Star, Continental: DOJ ATI analysis 'flawed. . .should be disregarded'
July 8, 2009: Current members of Star Alliance and aspiring member Continental Airlines pushed back strongly against the US Dept. of Justice's opposition to the extension of antitrust immunity to CO when it joins in October, arguing in a filing with the Dept. of Transportation that DOJ favors a "myopic policy" that would "abandon almost two decades of highly successful international aviation policy."
DOT in early April approved CO´s entry into Star and granted tentative ATI to the carrier and certain Star partners and to CO´s proposed transatlantic joint venture with Air Canada, Lufthansa and United Airlines. It has final say on whether ATI will be granted, but the seemingly clear path to final approval hit a roadblock last month when DOJ weighed in to argue that ATI would bring "substantial" harm to consumers
A 52-page response filed yesterday by the Star carriers and CO urged DOT to ignore DOJ and "promptly" issue a final order that would grant ATI "without modification" from its tentative order. DOJ is proposing "a narrowly focused and ill-conceived policy that ignores unique considerations affecting international aviation," the carriers wrote. "Aside from being inconsistent with [DOT´s] statutory mandate, such a myopic policy would jeopardize current and future open skies agreements [and] hobble the Star Alliance and Continental so they cannot compete effectively with the SkyTeam Alliance."
The carriers added that consumers would lose out on benefits that immunized alliances bring if DOJ had its way and argued that adding CO to Star and allowing it to participate in the transatlantic JV does not raise any issue that "justifies such an abrupt reversal of international aviation policy," particularly considering that CO "offers fewer than 3% of worldwide scheduled seats."
The Star carriers and CO said DOJ is advocating a "radical shift. . . predicated on faulty analysis [that] ignores critical aviation policy considerations." They wrote that the department does not understand that current and future open skies accords "directly" depend on immunized alliances, adding that it also "ignores the substantial benefits that would flow from immunity" and "fails to recognize. . .substantial and actual competition" in markets in which CO would operate in conjunction with Star members.
DOJ in its filing with DOT estimated that fares "are likely to increase by roughly 15% on routes where the number of nonstop competitors decreases from two to one, and by roughly 6% on routes where the number of nonstop competitors decreases from three to two." The Star carriers said this analysis is "flawed, contradicted by previous analyses and DOT´s findings, and should be disregarded."