Friday, June 18, 2010

Transpacific Alliances Going Forward

Several news outlets are reporting that Japan's primary air carriers, ANA and JAL, are pressing ahead with plans for deeper integration with the Star and oneworld alliances, respectively.  See Yoshio Takahashi, Filed ATI Application with Japan Govt on United, Continental Joint Ops, Dow Jones Newswires, June 18, 2010 (available here); Yoshio Takahashi, JAL Submits Anti-Trust Immunity Application on Ties with American Airlines, Dow Jones Newswires, June 18, 2010 (available here).  Both applications have been filed with Japan's Transport Ministry, though neither story offered a timetable on when a decision would be reached.

Winning antitrust immunity from Japanese regulators is only half of the equation for both joint ventures.  The U.S. Department of Transportation has to make an antitrust immunity determination as well.  Given how protracted the recently concluded oneworld Alliance proceeding was, it's hard to speculate when the DOT will reach a decision in the matter.  Besides the protest both applications are likely to receive from the Justice Department's Antitrust Division, there are two additional complicating factors to consider.

First, with respect to the ANA/United/Continental application, it's unclear what impact the pending United/Continental merger will have on the DOT's analysis.  Will the DOT wait until the merger is cleared before deciding on whether or not to grant antitrust immunity?  Arguably the merger shouldn't be a factor.  Continental and United are already allowed to cooperate on international services as part of the antitrust immunity they received in 2009 to cooperate with the Star Alliance's European airlines.  More importantly, the merger is not expected to substantially reduce competition since the two airlines have complementary rather than overlapping route networks.  Even so, the DOT may wish to avoid the appearance of "jumping the gun" on rendering a decision before the DOJ concludes its pre-merger review.

Second, with respect to the JAL/American Airlines application, JAL is still in the midst of bankruptcy reorganization.  It will be difficult for the DOT to make a proper assessment of the potential harms and benefits of the alliance until it knows for certain what JAL will look like after its restructuring.

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