ONEWORLD

US Justice Department raises concerns over Oneworld anti-trust
By Lori Ranson









An anti-trust application filed by Oneworld Alliance members has drawn criticism by the US Department of Justice, who believes the proposed tie-up would result in competitive harm in six transatlantic markets.
The Justice Department filed similar comments earlier this year in the anti-trust approval process for members of the Star Alliance, two months after the Department of Transportation awarded tentative approval for the transatlantic venture now in development by Air Canada, Continental Airlines, Lufthansa and United.
In the Oneworld proceeding Justice filed its comments after the deadline established by DOT, but before Transportation officials have issued their ruling on the Oneworld anti-trust application.
American, British Airways and Iberia in 2008 sought approval to form a transatlantic joint venture similar to agreements that are now in place among members of the two competing alliances, SkyTeam and Star. The three Oneworld members are also seeking broader cooperation with Finnair and Royal Jordanian.
The Department of Justice in its comments contends if immunity is granted fares on six transatlantic markets would increase by 15% due to a loss of competition.
Justice believes any anti-trust approval must carry restrictions, explaining remedies include unencumbered slot divestitures, earmarked slot divestures or carve-outs, which are essentially city pairs excluded from immunity.
The Justice Department believes carve-outs are the simplest and most straightforward way to allay anticompetitive concerns despite arguments by the Oneworld members that requiring carve-outs would erode an incentive to increase capacity, reduce their ability to optimise schedules and result in each carrier's respective yield management system placing a higher value on local traffic instead of connecting passengers.
DOT in its final ruling on Star anti-trust immunity did require some carve outs after virtually requiring none in its tentative approval of the joint venture among the alliance partners.
Recently DOT said it was working with Justice cooperatively in the Oneworld approval proceeding, and dismissed any perceived strife between the two agencies stemming from the Star approval process.
Characterising missing a 31 October deadline in ruling on Oneworld anti-trust as "unfortunate", DOT has said it is working double time to complete the review.

DOT requires Heathrow slot divestment for AA-BA anti-trust
By Lori Ranson

US regulators have tentatively approved transatlantic anti-trust immunity for Oneworld partners American, British Airways, Finnair and Iberia on the condition they make four pairs of London Heathrow slots available to competitors for new US-Heathrow flights.


The relinquishment of slots has long been discussed as a potential requirement for the Oneworld partners to ultimately achieve anti-trust. Previously American chief executive officer Gerard Arpey has said he doesn’t believe any remedies are necessary in order for the partners to gain necessary approvals to launch a transatlantic joint venture.








DOT in granting tentative approval explains that benefits from allowing the Oneworld partners to operate under anti-trust include lower fares on more routes, increased services and better schedules.

But the department also believes the proposed tie-up would harm competition on select routes between the USA and Heathrow, where regulators feel the availability of landing and takeoff slots is limited.


In addition to requiring the relinquishment of four pairs of Heathrow slots, DOT is also requiring changes to ensure capacity growth while also requesting the partner airlines submit traffic data for review.


Despite the stipulations, DOT has concluded the proposed alliance among the Oneworld partners will “enhance competition around the world by creating competition with the existing Star alliance and SkyTeam alliance, which have already been granted immunity”.

The Oneworld airline alliance has staved off the potentially disastrous loss of leading Asian member Japan Airlines, allowing it to refocus on major headaches the alliance is dealing with in other parts of the world.

Oneworld could be excused a sigh of relief when JAL opted last week to deepen its cooperation with Oneworld partner American Airlines rather than switch allegiance to Delta Air Lines and the rival SkyTeam group. But further risks loom for the alliance.

For example, the alliance is still battling to win antitrust immunity on transatlantic routes, without which it will be at a competitive disadvantage to the other two alliances. And it cannot afford any slip-ups in the British Airways-Iberia merger process.

Keeping its members in the fold is arguably more critical to Oneworld than its alliance competitors, as it is the smallest of the three. This also means it has to work the hardest to retain the balance of power.

In its energetic effort to hold on to JAL, Oneworld may have hit on the template for future success: the deeper integration of services, which American and British Airways now plan to implement with their Japanese partner.

