May 13 - BTC Letter To U.S. DOT Regarding oneworld ATI

May 13, 2009

The Honorable Ray LaHood


U.S. Department of Transportation

1200 New Jersey Ave. SE

Washington, DC 20590

Docket: DOT-OST-2008-0252

Dear Secretary LaHood,

Business Travel Coalition (BTC) supports the application of American Airlines, Iberia and British Airways before the U.S. Department of Transportation (DOT) for antitrust immunity for their oneworld alliance as corporate buyers of air transportation services in North America and Europe require a third competitively viable alliance alternative. The nearly twenty-year government-driven evolution from competition between international airlines to competition among global, networked and immunized alliances is almost complete.

The U.S. policy toward immunized alliances, designed to liberalize markets and provide airlines with opportunities to efficiently expand services, was formulated in a global context where, then and now, true mergers and acquisitions are not options. Advocates of the alliance approach logically and factually argue that consumers can benefit as alliances allow airlines to reduce expenses and their overall cost structures. However, in the absence of comprehensive network competition, consumer benefits from more efficient alliances cannot fully materialize. An immunized oneworld would level the playing field and considerably strengthen network competition at a critical time for consumers as the global airline industry is consolidating rapidly.

DOT’s strategy to “surround Heathrow” with Open Skies agreements with other countries has worked. Instead of acquiescing to another infamous win-lose Bermuda II-type of aviation agreement, the U.S. held fast in the belief that the UK would come under increasing pressure to accept an equitable U.S. - EU Open Skies agreement as Heathrow lost its dominant market position to other European gateways. This is exactly what has happened, but now there are competitive imbalances that must be corrected via an immunized oneworld Alliance.

Charles de Gaulle Airport service to and from the U.S. is now dominated by the SkyTeam alliance (65% seat share), Frankfurt Airport by the Star Alliance (83%) and Amsterdam Airport Schiphol by SkyTeam (82%). In contrast, London Heathrow has a oneworld share of 58%. As BTC predicted earlier in the decade, operating slots have become available through a variety of means resulting in some 50 airlines securing slots since 2000. EU - U.S. Open Skies Phase 2 holds the promise of more services and price competition if done correctly.

However, right now is the time to address the imbalances at these other European gateways that impede the latent potential of Open Skies between the U.S. and Europe. An immunized oneworld will make this alliance and British Airways far more competitive with immunized Star and SkyTeam, and by extension, position Heathrow to be more competitive with Charles de Gaulle, Frankfurt and Schiphol. These competing alliances will be forced to respond to a more open and competitive Heathrow by providing corporate buyers with better pricing and improved contract terms and conditions. What’s more, an immunized oneworld will bring pricing discipline to some 31,000 city-pairs between the U.S. and Europe where the combined Star and SkyTeam dominate with 80% or more booking market share.

Secretary LaHood, during the past decade the U.S. and EU have transitioned from a regime of bilateral aviation agreements to an increasingly liberalized environment that has provided small and mid-size communities with greater connectivity to important global business centers and travelers with greater service options. However, these benefits are overshadowed by the lack of effective competition from a third immunized alliance capable of disciplining pricing across the Star and SkyTeam networks. Every day that goes by in which these competitive imbalances are allowed to exist, consumers and businesses pay higher prices.

I urge the DOT to approve the oneworld application as a matter of the highest public policy importance.


Kevin Mitchell


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