Aer Lingus approved to join Oneworld TATL joint venture

Aer Lingus received tentative approval from the US Department of Transportation on Monday to join the Transatlantic OneWorld Immunized Alliance joint venture. The ruling, pending final approval and a similar order from the UK’s Competition and Markets Authority (CMA), will allow Aer Lingus to fully participate in the coordination of fares and scheduling with American Airlines, British Airways, Iberia, Finnair and OpenSkies. Royal Jordanian is also listed in the filing but further actions on that portion of the request remain pending.

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Heathrow Slots Still at Issue

When the oneworld JV was initially approved the carriers were required to divest certain landing slots at London’s Heathrow Airport. Delta Air Lines picked up those slots and JetBlue now wants them, arguing that they should be reallocated to a new entrant. The UK’s CMA continues to work on that issue, with the DOT consulting on that process.

The interim measures imposed by the CMA satisfy the concerns raised by Delta (that the existing commitments remain in place) and JetBlue (by providing for a tendering process for the slots), and they address the Parties’ request that we defer action on competition issues while the CMA continues its investigation.

The CMA might not act to release the slots until March 2022 at the earliest, too late for JetBlue’s current plans to launch London service in Q3 2021. But it is still the best opportunity JetBlue has to acquire Heathrow slots at a reasonable price.

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TATL Competition Considerations

In approving the application the DOT relied on data suggesting that Aer Lingus carries only a tiny fraction of the transatlantic passenger load (~3%) and that other competition, including from LCC Norwegian, remains steady.

Prior to the COVID-19 public health emergency, Aer Lingus was one of the largest transatlantic operators, after Norwegian Air Shuttle (inclusive of its affiliates referred to as “Norwegian”), that is not currently part of the three transatlantic joint ventures. While the Proposed JB will limit Aer Lingus’ disciplining potential, Aer Lingus only carries three percent of travelers between the United State and Europe. With a relatively small market share, and absent the loss of any further independent competitors with a material share of U.S.–Europe traffic, we do not expect the Proposed JB to impact competition significantly at the broader U.S.–Europe level.

The current financial predicament of Norwegian and its unlikely return to the TATL market any time soon was not enough to dissuade the DOT from approving the deal, though it did play into the Department’s decision to review the JV after 5 years instead of 10, “We note Norwegian’s struggle as of late and great uncertainty surrounding the company’s future, the recent demise of WOW air, as well as other recent transatlantic upstarts. Given this uncertainty, and the loss of Aer Lingus as an independent transatlantic competitor, we are proposing to review the Parties’ Proposed JB in five years…”

Moreover, the DOT determined that moving Aer Lingus into the joint business “would be unlikely to impact competition for 90 percent of U.S.–Europe passengers. Markets that go from three to two, or two to one competitors raise the most significant concern, and they represent less than two percent of all U.S.–Europe passengers in 100 out of a total of 5,593 markets. The remaining markets that may see a loss of a competitor will have ample competition from remaining competitors.”

The Chicago and Philadelphia to Dublin markets are significantly impacted, according to the DOT. The presence of LCCs and the growing active fleet of single-aisle aircraft that can make the TATL trip, however, tempered the DOT’s concerns sufficiently.