Star Critical Of DOJ Immunization Stance
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By Darren Shannon
The U.S. Justice Dept.’s objection to Star Alliance’s planned expansion of its antitrust immunity and the formation of a four-member joint venture is misguided, perplexing, poorly conceived and myopic, according to a damning rebuttal issued late yesterday by the alliance.
Star’s filing and a separate, although nonetheless critical, docket from oneworld anchor carrier American calls for the U.S. Transportation Dept. to quickly proceed with an April show cause order that tentatively approved the joint venture between Air Canada, Continental, Lufthansa and United, and backed expanded immunization across the Atlantic, Latin America and Asia.
This tentative approval was expected to be formally granted in June, but the arrival of new political figures at DOJ and an inter-departmental dispute over the benefit of immunization have at least temporarily delayed DOT’s decision.
At essence, DOJ’s new leaders have shifted away from the laissez faire attitude of President George W. Bush’s administration that allowed the world’s two largest carriers — Air France-KLM and Delta — to effectively merge their transatlantic operations toward a more protectionist policy.
DOJ’s shift has irked Star and oneworld, both of which have applied to DOT for rights similar to those awarded to SkyTeam, which was formed by Air France and Delta. According to Star, DOJ’s argument, which it said is based on “faulty analyses,” not only attempts to “abandon almost two decades of highly successful international aviation policy” but also seeks to mandate “a narrowly focused and ill-conceived policy that ignore[s] unique considerations affecting international aviation.”
The alliance said, “Such a myopic policy would jeopardize current and future open-skies agreements [including the second phase of a deal with the European Union] and hobble the Star Alliance and Continental so they cannot compete effectively with the SkyTeam Alliance.”
Star’s application seeks to expand its current immunization to include Continental, which intends to join the alliance when it leaves SkyTeam on Oct. 25. DOJ has argued that neither Star nor Continental requires this immunity to successfully compete with the two other global alliances.
DOJ also called for an expansion of so-called carve-outs — city-pairs within an immunized area where antitrust laws would still apply. Key routes from Continental’s hub at New York Newark to Canada and transatlantic service operated by non-joint-venture Star members were identified in Justice’s advisory filing.
That view is misguided, said Star. Instead, failure to proceed with the DOT’s approved plan will give Continental and Star “a limited presence” in a New York market where “SkyTeam and oneworld carriers enjoy substantial market shares [from Kennedy and LaGuardia].”
Also, DOJ “failed to justify its request for carve outs,” added Star.
The same applies to DOJ’s dismissal of Star’s plan to expand its immunization to Pacific and Latin American routes. The alliance, citing Justice’s own filing, noted that the argument that prices will rise has been debunked by the department’s own analysis, and that a new methodology is flawed.
DOJ’s specific argument on the loss of competition between the U.S. and Hong Kong is “particularly perplexing as this market is open-entry,” added Star.
American’s comments followed a similar tone, noting that DOJ’s new “short-sighted” policy on antitrust immunity “reflects a significant undervaluation of [its role] in the [DOT’s] highly successful open-skies policy.”
DOJ’s dismissal of immunization “appears misinformed,” added American, which also noted that a statement on its relationship with British Airways “is simply incorrect.”
For now, it is unclear how Star’s application will proceed, although both the alliance and American have noted that DOT has final authority and should issue a quick resolution. DOT for its part said that the “record is complete” and that it intends to issue its final decision “as soon as possible.”
Photo: Star Alliance
