Friday, November 12, 2010

Busy Week of Antitrust Developments in Aviation Industry

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The Department of Transportation's antitrust immunity grants to two groups of air carriers seeking to jointly market trans-Pacific routes were among a number of interesting antitrust developments in the aviation industry this week.

American Airlines and Japan Airlines (JAL), members of the oneworld alliance, announced on November 10 that the DOT had granted final approval to their request for antitrust immunity with respect to their trans-Pacific joint business. The arrangement has also been approved by Japan's Ministry of Land, Infrastructure, Transport and Tourism. Both airlines anticipate launching their coordinated services in early 2011, according to their joint statement.

American and JAL filed their application for antitrust immunity for the joint business agreement (JBA) in February 2010. At that time, the carriers said that, under an immunized JBA, American and JAL would cooperate commercially on flights while continuing to operate as separate legal entities. They would coordinate fares, services, and schedules.

United Airlines, Continental Airlines, and ANA also announced on November 10 that the DOT issued a final order granting antitrust immunity for their trans-Pacific joint venture under which the carriers intend to jointly develop flight schedules and sales activities. United Continental Holdings, Inc. is the holding company for United and Continental, which recently merged to form the world's largest airline. ANA is a leading Japanese provider of air transportation services.

Southwest/AirTran Merger

Earlier this week, Southwest Airlines Co. and AirTran Holdings, Inc. announced that the Department of Justice Antitrust Division had issued a “second request” in its investigation into the combination of the low-cost air carriers.

A second request is issued when the antitrust agency reviewing the deal determines during the initial waiting period that it needs additional information and/or documents to complete its analysis of competitive effects under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act. The second request extends the waiting period imposed by the HSR Act until 30 days after the parties have substantially complied with the request.

Second requests are not uncommon in federal antitrust reviews of large mergers. The Justice Department issued a second request in the recently consummated United/Continental merger.

“Both parties are in the process of gathering information to respond to the second request and will continue to work cooperatively with the DOJ as it reviews the transaction,” according to the carriers' joint statement of November 9. Southwest and AirTran expect the transaction, which was announced on September 27, 2010, to close in the first half of 2011.

Air Cargo Cartel

Meanwhile, on the other side of the Atlantic, the European Commission (EC) announced on November 9 that 11 air cargo carriers had been fined a total of nearly €800 million for operating a worldwide cartel. Air Canada, Air France-KLM, British Airways, Cathay Pacific, Cargolux, Japan Airlines, LAN Chile, Martinair, SAS, Singapore Airlines, and Qantas were fined a total of €799.445.000 by the EC for coordinating surcharges for fuel and security over a six year period. Lufthansa (and its subsidiary Swiss) received full immunity from fines under the EC's leniency program.

The EC fines follow a number of guilty pleas from these same carriers to price fixing charges filed by the U.S. Department of Justice since August 2007.

No comments: