Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Department of Transportation grants antitrust immunity to Delta-Virgin Atlantic joint venture on North America-U.K. flights, (Sep 24, 2013)

By Tobias J. Gillett, J.D., LL.M.

The U.S. Department of Transportation (DOT) approved on September 23 an application for antitrust immunity filed by five airlines that will permit Virgin Atlantic Airways, Ltd. and Delta Air Lines, Inc. to operate a joint venture offering flights between North America and the United Kingdom.

The request for immunity covered a series of alliance agreements between Virgin Atlantic, Delta, Societe Air France, Koninklijke Luchtvaart Maatschappij N.V. (KLM), and Alitalia Compagnia Aerea Italiana S.P.A., including a Joint Venture Agreement between Delta and Virgin Atlantic, a five-way Coordination Agreement between the airlines, and several implementing agreements between Delta and Virgin Atlantic. The parties had argued that their proposed joint venture would provide benefits to consumers and increase competition, and their application had noted that British Airways and its joint venture partners controlled nearly 60 percent of the slots at London’s Heath Row Airport.

“We have concluded that, overall, the alliance and Joint Venture will be procompetitive and are likely to generate substantial public benefits to the traveling public,” the DOT stated in its Final Order.

The Order notes that the DOT did not receive any objections following its issuance of a show cause order with its tentative decision to grant antitrust immunity, and grants the agency’s approval of the airlines’ application subject to certain conditions. The airlines must submit subsequent agreements implementing the alliance agreements for prior approval, must resubmit the alliance agreements within five years of issuance of the order, and must obtain prior approval before offering service under a common name or brand.

Among other provisions, the Order also requires Virgin Atlantic and Delta to file statements attesting that the joint venture had been implemented pursuant to the application with a copy of the most recent Joint Venture Agreement; requires the five airlines to submit annual progress reports; requires the five airlines to abstain from participating in any International Air Transport Association tariff coordination activities that discuss any proposed through fares, rates, or charges applicable between the United States and any countries whose airlines have been or are later granted antitrust immunity to participate in a similar alliance; and requires the five airlines to report a full-itinerary Origin-Destination Survey of Airline Passenger Traffic for all passenger itineraries that include a U.S. point.

Delta-Virgin Atlantic statement. Delta and Virgin Atlantic issued a press release applauding the DOT’s decision and setting forth a new schedule for air traffic between New York’s JFK Airport and London’s Heath Row Airport. The airlines’ schedule includes seven nonstop daily flights between the airports beginning March 30, 2014, to be complemented by a further two daily nonstop flights between Newark Liberty International Airport and London Heathrow. The two airlines plan to operate a total of 32 peak daily nonstop flights between North America and the U.K., including 24 flights between London Heathrow and U.S. destinations.

“We are delighted that the Department of Transportation recognizes that the immunized partnership offers significant advantages to customers,” said Ed Bastian, president of Delta. “The freedom to cooperate fully with Virgin Atlantic will initiate a new era of greater competition in the New York to London market where it is much needed. We have a proven record in making joint ventures succeed and we look forward to building our relationship with Virgin Atlantic.”

“Today represents a huge opportunity for both Virgin Atlantic’s passengers and our business,” added Craig Kreeger, CEO of Virgin Atlantic. “Our partnership with Delta means we will be able to offer convenient aligned schedules and a much broader network, giving the best possible travel choices and on board experience to trans-Atlantic passengers. For almost 30 years Virgin Atlantic has offered an award-winning experience and service to passengers traveling across the Atlantic, and today’s ATI approval means we can build on this momentum and improve the consumer landscape at Heathrow for the better.”

Companies: Virgin Atlantic Airways, Ltd.; Delta Air Lines, Inc.; Societe Air France; Koninklijke Luchtvaart Maatschappij N.V.; Alitalia Compagnia Aerea Italiana S.P.A.

News: Antitrust