Star Alliance gets Continental and antitrust immunity

By Bill Poling

The Transportation Department on Friday approved the Star Alliance’s request for expanded antitrust immunity that would bring Continental into the group as part of a four-carrier joint venture with Air Canada, Lufthansa and United.

In so doing, the DOT rejected most of the advice of the Justice Department, though it accepted some suggestions to limit immunity in certain markets dominated by Star members. The grant of immunity extends to 10 of the alliance’s 22 members: Air Canada, Austrian, BMI, LOT Polish, Lufthansa, SAS, Swiss, TAP Air Portugal, United and, now, Continental.

It permits the carriers to agree on fares, capacity and scheduling; coordinate marketing activities with respect to agents, wholesalers and corporations; and pool revenue.

ASTA, ARTA and the Interactive Travel Services Association had sought limits on the way in which immunized carriers could deal with agents and other intermediaries, but the DOT rejected those proposals. It also dismissed the Justice Department’s assertion that the carriers had failed to justify the need for global immunity, and that immunity should be limited to certain transatlantic markets.

However, the DOT, in response to Justice Department concerns, decided to retain certain "carve-out" routes where immunity does not apply and add several routes to the list.

Under previous DOT orders, immunity was withheld for nonstop service from Chicago and Washington to Frankfurt, and nonstop service to Toronto from Chicago and San Francisco because of the overlap between United and fellow Star members Lufthansa and Air Canada. On those routes, the carriers continue to codeshare, but they have no immunity to fix prices.

With the inclusion of Continental, the list was broadened to cover transatlantic nonstops from New York and Newark to Copenhagen, Geneva, Lisbon and Stockholm. The Justice Department had wanted to include New York-Zurich, but the DOT said a restriction in that market is not necessary.

In the U.S.-Canada market, the DOT added carve-outs for nonstop services in the following markets: Cleveland-Toronto, Houston-Toronto, Houston-Calgary and New York-Ottawa.

At the Justice Department’s suggestion, the DOT also carved out U.S.-Beijing service, with the proviso that the carve-out will be removed if any U.S. airline that does not have immunity with a Star carrier begins service and maintains it at a level of five weekly flights for nine months.

The DOT rejected a Justice Department suggestion to impose a similar condition on Hong Kong service.

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