Airlines ask U.S. to preserve global alliances

WASHINGTON Mon Mar 23, 2009 6:54pm EDT

Continental Airlines planes prepare for take off in Houston, Texas, February 20, 2006. REUTERS/John Gress

Continental Airlines planes prepare for take off in Houston, Texas, February 20, 2006.

Credit: Reuters/John Gress

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WASHINGTON (Reuters) - U.S. and overseas airlines asked the Obama administration to oppose an effort in Congress they said would threaten the global aviation alliances that allow relief from antitrust law to coordinate schedules and fares, particularly on transatlantic routes.

Lobbyists for airlines, hotels and other travel organizations said in a letter to U.S. Transportation Secretary Ray LaHood on Monday that ending the tie ups would cost jobs and weaken an industry nervous about softening demand amid recession.

"The emergence of global alliances - which are defined by their core European/U.S. airlines partnerships - have eliminated inefficiencies, promoted best practices and fostered vigorous competition," said the letter to LaHood.

The move comes as LaHood's office considers two antitrust immunity applications.

Continental Airlines Inc wants to join UAL Corp's United Airlines and Germany's Lufthansa AG in the Star Alliance. American Airlines, a unit of AMR Corp, and British Airways Plc would like to cement deeper ties under the Oneworld banner.

Representative James Oberstar, the chairman of the Transportation Committee in the House of Representatives has co-authored a provision in aviation legislation that would launch a government study of whether the alliances serve the public interest, especially those with antitrust immunity.

"They sure work in the corporate interest," Oberstar told the International Aviation Club on Monday, underscoring his intention of allowing alliances to expire if the administration finds them unfair to consumers or monopolistic.

Oberstar believes concentration of the biggest carriers under three global alliance flags with immunity -- Star, Oneworld and SkyTeam -- would amount to what the influential lawmaker called "defacto mergers" over the routes they share.

"Is that what I voted for when I voted for (U.S. airline) deregulation in 1978?" Oberstar asked. "Hell no."

SkyTeam team is led by Air France-KLM and Delta Airlines, which merged last year with Northwest Airlines.

Antitrust immunity accelerated this decade to meet exploding world travel demand, allowing alliance members to operate as one flight on certain routes. Carriers are able to share pricing and scheduling information as well as ticketing and facilities.

Immunity is an easier way for carriers to build networks without running afoul of U.S. law that discourages mergers between domestic and overseas airlines. The arrangements also can be lucrative and are cheap to operate, compared to a merger.

The airlines also argue that the alliances provide crucial flexibility with the recession eroding transatlantic travel, the most important overseas market for many American carriers.

Flights between the U.S. and Europe fell 14 percent in the year ending January 2009, according to industry figures. Much of the drop in premium paying passenger traffic, especially between New York and London, corresponds closely to the financial services industry meltdown. Fares are also falling on overseas routes.

(Editing by Tim Dobbyn)

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