JAL , which applied for bankruptcy protection, is being reorganized to shield it from creditors. Its network will be trimmed as it loses a third of its employees and gains new equity and debt capital from the government. American and JAL say they will soon apply to authorities in the U.S. and Japan for antitrust immunity on transpacific routes—a move made possible by a new air services agreement signed between the two governments last December.

Masaru Onishi, JAL’s president and chief operating officer, says his executives “firmly believe that the advantages of this development with American Airlines can strongly support JAL at a time when we are striving toward the revival of our business.” The carrier also plans to “fortify its relationships” with other Oneworld members.

American says the airlines “will now focus on building a joint venture that can offer JAL significant revenue growth beyond the stability that Oneworld offers today.”

Uwe Weinreich, airline analyst at Unicredit, says Oneworld would have been “severely weakened” and would have been forced to focus more heavily on other regions, such as transatlantic routes, if JAL had opted for SkyTeam. JAL’s decision to stick with Oneworld, he says, means that three competitive alliance blocks will remain intact for at least the next 5-10 years.

Weinreich also believes that worries about losing JAL have led to a change of thinking within Oneworld. “Carriers such as British Airways have realized that they need to integrate more to be competitive,” he says.

Indeed, if all of Oneworld’s proposed joint ventures are approved, the alliance’s three biggest members—American, British Airways and JAL—will be melded with a series of integrated operations that will girdle the planet.

Oneworld still faces challenges, however, including expected cuts to JAL’s network, one of the alliance’s prime Asian assets, and the risk that British Airways will fail to merge with Iberia. If the proposed Anglo-Spanish merger cannot proceed, then Iberia can be expected to look elsewhere for an equity partner. If that partner is not in Oneworld, Iberia could easily switch alliances.

As part of its January offer to JAL, American told its Japanese partner it could earn $100 million more in annual revenue from an immunized joint venture. American guaranteed that $100 million in new revenue to JAL for the venture’s first three years.

Also as part of that offer, British Airways proposed a series of “enhancements to its business relationships” with JAL that it said would result in approximately $200 million in new revenue for JAL over three years. That included a joint business venture between the two carriers on Europe-Japan routes.

The joint venture would take effect in April 2011, subject to regulatory approval, which British Airways expects to get because of the “considerable competition” on routes between Japan and Europe, including Britain.

BA also promised to help JAL establish a new service between London Heathrow and Tokyo Haneda, the Japanese capital’s attractively located downtown airport. This offer may include a coveted Heathrow slot.


With Bradley Perrett in Beijing.

