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Airline Mergers Threaten National Airline Sovereignty

Airline Mergers Threaten National Airline Sovereignty

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Published by elaine cullen

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Published by: elaine cullen on Aug 13, 2010
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In a large number oI recent transnational mergers and ioint agreements between airlines, what
is occurring is the loss oI sovereign national control over national airlines and national airspace.
Historically, nations have had sovereign national airlines, which protected both their domestic
and international air travel as a security and economic goal. It also served to control and protect
their national air space security in terms oI Ioreign airlines and their actions national airspace.
Recently Japan Airlines has been considering a ioint agreement with either Delta or American
Airlines, with both airlines promising an inIusion oI a large amount oI money into ailing Japan
Airlines. Just in the last year, there has been a large number oI ioint agreements between airlines
in Ioreign countries, which involve an integration oI airline routing, services and Iees and a
sharing oI revenues between the companies. This is a non open type oI 'integration¨ between the
airlines, which serves to circumvent U.S. and other country`s antitrust laws meant to restrict
Ioreign nations or Ioreign national airlines to a limited and non controlling involvement or
interest in national airlines.
The recent ioint agreements between airlines have involved the ioint venture between
LuIthansa, United, Continental, Air Canada, Austria, British BMI, Polish LOT, Swiss and
Portugal`s TAP airlines. In July, 2009, The U.S. Department oI Transportation agreed to the ioint
venture. The U.S. Justice Department obiected to the Department oI Transportation`s granting oI
antitrust immunity to the ioint venture. The ioint venture is problematic both in regard to
saIeguarding oI U.S. control oI U.S. airlines, in this case United and Continental and also
problematic in terms oI antitrust regulations regarding monopoly as well.
This multinational ioint venture is not the only one occurring recently. In May, 2009, Delta
which had recently merged with Northwest, and Air France which is merged with Dutch KLM,
signed a ioint agreement as well. In December 2009, Australia`s Virgin Blue and Delta got the
go ahead Irom Australian oIIicials Ior a ioint agreement and in late December 2009, Japan`s All
Nippon Airways, United and Continental signed a ioint agreement, pending an OK by the U.S.
government Ior antitrust immunity Ior the agreement.
The government oI Japan asked Ior immunity Irom all U.S. antitrust laws in regard to both the
All Nippon Airways ioint agreement with United and Continental and a possible ioint agreement
with Japan Airlines and either Delta Airlines or United Airlines. Japan has linked their grant
request Ior antitrust immunity in the United States, with it`s Open Skies Treaty with the U.S.,
which would grant Japanese airlines both open skies allowances Ior Ilights in the U.S. as well as
immunity Irom antitrust violations. Germany and France as nations have also linked antitrust
immunity with their Open Skies Treaties.
The issue oI Open Skies treaties, are, in and oI themselves, problematic in regard to security
and airline competition. The Open Skies treaties allows airlines Irom a nation to Ily to any
destinations in a Ioreign nation with which they have an Open Skies agreement, as oIten as they
want, without restriction. This cuts national control over both where and how oIten Ioreign
national airlines Ily into a country. Most oI the Open Skies treaties between nations have been
signed in the last ten years, exactly the time period when more national and international airline
security has been called Ior, not less. It has also created a situation where the security required
Ior international Ilights is increased, given the increased demand.
Open Skies treaties allow Ior airlines, which previously were only allowed to originate Ilights
to a Ioreign country in their own nation, to Ily Irom one Ioreign nation to another Ioreign nation,
without originating Ilights in their nation. For example, previously an American airline such as
United could Ily Irom the United States to another country. They were not allowed to originate a
Ilight Irom a Ioreign country to Ily to another country. For instance, United could not originate a
United Ilight in Athens, Greece to Ily to Nairobi, Kenya. Given the Open Skies Treaties, nations
are now allowed to do that.
The Japanese government`s request Ior a grant oI immunity Irom antitrust regulations in the
U.S. and other countries, at the same time they sign the Open Skies Treaty, which Germany and
France have also asked to be granted in Ioreign nations, is particularly problematic given the
Ireedoms granted Ioreign airlines in Open Skies treaties and the potential Ior abuse.
In the case oI Japan Airlines, in April 2008, they pled guilty to a U.S. Justice Department
criminal Iinding oI cargo shipment price Iixing. A Iew other international airlines have also been
Iound guilty oI price Iixing in the United States as well, which illustrates the potential Ior abuse.
As well, both the ioint agreements and the airline alliances, the three maior ones being
Skyteam, Oneworld and Star Alliance, have given rise to a number oI cross national airline
mergers that have served to destroy Iully sovereign national airlines. Many nations in Europe
have lost their sovereign national airlines. In the case oI the Netherlands`s KLM and Air France,
the merger has served to destroy the sole sovereign national airlines. KLM and Air France also
invested heavily in Italy`s Alitalia. British Airways has merged with Spain`s Iberia Airlines.
In the case oI German LuIthansa, LuIthansa has taken over Swiss Air, Brussels Airlines,
which replaced Belgium`s Sabena Airlines, Austrian Airlines, and British Midland Airways, and
has made a signiIicant investment in Scandinavian SAS. LuIthansa has also made a signiIicant
investment in the U.S. airline, Jet Blue.
There has been recent discussion oI a merger between British Airways which is now merged
with Iberia and American Airlines. American Airlines, is the U.S.`s second largest airline carrier
aIter the recently merged Delta with Northwest, and this action would result in the U.S. losing
sovereign national control oI it`s second largest national airline.

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