What department within the federal government should have the final say about airline antitrust immunity? Two decades after the Department of Justice (DOJ) allowed the Department of Transportation (DOT) to rule on the first airline alliance that initially has minimal antitrust implications, the stakes are higher and the oligopoly bigger.
Back in 1999, DOT approved very limited antitrust immunity between KLM and Northwest Airlines allowing them to coordinate schedules that would handoff passengers at a handful of international gateways. The coordination of schedules morphed into a full merger of KLM’s marketing department in the U.S. with Northwest’s operations outside of Minneapolis. Northwest eventually gave up their presence in Europe and partnered up with KLM.
Today’s airline alliances have slowly but surely continued to grow following the letter of airline alliance agreements. Today, SkyTeam (anchored by Delta and Air France) and Star Alliance (led by Lufthansa, United and, soon, Continental) have basically formed a joint venture to manage, set prices and coordinate schedules for their international routes. In some cases, the aircraft used on international routes has been painted with alliance colors — eliminating the visual differences between aircraft of the airline partners.
The latest move in this developing airline alliance and antitrust immunity saga was recently made by the Chairman of the House Judiciary Committee, John Conyers. Last week, he asked the DOT to go slow on approving an antitrust immunity agreement between American Airline, British Air, Iberia and others.
Plus, it was announced that Richard Branson President of Virgin Atlantic is scheduled to testify in Washington Sept. 16 when the House Judiciary Committee on Competition Policy holds a hearing on the proposed trans-Atlantic alliance among American Airlines, British Airways and Spain’s Iberia.
This new interest of the judiciary has been evidenced since last December when the Senate Judiciary Committee and its antitrust subcommittee leaders sent a letter to DOT urging that they refrain from ruling on the Continental/United Airlines until the DOJ had a chance to make comments on the proposal.
The DOJ indeed came through with comments, strongly disapproving of the antitrust immunity for CO and UA. The DOJ findings did not dissuade DOT from approving the alliance.
Now, with another airline alliance under scrutiny, the DOJ plus, the Senate and House Judiciary Committee are making sure that they are heard. This next grant of antitrust immunity and permission to form an airline alliance is becoming more than simply a set of regulations for airlines to follow.
These House hearings will begin to set a tone in Washington about whether the days of protecting the airlines against real competition outside of the U.S. will be allowed to continue.
Charlie Leocha is the President of Travelers United. He has been working in Washington, DC, for the past 14 years with Congress, the Department of Transportation, and industry stakeholders on travel issues. He was the first consumer representative to the Advisory Committee for Aviation Consumer Protections appointed by the Secretary of Transportation from 2012 through 2018.
