Problems ahead for global airline alliance immunity

The Department of Justice recently expressed objections to the antitrust immunity agreement that nine Star Alliance carriers (plus Continental, which will be a Star member later this year) are seeking. The airlines, which include United, Lufthansa, Air Canada, SAS and Swiss (but notably, not US Airways), have been looking to obtain global immunity from antitrust laws for some time now. In April, the Department of Transportation gave the carriers a tentative green light, but last Friday, the DOJ instead called on the DOT to "deny the broad requested immunity and instead grant a more limited immunity" - probably just a more limited transatlantic cooperation.
Right now, Continental technically competes with Star Alliance members on its routes, but under the proposed immunity agreement, that competition would be eliminated. The DOJ went further in its explanation, saying that Asian and Latin American routes flown by United and Continental would probably see price increases, as the airlines would no longer be competing. And the DOJ also took fault at some transatlantic routes; Continental has a pretty extensive list of European destinations, and the DOJ said that competition on some routes between the US and some of those cities would decrease substantially.
So, what implications does this have? First, it shows that the federal government is getting more serious about enforcing anti-trust policies, especially under the new presidential administration (as had been expected). Secondly, it could have serious effects for a similar agreement that rival alliance oneworld is trying to put together, and could be in the shape of things to come for such global agreements. And the DOJ statement also goes after cooperation between United and Continental on domestic US routes; "a sweeping grant of immunity raises significant concerns about harm to domestic competition," it said - something that might indicate obstacles to a potential United-Continental merger.

photo by caribb