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Airline Alliances Draw Hill Scrutiny

By Sholnn Freeman
Washington Post Staff Writer
Friday, January 9, 2009

Senate Judiciary leaders have expressed concern about attempts by two U.S. airlines to form alliances with overseas carriers.

In a letter addressed to Attorney General Michael B. Mukasey and Secretary of Transportation Mary Peters, Sen. Patrick J. Leahy (D-Vt.), chairman of the Judiciary Committee, said such alliances, if not properly scrutinized, could undermine free-market competition and lead to higher prices for air travelers.

Leahy sought to persuade the antitrust division of the Justice Department to take a more active role in the review process. The committee's top Republicans, Sens. Arlen Specter (Pa.) and Orrin G. Hatch (Utah), signed the letter, as well as Sen. Herb Kohl (D-Wis.).

Continental Airlines is seeking immunity from antitrust rules so it can partner with United and Lufthansa on flights between the United States and Europe, and eventually on routes to Latin America and Asia. In the other application, American Airlines is seeking immunity to enter into an alliance with British Airways and the Spanish carrier Iberia on transatlantic flights.

Without clearance from U.S. regulators, the airlines would be breaking U.S. laws that forbid airlines from sharing information on scheduling and ticket pricing.

The Transportation Department has the authority to lead reviews of antitrust applications, while the Justice Department has the right to file comments.

The letter asked regulators at the Transportation and Justice departments to grant antitrust immunity "sparingly" and only in "extraordinary cases." Spokesmen at both agencies said officials planned to respond to the Senate letter but declined to comment further.

Battles over antitrust immunity and industry alliances are becoming increasingly common in Washington. Airlines view immunized alliances as a one of the few tools they have to bring about business cooperation across borders.

Labor unions, though, want to slow such cooperation, fearing that it would lead to industry consolidation and eliminate U.S. jobs. Bob Coffman, chairman of the governmental affairs committee of the Allied Pilots Association, said the views of the Justice Department's antitrust division have been largely ignored in recent years.

The Transportation Department's authority to review airline antitrust applications dates to industry deregulation in the late 1970s when lawmakers were looking for ways to streamline airline mergers within the United States.

Coffman said U.S. regulators were allowing "multi-national networks and virtual mergers" that far exceed the intent of 1970s-era regulations. He said peeling back antitrust protections was the first step to "global consolidation where all passengers and cargo would be handled by a few companies."

In the past month, the Transportation Department has pressed American Airlines for more details about its plans for an alliance with British Airways. The department has closed the fact-finding phase in the Continental case, although it has yet to announce a final decision.

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