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American Airlines has announced that it will be seeking regulatory approval to enter into a Joint Business agreement with the South American airline group LATAM. The airlines also intend to file for antitrust immunity from the US DOT and the “appropriate authorities in South America”
According to American Airlines:
[T]he JB will enhance the existing strategic partnership between American and LATAM allowing closer commercial cooperation that will provide significant benefits for consumers. They include:
- Expanded network offerings, with access to more routes, frequencies and destinations
- More competitive fares
- Increased choices for customers
- Seamless connectivity
Those comments from American Airlines raise a few questions:
How, exactly, will antitrust immunity and a Joint Business agreement offer “more competitive fares”? Whichever way I look at it that statement seems nonsensical.
Although LAN is a member of the OneWorld Alliance it still competes with American Airlines on various routes between the US and South America so I fail to understand how a JB between the two airlines will create more competitive fares.
If anything, should the JB be allowed, it will reduce competition on South American routes just like American Airlines’ Joint Venture with British Airways reduced competition on trans-Atlantic routes. That’s the whole point of JBs/JVs and anti-trust immunity. No airline wants increased competition on its routes. Ever.
How will the JB give customers “increased choices”?
LATAM already has its own South American route network as does American Airlines and, as there’s no mention of new routes being opened up, I’m not clear on what exactly the increased choices are.
Doug Parker (American Airlines CEO) said the following:
Customers will gain seamless access to more frequent and convenient schedule options than either carrier could offer individually. In the eight countries covered by this new joint business agreement, customers will have access to nearly 330 destinations, including 100 more South American destinations than American’s network serves today.
I’m happy to concede that customers my benefit from better scheduling if American and LATAM work more closely together but, thanks to the OneWorld alliance, don’t American Airlines flyers already have access to the “100 more South American destinations” that Mr Parker is referring to?
Bottom Line
Aside from better scheduling I’m not sure that there’s any reason for consumers to get excited about this. Joint Business agreements are never made with the customer in mind, it’s all about making more money for the airlines. With two of the major carriers between the US and South America joining forces, competition on routes to South America will decrease and not increase as the airlines would like us to believe.
Yes, there may well be more codeshare flights between the two entities but will that really make up for the reduced level of competition? I doubt it.
American Airlines and LATAM can spin this whichever way they like but, the truth is, most benefits that a JB brings to consumers will either be at the expense of benefits elsewhere (price competition) or will be lucky byproducts of the airlines looking to make more money. They’re not doing this for us.
