Well, I guess the third time’s the charm for oneworld. On Saturday , the DOT tentatively approved anti-trust immunity for oneworld, a deal that involves a joint venture between American, British Airways, and Iberia. Finnair and Royal Jordanian, while not part of the joint venture, would also receive immunity. BA and AA have tried for immunity in the past in 1997 and 2001.
DOT argues that immunity “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.”
To be honest, I’m not too surprised that the DOT approved the application. For one, Heathrow wasn’t opened up until the open skies agreement between the US and EU in 2007, so that was a reason to deny immunity that isn’t a factor anymore. Plus, with immunity given to the other two major alliances, DOT loses other reasons to deny the application. In fact, that seems to have helped oneworld’s case this time around, as according to DOT, immunity would “enhance competition around the world by creating competition with the existing Star Alliance and the SkyTeam alliance.”
What does surprise me, though, is the concessions that DOT is looking for – only four pairs of Heathrow slots. I was expecting a lot more (16 were requested last time). Two of those slot pairs are earmarked for Boston-London service, as DOT sees that as a highly competitive overlap market. (Actually, Dallas is more competitive but DOT thinks the market isn’t big enough for another carrier.) As a New Englander, I’m excited to see what carrier (if any) picks up that Boston service – it’s a route that has been tried and dropped by both United and Delta.
I was also a bit surprised that the DOT did not utilize carve outs – specifying routes where the carriers could not cooperate and would compete with one another. According to the DOT, “The recent fundamental shift in the character of alliances – towards integrated joint ventures – has made us more skeptical about the efficacy of carve-outs, especially in the context of joint ventures….We determined that the carve-outs would detract from the potential benefits of the alliance by introducing inefficiencies, and in some areas, impediments to pro-competitive cooperation.”
Of course, the folks over at Virgin Atlantic aren’t exactly pleased with this announcement. Soon after the news came out, a strong-worded statement from Richard Branson was released. “This preliminary decision beggars belief….Four slot pairs is a complete joke and those responsible for this decision should hang their heads in shame….Millions of trans-Atlantic travelers 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,” remarked Sir Richard.
So, where do we go from here? Well, there are now 45 days for objections to be submitted. (I’m sure we’ll see one from Virgin!) Then, there are another 15 days to provide responses to objections. Once that’s over with, the DOT will issue a final ruling soon after. It will certainly be interesting to read the comments submitted.
Personally, I think oneworld will end up getting immunity, though I wouldn’t be surprised if DOT increases the number of Heathrow slots that must be given up. American has said in the past that they don’t think any slot divestitures at Heathrow were necessary, but to be honest I think oneworld should just accept this deal (provided the number of slots doesn’t go up too much) and move on.
But, overall, a good week for oneworld- this is a big step for them in Europe, and at the same time JAL decided to stick with the alliance, and American and JAL have already applied for immunity (possibly more on that this week).
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