No benefits to consumers, DoJ claims
The US Department of Justice (DoJ) has come out strongly against wide ranging anti-trust immunity (ATI) for members of the Star Alliance.
It said the scope of the application for immunity was "unprecedented" and it would grant no benefits to US consumers.
The DoJ also said it was against extending ATI, which other Star members now have, to Continental Airlines which is due to join the alliance in October.
It said the extension of ATI for joint ventures with currently immunised Star members Lufthansa, United Airlines and Air Canada would "sanction collusion" between the carriers.
Star asked the US Department of Transportation (DoT) last year to include Continental in its ATI for the three other carriers.
The DoT gave "tentative approval" earlier this year.
But the DoJ has now hit out strongly at the breadth of the proposed ATI for the four carriers.
It wants Star to revise substantially its application.
In a 58-page document, the department said: "The addition of Continental to the immunized Star ATI Alliance is likely to result in harm to certain international routes, including routes between the US and China, routes spanning the US and Canadian border, and routes between the US and Denmark, Portugal, Sweden and Switzerland."
It added: "Granting immunity for Continental to coordinate with Star ATI Alliance members on US to Latin American or Pacific routes is not likely to result in further liberalization discussions between the US and countries with which we have not yet negotiated open skies, such as China or Brazil.
"Therefore, an expansion of immunity offers no open skies benefits for US consumers."
The DoJ said the DoT's ruling to revoke controls on key United and Lufthansa routes would end competition on flights from Chicago and Washington to Frankfurt.
Continental's admission to the ATI group was likely to raise fares on services from New York to Copenhagen, Geneva, Lisbon, Stockholm and Zurich, it said.
After warning of price increases on of between 6.6% to15% on some routes, the DoJ statement added: "The applicants present no evidence that customers will receive quantitatively or qualitatively different service if Continental receives antitrust immunity to coordinate with the Star ATI members compared to what would be provided if Continental merely interacted with the level of cooperation expected of any member of the broader, non-immunized Star Alliance."
The DoJ also dismissed Star's claim that it needed this level of ATI to compete with members of the rival SkyTeam alliance whose leading members, Delta Air Lines, NorthWest Airlines and Air France KLM have already been granted wide ranging immunity.
It said balance was "not a legitimate goal of sound competition balance."
It added: "Alliances should compete against each other, and the market should determine the outcome of that competition."
Continental said it planned to reply to the comments to the DoT.
A spokesman said:"We remain confident that DoT will approve our application. That action is necessary to correct the competitive imbalance that now exists and safeguard our future."
United also said in a statement it was confident the application would clear regulatory hurdles.
www.usdoj.gov www.dot.gov www.staralliance.com www.continental.com www.unitedairlines.co.uk