India's Kingfisher Airlines Set to Join oneworld Alliance

British Columbia, Feb. 23 /PRNewswire/ -- India's leading domestic carrier and only five-star airline, Kingfisher Airlines, is lining up to join oneworld after signing a memorandum of understanding as its first step towards full membership of the world's leading quality airline alliance, subject to Indian regulatory approval.
The agreement was concluded at a meeting between Kingfisher Airlines' Chairman Vijay Mallya and Chief Executives from oneworld's 11 existing member airlines, which include some of the best and biggest names in the industry.
Kingfisher Airlines today applied to India's Ministry of Civil Aviation for authority to proceed with its membership of oneworld.
A target date for Kingfisher Airlines to join the alliance will be confirmed once this approval is gained. The process to bring any airline on board normally takes around 18 months to complete, so Kingfisher Airlines could be expected to start flying as part of oneworld during 2011.
Kingfisher Airlines' addition to oneworld will link India's most extensive domestic network with oneworld's unrivalled global network, as the only alliance with airlines based on every continent. It will add 58 cities to the oneworld map – all of them in India. This will expand oneworld's network to 800 destinations in almost 150 countries, served by a combined fleet of 2,350 aircraft operating some 9,000 flights a day, carrying some 340 million passengers a year.
Established oneworld members American Airlines, British Airways, Cathay Pacific, Finnair, Japan Airlines, Qantas and Royal Jordanian already serve five gateways in India between them – Bangalore, Chennai, Delhi, Hyderabad and Mumbai.
British Airways will support Kingfisher Airlines through its allianceimplementation programme, as its oneworld sponsor.
Kingfisher Airlines Chairman and Chief Executive Vijay Mallya said: "Kingfisher Airlines is proud to be lining up to join the world's leading quality global airline alliance. Becoming part of oneworld would be one of our most significant steps so far - and is right in line with our vision to become one of the world's top airlines. It will enable us to offer our guests a truly global network served by partners who include some of the best known and most admired airlines in the world, with frequent flyer benefits extended throughout this network. It will also strengthen us financially, through revenues from passengers transferring to our network from our oneworld partners and the cost reduction opportunities the alliance offers."
Gerard Arpey, Chairman and CEO of American Airlines and Chairman of the Governing Board of oneworld said: "The addition of Kingfisher will further solidify oneworld's standing as the premier global alliance, providing the highest level of service to the world's most important markets and delivered by airlines with a strong track record of success. Because no single airline can take every customer every place he or she wants to go it is critical for business and leisure travelers to have access to the finest collection of airline partners and networks, and that is exactly what oneworld delivers."
Willie Walsh, Chief Executive of British Airways, oneworld's sponsor of Kingfisher Airlines, said: "Kingfisher Airlines is an ideal fit for oneworld. It has a strong focus on customer service and its network expands what the alliance currently offers. oneworld's priority is the quality rather than quantity of our member airlines, which is why British Airways is delighted to be developing our relationship with Kingfisher Airlines further by acting as its sponsor into the alliance."
oneworld Managing Partner John McCulloch added: "Last February oneworld celebrated its 10th birthday. This February we've been able to celebrate Japan Airlines' reaffirmation of its oneworld membership, its filing for anti-trust immunity across the Pacific with American Airlines, tentative approval in the US for anti-trust immunity for our transatlantic partners and in Australia for British Airways and Qantas' joint services agreement on the kangaroo route between Europe and Australia – and now we are welcoming Kingfisher Airlines on board. Kingfisher Airlines will fill one of oneworld's few remaining membership spaces with a carrier that matches our alliance's demanding requirements, benefiting customers by expanding our global reach and helping us ensure oneworld remains the pre-eminent global alliance with members unmatched in brand and service quality."
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SriLankan Airlines (UL) has been elected as a oneworld member, the alliance announced just prior to the opening of IATA's 2012 World Air Transport Summit in Beijing. UL is expected to join oneworld late next year.

UL chairman Nishantha Wickremasinghe said the airline has “virtually doubled our size since peace returned to our country three years ago and we plan further substantial expansion to our fleet and network in the next few years.”

UL also announced it will codeshare with oneworld partners Royal Jordanian and S7 Airlines.

UL operates a fleet of 21 aircraft and carried 3.5 million passengers last year between its Colombo base and 34 destinations in 22 countries across Asia, Europe and the Middle East.

According to oneworld, UL will bring three new destinations into the alliance’s network, all in southern India—Kochi, Tiruchirapalli and Thiruvananthapuram, expanding oneworld's global coverage to some 850 destinations in more than 150 countries and generating annual revenues of more than $100 billion.

American Airlines CEO and oneworld chairman Tom Horton said that Malaysia Airlines “is on the right track to join the alliance later this year”

While Qatar's addition would indicate unanimous approval from oneworld carriers, it would not have been attained easily and does not guarantee all carriers are pleased. Qatar for IAG's British Airways and Iberia will be a deep partner while for others – chiefly Cathay Pacific, Finnair and Qantas – it will be a competitor and they must sort through how to integrate Qatar into their web at a time marketing alliances are losing lustre to a Middle East-centric approach. For this redirection of global aviation strategy, there is no guide. Qatar and oneworld are writing a new rulebook.

Alliance membership was once seen as the pinnacle strategic option – aircraft were painted, lounges branded – but in the eventuating new order, some oneworld carriers will not prize alliance membership, either of their own doing or a result of their benefits being lessoned. The candidate list is tall: American Airlines is being courted by Emirates, which has a close relationship with Japan Airlines and in Sep-2012 signed an extensive partnership agreement with Qantas; Finnair's future has been bet on connecting European-Asian traffic, a staple of Qatar Airways; Cathay Pacific already has a hands-off approach and Qatar's addition will do little to reverse that stance; Royal Jordanian is in Qatar's backyard; and airberlin has a deep partnership and equity stake with Qatar rival Etihad Airways.