Friday, September 25, 2009

Why Airline Antitrust Immunity Benefits Consumers

Posted by D. Daniel Sokol

Daniel Kasper & Darin Lee (LECG) explain Why Airline Antitrust Immunity Benefits Consumers.

ABSTRACT: Any analysis of immunized airline alliances must begin by recognizing that, unlike most other global businesses, airlines are precluded by a host of laws and regulations in the United States and abroad from acquiring control of foreign airlines and from carrying domestic traffic in other countries. These barriers to investment and market entry effectively preclude any single carrier from building a global network using its own network resources and aircraft and thus pose a particular problem for the airline industry, which has become an increasingly network-based business since deregulation. As a result, the only way a U.S. airline can provide convenient connections, common service standards, lounge access, and frequent flyer credits for its customers traveling internationally to points that the U.S. carrier cannot itself serve is by forming an alliance with a foreign carrier. Likewise, foreign carriers must rely on alliances with U.S. carriers to provide their customers access to routes that the foreign carrier cannot serve for legal or economic reasons.

Because these joint ventures involve cooperation between actual or potential competitors, airlines must obtain a grant of antitrust immunity (“ATI”) from the U.S. Department of Transportation (“DOT”) and foreign competition authorities before implementing their alliance.

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