chapter  4
33 Pages

Regulatory schizophrenia

Mergers, alliances, metal-neutral joint ventures and the emergence of a global aviation cartel *
WithPaul S. Dempsey

The competitive landscape in international aviation has transformed enormously during the last decade. Airlines traditionally seek an antitrust clearance for their strategic intercarrier alliances. However, aviation regulatory policy has evolved in ways that are arguably anticompetitive.

The regulators insist on ‘metal-neutral joint ventures’ as the price of admission for antitrust immunity. Massive mergers and acquisitions also have reduced competition. In the US, seven major network airlines have diminished to three, and in the EU the British Airways, Lufthansa and Air France conglomerates have reduced network competition.

Meanwhile, many major US and EU alliance airlines complain about the alleged subsidies received by airlines from the Middle East, which operate from countries without state aid prohibitions, and seek a roll back from the ubiquitous, ‘open skies’ bilateral air transport agreements with the United Arab Emirates (UAE) and Qatar. Airlines are also immune from GATS antidumping prohibitions. The result is a regulatory mess with no clear solutions.