International Aviation:

Airline Alliances Produce Benefits, but Effect on Competition Is Uncertain

RCED-95-99: Published: Apr 6, 1995. Publicly Released: May 5, 1995.

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GAO provided information on marketing alliances between U.S. and foreign airlines, focusing on: (1) their effect on consumers and airlines' traffic flows and revenues; and (2) key issues that the Department of Transportation (DOT) needs to address.

GAO found that: (1) alliances between U.S and foreign airlines have increased ridership and revenues for partners; (2) the impact of an alliance on other U.S. airlines depends on the alliance's geographic scope, other airlines' competitive response, and the extent to which competition between that alliance and the other airlines stimulates new traffic; (3) consumers benefit from the conveniences that alliances provide, although it is unclear how alliances will affect fares; (4) DOT has not required airlines to report sufficient data to monitor the alliances' effects on competition; (5) DOT has not determined whether antitrust immunity should be available for alliances in markets that allow for increased access for U.S. airlines; and (6) DOT has not limited code sharing, or multiple listings of the same flight, which gives airlines in an alliance a competitive advantage.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: The Secretary of Transportation should prohibit more than two listings of the same code-share flight in computer reservation systems (CRS).

    Agency Affected: Department of Transportation

    Status: Closed - Not Implemented

    Comments: On September 10, 1997, DOT sought comments on a proposed rulemaking on whether and how CRS rules should be changed. However, the DOT rules did not specifically address restricting multiple screen listings for code-share flights. DOT's final rulemaking (Docket OST-96-1145 and 1639) also did not include any restrictions on multiple listings. According to a DOT attorney responsible for CRS rules, DOT has never proposed rules restricting the number of flight listings.

    Recommendation: The Secretary of Transportation should examine, in light of the Northwest/KLM experience, whether antitrust immunity should be potentially available for other alliances in markets that allow for significantly increased access for U.S. airlines.

    Agency Affected: Department of Transportation

    Status: Closed - Implemented

    Comments: DOT concurred with GAO's recommendation and is analyzing whether immunity should be potentially available for other alliances in markets that allow for significantly increased access for U.S. airlines. DOT has granted immunity with some conditions to four requests and, as of August 1, 1996, two others are in process. Any further requests for antitrust immunity will be analyzed by both DOT and Justice for their competitive effects

    Recommendation: The Secretary of Transportation should direct the agency's new economic unit to analyze existing DOT data and the data obtained on code-sharing alliances to determine if U.S. consumers and the aviation industry have been significantly affected in a negative way before reapproving all strategic code-sharing alliances and any other alliance that the Secretary deems significant.

    Agency Affected: Department of Transportation

    Status: Closed - Implemented

    Comments: DOT concurred with the recommendation and has continued to monitor the existing major alliances using confidential data supplied by the airlines. Also, DOT has commissioned an update of the original code-sharing study. As new data are collected, they will be incorporated into the analysis.

    Recommendation: The Secretary of Transportation should require, either by regulation or by conditioning the approval of code-sharing alliances, that foreign airlines involved in code-sharing alliances with U.S. airlines report data on their code-share traffic to DOT.

    Agency Affected: Department of Transportation

    Status: Closed - Implemented

    Comments: The Bureau of Transportation Statistics now collects origination and destination passenger data into and from the United States from foreign carriers that code-share with U.S. carriers.

    Recommendation: The Secretary of Transportation should require that U.S. airlines, as part of their regular reporting of traffic data to DOT, identify passengers that travelled on code-share flights and that they take steps to ensure that they report which airline actually operated those flights.

    Agency Affected: Department of Transportation

    Status: Closed - Implemented

    Comments: DOT has revised its reporting requirements to require airlines to identify passengers who traveled on code-share flights and the airlines that actually operated those flights.

    Recommendation: In limiting the number of CRS listings of the same flight option to two, the Secretary of Transportation may wish to examine whether an exception should be granted for alliances with three partners so that each partner may list a given flight as its own.

    Agency Affected: Department of Transportation

    Status: Closed - Not Implemented

    Comments: On September 10, 1997, DOT sought comments on a proposed rulemaking on whether and how CRS rules should be changed. However, the DOT rules did not specifically address restricting multiple screen listings for code-share flights. DOT's final rulemaking (Docket OST-96-1145 and 1639) also did not include any restrictions on multiple listings. According to a DOT attorney responsible for CRS rules, DOT has never proposed rules restricting the number of flight listings.

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