Friday, June 20, 2008

Can They Spell 'A-n-t-i-t-r-u-s-t?'

…They can spell it, but some observers don’t seem to grasp the historical concept in their eagerness to swallow everything the airlines tell them these days.

Way back in April, the tone was set for what is now developing when the Transportation Department announced a six-way antitrust-immunity deal for Northwest and its SkyTeam partners — Delta, Air France, KLM (Air France and KLM are owned by the same company, incidentally), Alitalia (stop that snickering right now!) and CSA Czech Airlines.

This wonderful gift was modeled on an exemption Northwest got from antitrust law in an alliance with KLM 10 years ago, followed by a similar deal Delta got from the feds in an alliance with Air France this year.

Dunno, I’m just a simple reporter who probably spends way too much time in the desert, but I seem to recall that antitrust law, as applied to airlines, essentially prevents them from colluding, especially in the matter of setting prices. International alliances have always operated in a kind of legal gray area in price fixing. But don’t forget, with Open Skies, the borders between international and domestic markets are disappearing.

And today we have word of still a new antitrust-law exemption — the new so-called “alliance” between United and Continental. Continental will join the Star Alliance, yada, yada, yada. All subject to (expected) approval from the feds. No downside at all, the experts proclaim.

O.K., you can call these things “marketing alliances” if you want, as if they’re just more of the same. But I call them quasi-mergers on select routes. And the key component of all these wondrous new partnerships, and the anti-trust exemptions that accompany them, is that the involved airlines will be able to collude to a degree that previously would have been illegal. Two words: Set prices.

I’d also suggest that the successive series of 14 across-the-board fare hikes this year by the major airlines — all done in remarkable lock-step — could arguably be looked at as price fixing. I know they didn’t all get in the same location to do it. With fancy technology and shared assumptions, they didn’t have to book a conference room at the Marriott. Res ipsa, as the tort lawyers say.

As I have said repeatedly, airlines obviously cannot survive charging last year’s fares with this year’s fuel bills. The days of cheap airline fares have ended. More fare hikes are inevitable, and by this fall we will be contending with a domestic air-transportation system that is significantly smaller and less reliable than we have been used to.

But that doesn’t have to mean that the days of airline competition in a free market need to be declared over. Not without some debate about antitrust law, it doesn’t.

I wouldn’t be surprised if Southwest, JetBlue, AirTran, Frontier, Virgin America and some of the other formerly low-cost carriers didn’t start pointing out more clearly some of the nuances of antitrust law which seem to be lost in the rush to ensure that the major airlines can avoid more bankruptcies.

I think they, at least, can spell a-n-t-i-c-o-m-p-e-t-i-t-i-v-e.


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