8.3 Cooperative Agreements Code Sharing And Alliances

kenty9x | November 27, 2020 | 0

The parties to the immunized EC also argue that seat management in a metallurgical-neutral joint venture, which has a common end result, is improved. In the absence of immunity, airlines may prefer to assign seats to your own passengers rather than Alliance passengers to maximize revenue. A joint venture with a revenue pool will eliminate these incentives. (23) This argument overlooks two issues. The first is that sophisticated inventory management systems can be programmed to avoid this problem, as many unimmunized JVs have shown. The second problem is the assertion that the common quintessence will solve this problem. A joint venture is not a merger and the participants remain separate companies that share only the revenues attributable to the lines included in the joint venture. In the oneworld joint venture, for example, the profit line and the common distribution of revenues cover only transatlantic funds. (24) Suppose, for example, that American plans to assign a seat on his Atlanta-Miami flight after obtaining immunity in oneworld. If it sells the seat to an Atlanta-Miami-London passenger, it must share the revenue with its oneworld partners, since the line is included in the oneworld agreement. If it sells the seat to a passenger in Atlanta-Miami or Atlanta-Miami-Bogota, it retains all its revenues, because those lines are not in the JV oneworld.

Therefore, even if the Atlanta-Miami-London passenger is willing to pay a higher price for the seat, so americans may not have a commercial incentive to sell the seat to that passenger, even if that would maximize consumer welfare. An alternative to immunity has often been used for years by unimmunized carriers. Instead of strictly evaluating each route on the basis of the revenues each airline expects to earn or lose, antitrust-free alliances generally have a simple goal: partners agree on how fares should be categorized into each other`s return management systems. Using these maps to ensure that the fares to be assessed are comparable, each airline processes partially reserved fares on its partner`s aircraft as separate fares. The airline that makes the flight receives fare revenues (but for processing fees paid to the marketing partner) and for itineraries combining flights of two airlines, the airlines distribute the revenues. Partners then form codeshare flights on their routes within the geographic area of their joint venture — just like antitrust immunity applicants. It is likely that partners expect their combined flight offerings to add sufficient value to customers on their combined routes, all of which generate higher overall revenues, even if they suffer diversion losses on a line (or passenger). This type of agreement was adopted by the national alliances between Delta, Northwest and Continental for the period 2003-2008 and United and Continental during the period 2009-2010.

(22) These airlines have successfully offered code-sharing on the routes of their combined national networks without any antitrust immunity. Dot has long stated that “U.S. foreign policy objectives are a key element of these [public] benefits (43) and many of DOT`s antitrust immunity to international alliances has been widely used for other foreign policy objectives such as open skies agreements. Thus, in conjunction with the 1993 agreement between the United States and the Netherlands, DOT granted immunity to the Alliance between Northwest and KLM, which stated that “the granting of immunity should promote competition by encouraging our efforts towards less restrictive air agreements with other European countries.” (44) The granting of antitrust immunity has probably guaranteed policy makers that decisions within an alliance will be made in the common interest of all participating air carriers, including the alliance`s small carriers. In 1996, DOT also granted immunity for alliances between United and Lufthansa and Delta, Air