ATI hurdle cleared for Continental & Star Alliance

As part of their announced move to the Star Alliance, Continental applied for anti-trust immunity (ATI) from US and foreign regulators.  The ultimate goal is to be able to co-market flights across the Atlantic with their new partners, including Air Canada, Lufthansa and United, and to pool revenue from those flights.  The ATI application was filed almost a year ago and yesterday afternoon the US DoT filed their response to the request, approving the deal.  Here’s part of the DoT’s statement from the response:

In a show-cause order issued today, the Department tentatively decided to grant immunity to new alliance member Continental and to allow Air Canada, Deutsche Lufthansa Airlines, United Air Lines, and Continental Airlines to place a portion of their international air services within a new joint venture, to be called Atlantic Plus-Plus. Under the venture, the carriers would jointly arrange capacity, sales and marketing as well as share revenues.

The Department tentatively concluded that granting antitrust immunity to Continental to join the alliance and approving the joint venture would be in the public interest because it would support increased levels of service in international markets served by the carriers, give consumers more travel options and shorter travel times, and reduce fares.

So the good news, from the DoT view, is that they expect to see more routes and more travel options, as well as lower fares.  But is that really going to happen?   We are rapidly moving to an industry where there are really only 3 main players in the transatlantic market, defined by the three ATI alliances (it is expected that the BA/AA/Iberia application will be approved in the next month or so, just like this one was).  So instead of having lots of competition on the routes across the pond there will be little pockets of competition.  Even worse is that where the route connects hubs from ATI partners, there is real reason to worry.  There is no reason for Delta and Air France to compete on service between Atlanta and Paris.  Ditto for United and Lufthansa on service between San Francisco and Frankfurt. 

I like the idea of stronger alliances and better coverage.  I think that it actually has worked thus far in the great experiment that the three major alliances have run over the past decade.  But I do still worry a little bit about the ATI part of the deal.  I really would prefer to not lose access to the cheap transatlantic fares that I have been enjoying so far this year.

The other significant aspect of this announcement is that it means the last major hurdle has been cleared in Continental’s efforts to make the leap to Star Alliance later this year.  The countdown continues: T-200 days and counting.

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Seth Miller

I'm Seth, also known as the Wandering Aramean. I was bit by the travel bug 30 years ago and there's no sign of a cure. I fly ~200,000 miles annually; these are my stories. You can connect with me on Twitter, Facebook, and LinkedIn.