Over the weekend, the Department of Transportatin (DOT) announced that they have given the oneworld Alliance provisional antitrust immunity. This brings oneworld into line with SkyTeam and Star Alliance and is the final nail in the coffin of advancing competition between scores of airlines in the international arena.
Here is the DOT pronouncement:
If the decision is made final, American and its “oneworld” alliance partners British Airways, Iberia Airlines, Finnair and Royal Jordanian Airlines would be able to more closely coordinate international operations in transatlantic markets.
In today’s show-cause order, the Department tentatively found that granting antitrust immunity to the oneworld alliance would provide travelers and shippers with a variety of benefits, including lower fares on more routes, increased services, better schedules and reduced travel and connection times. The Department also said the proposed alliance would enhance competition around the world by creating competition with the existing Star Alliance and the SkyTeam alliance, which already have been granted immunity.
However, the Department also noted that the alliance could harm competition on select routes between between the United States and London’s Heathrow Airport, oneworld’s primary hub, where the availability of landing and takeoff slots is limited. As a condition of approval, the Department is proposing in its show-cause order that the applicants make four pairs of slots available to competitors for new U.S.-Heathrow service. The Department also would require changes to the agreement to ensure capacity growth, and require the carriers to submit traffic data and implement the proposed alliance within 18 months of a final decision.
I beg to differ. The Consumer Travel Alliance will be filing our objections to this action. Let’s go item by item through the supposed benefits of this action.
Lower fares on more routes
Alliances actually limit routes. Interline agreements always allowed the most routes. They are still available, but alliances make them harder to use. Eventually, joint ventures will form fewer routes. Code-sharing will make it look like more routes, but with fewer planes in the sky.
Increased services
Wrong. Now the airlines can divide the schedules beteeen airlines and work as a single company for all international routes.
Better schedules and reduced travel and connection times
This may be true for connections between alliance airlines. However, it is done at the expense of frequency and competition.
Enhance competition around the world (by creating competition with the existing Star Alliance and the SkyTeam alliance, which already have been granted immunity).
Competition will decrease. Even with the oneworld alliance, there used to be competition between American Airlines, British Airways and Iberia across the Atlantic. Now these airlines will be allowed to coordinate and plan their flights to specifically eliminate competition between these three airlines. That is the entire rationale behind these antitrust immunity deals.
The lack of competition will affect more than only airfares. Suppliers, businesses and airports used to have to deal with three different companies who were in competition with each other. This antitrust immunity grant eliminates international competition.
Independent airlines like Virgin Atlantic and Emirates Airlines are certain to feel the economic heat as the three alliances are permitted to gang up on their operations and systematically attempt to root out non-alliance competition.
New international airline entrants will have a bigger problem cracking the government-created international airline oligopoly. This means less future competition.
Even frequent fliers are taking the short end of the stick. The current alliances certainly offered more free-ticket options that the new joint ventures will in the future as the alliance members begin to align their route structures.
Richard Branson, the boss of Virgin Atlantic, agrees with me. He said the agreement would “blatantly harm competition and the consumer“.
Sir Richard said: “The US Department of Justice, who are the experts in competition issues, called for strict remedies to protect the public interest, because the alliance will blatantly harm competition and the consumer.
“The Department of Transportation has chosen to stick two fingers up at them.
“Millions of transatlantic travellers will be adversely affected if the alliance receives final approval.
“In my personal opinion, this draft decision is a real kick in the teeth for consumers and they will be paying the price for it for years to come.”
Bottom line: Consumers are taking it in the shorts. With the airlines in a precarious position because of financial constraints, this action will help their bottom line. Consumers will bear the full burden of these misguided government manipulations of competition as the airlines return to full financial strength.
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.
