US Transportation Dept. tentatively denies Delta-Virgin Blue alliance on Australia flights

Wednesday, September 8, 2010

DOT plans rejection of Delta-Virgin Blue alliance

MINNEAPOLIS — Plans by Delta Air Lines Inc. and affiliates of Virgin Blue Group to collaborate on flights between the U.S. and Australia suffered a setback on Wednesday, with the U.S. Transportation Department saying it expects to deny their request.

Delta currently flies only between Sydney and Los Angeles. UAL Corp.’s United Airlines and Australian carrier Qantas currently dominate the flight schedule between the two countries.

Delta and Australian budget airline Virgin Blue wanted permission to coordinate fares and schedules, and to share money from the flights. Usually, antitrust laws would block that kind of collaboration, but airlines can get permission in some cases for joint ventures if they can show that consumers will benefit. Australian authorities approved the proposal in December.

However, the Transportation Department said the airlines have not shown that the alliance would provide enough benefits for travelers such as lower fares or increased capacity. Also, the DOT said that Delta and Virgin Blue plan to limit their cooperation to the largest routes between the U.S. and Australia, limiting the benefit for travelers.

The two “have virtually no experience as commercial partners and employ business processes that they admit are not compatible,” the DOT order said. “They have only just begun to explore the feasibility of arms-length cooperation, much less the degree of cooperation that requires, or would merit, a grant of antitrust immunity.”

The airlines have two weeks to object.

“We strongly believe our proposed alliance with the Virgin Blue Group will be good for consumers,” Delta said in a written statement. “We are reviewing the DOT’s tentative order and will respond within the comment period.”

will not be displayed