US Dept. of Justice says Star ATI would cause 'substantial' harm

US Dept. of Justice strongly opposed extension of antitrust immunity to Continental Airlines when it joins Star Alliance this October, arguing that the immunity request is "unprecedented in scope and breadth" and would "sanction collusion" between current Star member United Airlines and Continental "on all international service."

The US Dept. of Transportation in early April approved CO's entry into Star and granted tentative antitrust immunity to the carrier and certain Star partners and to CO's proposed transatlantic joint venture with Air Canada, Lufthansa and United Airlines (ATWOnline, April 8), but DOT agreed to delay its final order (scheduled for May 31) pending comments from DOJ.

In a 58-page document filed Friday, DOJ said, "the addition of Continental to the immunized Star ATI Alliance is likely to result in harm to certain international routes, including routes between the US and China, routes spanning the US and Canadian border, and routes between the US and Denmark, Portugal, Sweden and Switzerland."

Additionally, it would eliminate or significantly reduce competition on routes where CO and current Star members provide "the only or almost all of the competitive alternatives" and remove previously imposed protections designed to preserve competition on overlap routes," likely resulting in "substantial" harm to consumers.

DOJ estimated that fares "are likely to increase by roughly 15% on routes where the number of nonstop competitors decreases from two to one, and by roughly 6% on routes where the number of nonstop competitors decreases from three to two."

The department noted that CO and UA are the only two US carriers currently offering nonstop service to Beijing from the US mainland, accounting for a combined 57% of the available nonstop seats to Beijing, and the only US carriers providing US mainland-Hong Kong nonstop service. DOJ also believes the proposed agreements "pose harm to domestic competition" where UA and CO have agreed to enter into a marketing relationship.

It said that previous ATI granted to the major airline alliances typically was a quid pro quo for open skies agreements with the US. Granting CO ATI in Star and Atlantic++ will not further the goal of open skies because the relevant agreements already are in place, it argued.