Oneworld Anti-Trust Immunity and You

It’s been a bit over a week since American Airlines, British Airways and Iberia (along with Finnair and Royal Jordanian) received anti-trust immunity approvals from both the EU and the DoT.  What it means is that each of those airlines will be able to cooperate closely with each other on a variety flights between the United States and Europe. 

What closely cooperate means is that these airlines will start marketing their respective flights between cities under the various brands but each airline will be responsible for certain flights.  For example, British Airways may begin operating more of the capacity between DFW and London while American Airlines retasks the aircraft they were using for some of those flights to other flights.  Iberia Airlines may begin operating the flight(s) between Miami and Spain.  BA, AA and IB will be selling seats on all of those flights as their own just as you already see done as codeshares.

The difference is that now these airlines will also begin cooperating on scheduling.  In other words, American Airlines might start scheduling its “feed” for a British Airways flight from DFW to London.  American Airlines might do the same for an Iberia flight from Miami to Spain.  On the other side of the ocean, British Airways might schedule its “feed” for London to Chicago to mate up with an AA flight.   These airlines will start acting almost as if they are one company so to speak.

Is that good or bad?  If you ask the airlines, the customer will get to see more choices to more destinations on Oneworld flights and that choice is good.  In most cases, it is good and air fares are likely to be unaffected on many routes because of competition from other alliances such as SkyTeam and Star Alliance. 

However, in some cases, I think this is bad.  For instance, American Airlines already effectively “owned” the DFW to London market and really the DFW to Europe market.  So much so that previously they weren’t allowed to code share with British Airways on such routes at all.  There is very little competition in the DFW market to Europe.  Some exists, yes, in the form of flights by KLM and Lufthansa to Amsterdam and Frankford respectively.  One flight each a day.  Now, with even closer cooperation allowed, I do fear that KLM and Lufthansa may find such flights simply uneconomical.  There is no real Star Alliance and/or SkyTeam presence at DFW anymore. 

In the short term, I do think there are markets that are going to see much higher air fares for non-stop flights to Europe.  As with all things, those higher air fares may one day drawn in more competition, though.  It is conceivable that if the fares rise considerably, another alliance may target such a market for competition.  For instance, the Star Alliance may decide that Dallas needs some competition and suddenly we may find ContiUnited or US Airways providing some feed to that destination in order for a European carrier such as Lufthansa to justify a route between Dallas and Germany. 

I think such developments are a good 5 years away at least.  Fundamentally, I think these alliances are bad for consumers and bad for the industry but they were instituted a long time ago and that genie is out of the bottle now.  Since it would be nearly impossible to break up those alliances, it is fair that Oneworld be permited to establish their own now.  SkyTeam pioneered such things and Star Alliance is also far ahead of the curve. 

Regrettably, now we have to manage competition between alliances rather than companies.  I think that is bad because those alliances potentially let airlines that would otherwise go out of business remain in the game longer.  We need to see this industry periodically purge itself of the weaker players.  If you think that didn’t happen under regulation, you’re wrong.  It did.  Airlines did file bankruptcy and if they didn’t, they were forced into mergers of convenience by the CAB.  In any case, the weaker players still went away.  All too often, we don’t allow that to happen anymore and that hurts us more than helps.


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