OneWorld airline alliance hits E.U. turbulence, Star and SkyTeam may be next

The long-sought antitrust immunity between British Airways, American Airlines and Iberia for their OneWorld alliance has hit another patch of turbulence with the E.U. as they attempt to gain the same interoperability enjoyed by competing Star Alliance and SkyTeam.

For years and through two previous AA/BA antitrust immunity applications, the E.U. and U.S. regulators have faced problems with the two airlines’ control of Heathrow Airport. But now, some insiders say the tie-up with Iberia has added to some new antitrust concerns

For years, Virgin Atlantic who competes with BA in and out of Heathrow has been adamant against the fruition of this alliance. They have repeatedly stated, “Virgin Atlantic would expect the Commission to find that the proposed alliance would damage competition and consumer interests on all six of the routes from [London] Heathrow to the US on which BA and AA both operate currently. These include Heathrow to New York JFK on which BA and AA together would control 62 percent of all capacity and would have an unassailable grip on time-sensitive premium passengers.”

In the U.S., the OneWorld alliance is the only one of the three major alliances that has not received the blessing of the Department of Transportation (DOT).

SkyTeam with Delta and Air France-KLM as the leading airlines, is in the midst of actually setting up a joint venture that will lead to the closest cooperation possible — bordering on a separate international airline without U.S. domestic rights.

The Star Alliance anchored by Lufthansa, United and (soon) Continental has been exchanging international marketing information and coordinating flights for years. They even have a livery painted as Star Alliance. From the paint job, one wouldn’t know whether they were getting aboard a United, USAirways or Lufthansa plane.

But these alliances are not out of the regulatory woods yet. The FAA Reauthorization Bill passed by the House of Representatives has a controversial “sunset provision” (H.R. 831) that would require a re-examination of the current airline alliances. And the E.U. has signaled that their investigators still are not finished looking at the other two major alliances.

The EC competition watchdog said it had sent a charge sheet to the three airlines. Since April, it has also been investigating similar deals between the 24 members of the rival Star Alliance – including BMI, United (UAUA) and Lufthansa (LHAG.DE) – as well as the SkyTeam partnership of 11 airlines including Air France-KLM (AIRF.PA), Delta (DAL) and Aeroflot (AFLT.RTS). It has yet to move on either inquiry.

Obviously the international alliance game is still afoot.

OpenSkies, once branded as the ultimate competition machine, designed to break the decades-old system of bilateral airline agreements, has not kicked into full gear because of the world’s economic problems. Someday, when funds become available and passengers begin to travel in greater numbers, airlines will be able to focus on more point-to-point routes.

Here at home, the DOT approves alliance antitrust immunity based on phantom customer service improvements and the Department of Justice continues to focus on loss of competition. In the wings congressmen are harboring serious concerns about the growth of airline alliances and their effect on suppliers and airports as well as passengers.