Delta Airlines, Virgin Blue Antitrust Immunity Tentatively Denied

 

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Delta Airlines, Virgin Blue Antitrust Immunity Tentatively Denied

By Jim Douglas
 

September 10, 2010 - The U.S. Department of Transportation (DOT) has proposed to deny an application for antitrust immunity made by Delta Air Lines and affiliates of the Virgin Blue Group with respect to joint services between the United States and Australia.

Antitrust immunity allows airlines to closely coordinate their international operations. In the show-cause order, the Department tentatively concluded that Delta and the Virgin Blue Group had not demonstrated that the alliance would produce sufficient public benefits to justify a grant of antitrust immunity.

The Virgin Blue Group includes V Australia, Virgin Blue, and Pacific Blue Airlines affiliates in both Australia and New Zealand.

 

In reaching its tentative decision, the Department noted that Delta and its partners have only recently entered the U.S.-Australia market, have not shown developed plans to operate as commercial partners, and have limited their cooperation to a handful of routes, thereby limiting the public benefits their alliance might produce. The Department also said that Delta and the Virgin Blue Group had failed to show that their alliance would have positive effects for consumers, such as lower fares or increased capacity.

Given the particular facts and circumstances of this case, DOT was not persuaded by their argument. “For the first time, we are being asked to grant an antitrust exemption to help two carriers establish a better position versus incumbents in essentially a single bilateral market that is open to competition, said Susan L. Kurland, Assistant Secretary for Aviation and International Affairs.

“In this regard, a grant of antitrust immunity could serve primarily to enhance the position of specific competitors in this market and not, as in past cases, a means to enhance competition and enable airlines to achieve efficiencies and benefits that are not otherwise possible given the legal restrictions in international aviation.”

“The weight of the evidence suggests that the primary effect of a grant of antitrust immunity at this time would be to improve the market share of Delta and V Australia, without certainty that the applicants will be making structural improvements in the market that would create large-scale public benefits, such as increased capacity, lower fares, or more efficient services.

“Given the barriers to integration that we have identified, and the current market conditions, the applicants have not provided sufficient evidence to show that the proposed alliance would produce substantial benefits for consumers to the extent justifying a grant of immunity.”

On July 8, 2009, the air carriers filed, concurrently, with immunity request, an application for blanket codeshare authority based on services between the U.S. and Australia/New Zealand, which was approved by the DOT on September 1, 2009. With that authority, the air carriers began codesharing in January 2010.

The carriers have 14 calendar days to show cause why the proposed decision should not be made final. Following the comment period, the Department will review all filings and then issue a final decision.

 

 
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