Wednesday, February 23, 2011
Two economists from the Justice Department's Antitrust Division, William Gillespie and Oliver M. Richard, have a new working paper available, Antitrust Immunity and International Airline Alliances (Economic Analysis Group Discussion Paper No. EAG 11-1, Feb. 18, 2011) (available from SSRN here). From the abstract:
Most of the major carriers worldwide have joined one of three international airline alliances. The U.S. Department of Transportation has granted immunity from the U.S. antitrust laws to many carriers within these alliances. This article assesses the competitive effects and efficiencies associated with such grants. A grant of antitrust immunity to carriers in an alliance reduces competition in routes where these carriers offer competing flights, and the data show that fares paid by passengers for travel in non-stop trans-Atlantic flights are higher in routes with fewer independent competitors. The data also show that the alliances can produce pricing efficiencies for trans-Atlantic passengers who travel with connecting itineraries, but antitrust immunity within an alliance is not necessary to achieve such efficiencies.
All Nippon Airways and Lufthansa announced today that they are seeking an antitrust waiver from the Japanese Government to cooperate on pricing, schedules, and revenue sharing on routes between Europe and Japan. See ANA, Lufthansa to Set Up JV for Japan-Europe Routes, Reuters, Feb. 23, 2011 (available here).
The joint venture will also be subject to the European Commission ex post antitrust review under Article 101 of the Treaty on the Functioning of the European Union. If the Commission believes the deal would threaten competition, the carriers may be forced to offer concessions, such as transferring slots from its hub airports, to one or more of the airlines' competitors.