Wednesday, May 20, 2009

United Pilots Make Trouble for Star

Reuters is reporting that the pilots union for United Airlines is seeking to delay the U.S. Department of Transportation's final order granting approval and antitrust immunity for Continental Airlines to join the Star Alliance.  As discussed previously on the blog, the DOT gave the expanded alliance tentative clearance last month, marking the first time two separate domestic carriers have been allowed to participate in a single alliance with immunization for coordinating international services.  According to United's pilots, the expanded Star Alliance could lead to an outsourcing of tens of thousands of U.S. jobs and pay cuts for workers.  United shot back to the charge by stating that the DOT itself has recognized that "alliances have created some 15,000 U.S. airline jobs and enable service to communities that would otherwise not be served."  Additionally, United expressed perplexity at why its pilots had waited so long to make their objections known.

The DOT's protracted process for applications seeking approval and antitrust immunity affords stakeholders, including airline pilots, more than ample opportunity to express their concerns.  It is important to remember that the Star Alliance received approval and immunity from the DOT two years ago.  See Dkt. No. OST-2005-22922, Order 2007-2-16 (Feb. 13, 2007).  If United's pilots were concerned about having their jobs "outsourced" to, say, Lufthansa or Air Canada, the 2007 order should have been the target of their ire.  The more recent decision to add Continental does not in any way expand the international scope of the Star Alliance, nor does it give rise to any risk of the alliance being used as a cover for a pseudo-merger between United and Continental.  Under the DOT's order, both carriers remain within the reach of U.S. antitrust law for any conduct in any air transportation market solely within the United States.  Even if the DOT does give ear to the pilots' complaints, it seems that it would only undermine Continental's chances of becoming part of Star, not the approval and immunization granted to the alliance as a whole two years ago.

It's possible that this latest move by United's pilots is intended as retaliation for the innovative United/Aer Lingus joint venture set to begin in 2010.  Under that arrangement, Aer Lingus would operate flights between Madrid, Spain and United's Washington-Dulles hub with the latter supplying the feeder traffic and marketing, but none of the workforce.  Arguably, the United/Aer Lingus plan is more akin to "outsourcing" than an international alliance where all participants are feeding new traffic into each other's respective markets.  While it's difficult to say what (if any) impact this latest quarrel will have on the Star Alliance going forward, with a labor-friendly Administration in power and increased (though largely unfounded) scrutiny being placed on immunized alliances, Star's members certainly have some reason to be concerned.

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Another delay. No surprise there. I hope this won't go on too much much longer.

Posted by: Brad Pilot | May 21, 2009 5:15:45 PM

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