Perhaps even more important that the merger agreements being considered here in the U.S.A., mergers in Europe are changing the landscape of international travel. This consolidation was just punctuated by the BA/Iberia agreement last week. During the past year or so, Lufthansa’s purchased Swiss, Austrian, Brussels and bmi. And before that, Air France and KLM created a jointly run airline.
Together with the airline alliances and antitrust immunity being approved by DOT, this consolidation will have profound effects on international travel. The three major alliances — SkyTeam, oneworld and Star Alliance — will control almost all of the international traffic. This will work against smaller independent airlines such as Virgin and Emirates Airlines.
Less competition, though touted as necessary for long term airline survival, always bodes poorly for consumers and price competition as well as route competition. Only the airlines win with these antitrust immunity and airline alliance pacts.
OK. Travelers will get more options for their frequent flier programs and top elite-level members can share airport lounges, but few other elements really add to the consumer experience.
Alliances actually limit flight choice. They make taking advantage of pre-alliance interline agreements more difficult. They don’t help with lost luggage retrieval. Most of the airline computer systems are not fully integrated making inter-alliance ticketing about the same as interline ticketing. Many airports don’t have the alliance members co-located, so transferring between alliance flights is just as difficult as transferring between non-alliance flights. Alliances destroy airline marketing and management jobs here at home. And the list goes on.
The latest international move is the consolidation of London-based British Airways and Madrid-based Iberia Airlines. With few overlapping routes, this combination of airlines will be a formidable force to Asia and South America. Plus, if the pending alliance and antitrust immunity petitions are approved, the Americas and transatlantic routes of this alliance will be some of the strongest.
Everything is not out of the woods yet. The E.U. has not approved either the merger or the antitrust immunity and alliance agreements. Smaller airlines are fighting aggressively to keep these behemoths from joining marketing, scheduling and route making forces.
These international alliance agreements combined with the antitrust immunity agreements are defacto mergers of international operations. Each of the approved alliances has already begun painting some planes with alliance colors rather than the member airlines’ colors. The agreements allow for the coordinated operation of the international operations through what amounts to a international joint venture board of directors.
Within the U.S. and the E.C. airline mergers are still moving in a traditional manner through the stock exchanges and regulatory processes. With the worldwide international alliances, a swapping of shares and ownership is missing. However, the airlines are gaining all of the benefits of mergers for their international routes.
In the coming FAA Reauthorization bill that is going to a Senate/House conference committee, Rep. Oberstar has introduced, and will fight vigorously for, a provision that re-examines the antitrust immunity agreements that have already been approved and require them to be reviewed every three years. There will be a battle royal between antitrust believers and the airlines who love being to coordinate business operations.
Unfortunately, what seems benign with the current slump in airline fortunes, will be devastating to healthy competition as the international airline business improves. The Consumer Travel Alliance will be supporting Rep. Oberstar in this effort.
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.
