Recently, I have been writing regularly about problems associated with approving new airline alliances. Many readers have commented that they are pleased with alliances because of the sharing of frequent flier miles, lounges and connections. However, beneath that façade bigger problems are brewing.
Don’t get me wrong. I’m all for sharing of frequent flier miles, lounges and connections. That’s not my beef.
The truth of the matter is that coordination between airlines regarding frequent flier miles and lounge sharing is allowed without any alliance agreement that includes antitrust immunity. Before the creation of airline alliances, airlines could always share miles and lounges. If the alliances all disappeared, sharing miles and lounges could continue without antitrust immunity.
In the old days, prior to alliances and antitrust immunity, airlines cooperated with each other with interlining of ticketing and transfer of baggage. That kind of cooperation improved the airline world for passengers and made travel easier. Interlining and baggage transfers require no antitrust immunity.
Without antitrust immunity and without any formal alliance, we passengers can still get the benefits that most of us associate with today’s alliances.
The airlines, however, are looking for more. They want to be able to bargain as a single massive airline without going through a merger. That is what’s sending a shockwave through the travel community and what has travel agents, online travel travel agencies, business travel managers and many suppliers up in arms.
The U.S. Department of Transportation’s initial approval of the Continental Airlines link-up with United, Lufthansa and other Star Alliance members is currently undergoing intensive debate and comments.
The European Union regulators have just announced their objections to the enhanced coordination between the airlines. They are focusing on the same portions of the alliance agreements that have made the hair on my neck stand up.
Here’s a look at ramifications of the fine print that we passengers rarely have an opportunity to see.
Alliances will be managed by a central board of directors
Again, here is a clip from the actual Alliance Agreement, stating that the airlines will form a unified “Joint Alliance Committee” to rule the alliance business.
The new alliance agreements allow collusion
Expanded antitrust immunity in virtually every area of the airline business from scheduling flights and pricing to cargo and computer services is embedded in the current Alliance Agreement. The scope of allowable coordination and cooperation included under this antitrust immunity agreement is breathtaking. Again, here is a clip from the actual Alliance Agreement:
The new alliances allow price fixing
In every other industry in the U.S. there are laws against price fixing. With the approval of the new enhanced airline alliances, carriers will be encouraged to fix prices between members. Here’s the exact wording clipped from the “Alliance Agreement”:
The U.S. airlines, legally restricted from having more than 25 percent foreign ownership, are turning over control of their international business to the alliance entities. Whether the alliance is Star Alliance, SkyTeam or oneworld, the fine print is the same and allows for a unified management team, cooperative efforts in almost every area of the airline business, joint alliance bargaining benefits and blanket price collusion.
This government-approved anti-competitive airline oligopoly is not a good deal for American or world consumers, nor for any business that works together with or sells to the airlines.
{ 2 comments… read them below or add one }
I agree with you Charlie – I think the alliances are ultimately anti-competitive and in the long run, we, the consummers will pay the price.
But here is another view from AA – published in Business Travel News yesterday.
http://www.btnonline.com/businesstravelnews/headlines/frontpage_display.jsp?vnu_content_id=1003963785
reb
So far, I’ve not noticed any problems with “seamless” travel or competition. I generally get where I’m going just fine……
We’ve had far too many mergers and combines lately…..I’m for bringing back strict anti-monopoly laws.
I’m with you Charlie, this looks like another legalistic end run around our regulatory system, sick at that system is right now……. It will most likely mean the end of competition and the airlines will go down the way newspapers are going.,..,maybe the last company flying will be called the USAToday Airline.
I;d like to know who is behind this idea……. what a way to bring all airline employees into one company and tell them all to work for what;’s being offered go find work in some other industry…..
Let’s hope the EU shoots this one down and our govt gets the moxie to do the same….. but I ain’t holding my breath.