Not Approved: Delta & Virgin Blue

The Department of Transportation has decided to recommend against anti-trust immunity between Delta Airlines and Virgin Blue airlines Virgin Blue and V Australia.   This decision caught many by surprise and I’ll confess to being somewhat suirprised but pleased as well.

The DoT seems to say that they don’t think Delta has worked to establish itself in the trans-oceanic market and hasn’t done a very good job of showing the benefits to the consumer.  There is some truth to that.  Delta and V Australia are both new entrants to the US-Australia routes and neither has really done that well so far but neither has seemed to have invested in developing that business all that well either.  The efforts made seem more pro forma than with enthusiasm. 

I also think that both parties felt that with two very established carriers between the two countries, an alliance between two new entries would just be automatically supported.  An assumption that I would have said is likely just a day ago. 

I think everyone could stand to take a moment and breath on these alliances.  Yes, they grow the network and they offer greater potential for profit but is an oligopoly of 3 really better than an oligopoly of 2?   The public good isn’t just served by profitable airlines.  The public good includes what is generally good for the consumer such as competition that offers varying levels of service and price. 

If you want an alliance across the ocean, prove you can be a player on that same set of routes first.  Better yet:  be creative and open up some new business rather than just continuing to try to compete on the ubiquitous California – Australia routes. 

Alliances are fine but let’s not forget the purpose of business and competition and what it has to offer.  If you want to be in business on a particular route, the preferred pathway should be making a long term investment and working for the traffic.  We should desire to start seeing *more* competition between these alliances, not a continued effort to stake out their “just share” of business in a particular market.  Carving things up into 3 equal shares serves no one’s interests at all.

Good on the DoT for doing the unexpected as well as doing it for a good reason.  I would like to see a bit more of that attitude in other future decisions.


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