DOT set to deny Delta, Virgin Blue Group immunity for transpacific alliance

By Perry Flint | September 9, 2010

Virgin Blue's alliance with Delta is on hold after DOT's decision.

US Dept. of Transportation yesterday tentatively decided to reject an application for antitrust immunity for services between the US and Australia from Delta Air Lines and affiliates of the Virgin Blue Group, including Virgin Blue, V Australia and Pacific Blue units in Australia and New Zealand.

In proposing to turn down the request, which received Australian regulatory clearance last December (ATW Daily News, Dec. 11, 2009), DOT said the alliance "would not produce sufficient public benefits to justify a grant of immunity from the antitrust laws at this time." It stated that the airlines "elected to limit the scope of their cooperation to focus primarily upon the 'trunk routes' between the US and Australia" and that this decision "reduces the potential benefits that are possible from a grant" of antitrust immunity."

Furthermore, "having recently decided to form an alliance, after entering a new market, the applicants have virtually no experience as commercial partners and employ business processes they admit are not compatible. In brief, they have only just begun to explore the feasibility of arms length cooperation, much less the degree of cooperation that requires or would merit a grant" of ATI.

DOT also said that the US-Australia market is "in an extraordinary state of flux" and that since the airlines entered the market, fares and capacity have "changed dramatically." Given this reality, DL and Virgin Blue failed to show that immunized cooperation "would yield substantially more public benefits," than the competition between them.

In a statement, DL said, "We strongly believe our proposed alliance with the Virgin Blue Group will be good for consumers. We are reviewing the DOT's tentative order and will respond within the comment period." Objections to the proposed decision are due within 14 calendar days and answers to the objections seven days afterwards. The carriers announced their proposed alliance in July 2009.

Discuss this news 9

08 Sep22:17

Delta Airlines which does not

By Khawaja Javaid

Delta Airlines which does not believe in customer service and DOT is giving it all the routes landing/take off slots. Present secreatary of transportation Lahood is the carbon copy of Samuel Skinner(worst secretary of transportation in US history).DOT does not believe in monitoring the airlines unfair dirty business practices,worst customer service.DOT is a white elephant in Washington.Delta airlines must be disqualified for any routes,take off/landing slots ,alliances permissions for the next five years.

09 Sep00:14

Aside from the post above

By Rob G

Aside from the post above which does not make sense or comment on the issue, some of the DOTs concerns regarding processes and being historical partners are business integration issues not something that indicate restraints to consumer options. Why didn't the DOT just say "the limited existing competion on trunk routes will suffer if the number of route carriers shrinks from 6 to 4, or 5 to 3"...

09 Sep01:11

... because the DOT would

By Lemeng

... because the DOT would then look inconsistent for letting BA-AA go through with minimal remedy. Remember, the DOJ thought that alliance needed remedying, but did not oppose DL-DJ at all. The DOT will have to find some interesting arguments to justify allowing AA-JL and UA-NH now! Or maybe its whole attitude to airline alliances is getting less permissive?

09 Sep07:18

Airlines Top Executives

By Khawaja Javaid

Airlines Top Executives thinking is very narrow minded,they don't think in a broader way.Airlines is not only about top executives.Airline is a venture,which consists of aircraft manufacturer,engine manufactures,passengers,employees,oil companies,civil aviation authorities and much much more..........
Airlines top executives incompetence have made PanAM.Eastern,Northwest, America West and many vanished from skies.KLM.Swiss Air,Austrian,Sabena,SAS, JAL
and many more have become miniatures.These alliances mergers are not for the benefit of passengers,employees,These are for washing dirty hands by these top executives.These alliances are to raise fares,monopoly,elimination of customer service.Some one suggesting my previous comments are not related to the article,need to learn the aviation business and history.

09 Sep08:07

The DOT is wildly

By William J

The DOT is wildly inconsistent in its rulings. It sits idly by while BA-AA control huge portions of JFK-LHR and then objects to adding another airline venture on the constrained US-Australia market. No doubt United or Qantas bought them off.

09 Sep11:09

To William J you are way off

By Kapo

To William J you are way off base on QF and UA. Actually QF raised no objection to the tie-up, and UA would not be doing so either. It is true since DL and DJ entered the market all airlines have been bleeding. In the event the tie- up did go ahead some capacity would come out of the market and offer some breathing space for all. Yes, this does not offer any benefits to consumers, but we all know this pseudo ruse of getting Anti-trust approval is only for the benefit of airlines.

The major reason QF and UA did not object is that in the event it is not approved DJ will leave the route. DJ CEO John Borghetti(ex-QF) has wasted no time chopping not performing vanity routes(JNB,HKT,NZ domestic), further DL has not indicated a real commitment to the route(1 daily flight), sans approval it is unlikely that they would continue fly the route either.

This opens the door to the airline that they all fear entering the route, SQ. SQ has been lobbying the Australian Government for many years and in the last rebuff in 2007 the "clutching at straws" reason cited was that DJ would be commencing services on the route and the government must give DJ, an Australian airline the necessary time to establish themselves on the route.

Without DJ on the route, the Australian government and QF for that matter will be unable to stop the inevitable appearance of SQ on the route. Under open skies agreements between US, Australia and Singapore, SQ technically has the rights to fly the route, only Australian Government approval has held them back and with last hurdle DJ out of the way no plausible reason will exist to deny them any further.

Let's just say the DOT has issued a speeding ticket, but they will be waved on with QF and UA "cheering on " the DOT to approve the joint venture.

09 Sep13:05

@Kapo: I suspect that if

By civet five

@Kapo: I suspect that if there is a change in the current number of carriers, that AC will lobby to have the Canada-Aus bilateral amended to add LAX as an approved 5th freedom gateway (currently only SFO and HNL are). This would allow them to utilize the scissor-feed at LAX and fly a YYZ-LAX-SYD rotation, and this would probably satisfy the Aus government in maintaining competition and capacity without letting SQ in. Remember, they're still terrified of letting SQ onto that route.

@anyone who even attemps to compare the AA-BA ATI/JVI with this: apples and oranges. Compare AA-BA to what UA/LH/AC have had FOR YEARS. Compare AA-BA to what NW-KL and DL-AF have had FOR YEARS. Let's look at the slot situation at FRA, shall we? Why aren't any of you complaining about the lack of options on NYC-CDG? What about NYC-FRA? There's a woeful lack of non-alliance capacity to AMS, CDG, FRA and MUC, yet this fact goes unacknowledged.

09 Sep23:32

Khawaja, DL does in fact

By IguanaDC3

Khawaja, DL does in fact preach AND practice generally good customer care & service. Been there, done that. You have not, I'll wager. Secondly, you need to retire your tired old weary bashfest against everything corporate & managerial. You've never walked in those shoes, so stop pontificating as if you have. And finally, please master the language before butchering it herein these sacred walls. I mean, really. Reading your posts give me headache, like aspirin no good to heal, sayeth Yoda the Jedi Master.

11 Sep10:58

DL chairman writes to me "we

By Khawaja Javaid

DL chairman writes to me "we have failed on all aspects of customer service". so the comments of lguanaDC3(with DC3 menatality) have no meaning on customer service.My comments about airlines top executives are based on solid evidence,anyone who have mental vision can see it.Instead of waisting time with Delta,apply in Ivy league school to teach your sacred language.Your heart cannot pump your thick blood to your brain and neads a daily dose of aspirin for your brain to work.