with respect to joint services between the United States and Australia. Antitrust immunity allows airlines to closely coordinate their international operations. In today’s show-cause order, the Department tentatively concluded that Delta and the Virgin Blue Group had not demonstrated that the alliance would produce sufficient public benefits to justify a grant of antitrust immunity.

The Virgin Blue Group includes V Australia, Virgin Blue, and Pacific Blue Airlines affiliates in both Australia and New Zealand. In reaching its tentative decision, the Department noted that Delta and its partners have only recently entered the U.S.-Australia market, have not shown developed plans to operate as commercial partners, and have limited their cooperation to a handful of routes, thereby limiting the public benefits their alliance might produce. The Department also said that Delta and the Virgin Blue Group had failed to show that their alliance would have positive effects for consumers, such as lower fares or increased capacity.

See Press Release, Dep't of Transp., DOT Proposes to Deny Antitrust Immunity for Delta/Virgin Blue Alliance (Sept. 8, 2010) (available here).

Over the past several year the DOT has been accused of dispensing antitrust immunity too freely as a concession for States signing liberal air services agreements with the U.S.  Even so, the DOT has immunized all three major transatlantic alliances--oneworld, SkyTeam, and Star--and had been expected to grant immunity to the pending United/Continental/ANA and American Airlines/JAL applications.  It's unclear whether today's decision demonstrates an about-face on antitrust immunity grants or merely the weakness of the Delta/Virgin Blue application. 

Readers interested in reading today's tentative order may do so here.

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