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United Airlines, Three Carriers, Can Expand Alliance

UAL Corp.'s United Airlines and members of its Star Alliance, the world's largest airline grouping, can add three new carriers with antitrust immunity, the U.S. Transportation Department said.

The three are Swiss International Air Lines Ltd., which is being taken over by Deutsche Lufthansa AG (LHA); Polskie Linie Lotnicze LOT SA, Poland's national airline; and TAP SGPS SA, Portugal's state-owned carrier.

Government approval, which is not yet final, would let a total of eight airlines in North America and Europe act more like a single carrier, coordinating routes, fares and marketing, without fear of antitrust prosecution. The alliance has 16 international carriers, according to the department.

``The proposed alliance expansion will enhance competition,'' Andrew Steinberg, the assistant transportation secretary for aviation and international affairs, said in the decision today in Washington. The alliance also will expand airline service, he said.

The decision also expands United's existing antitrust immunity with ACE Aviation Holdings Inc. (ACE/H)'s Air Canada (AC/A) to all international operations. Previously, United and Air Canada had antitrust immunity only to cooperate on flights between the U.S. and Canada.

Along with United and Air Canada, the three newcomers have antitrust immunity to cooperate with Lufthansa, Austrian Airlines Group, owner of the country's largest airline, and SAS Group's Scandinavian Airlines, the Nordic region's biggest carrier.

American, Continental

The decision is a defeat for AMR Corp.'s American Airlines and Continental Airlines Inc. American argued that antitrust immunity for the carriers would reduce competition at major European hubs. Continental said the alliance would enhance market power in the U.S.-London and U.S.-Poland markets.

The Transportation Department instead found that the immunized alliance would boost competition with other large airline alliances such as SkyTeam and oneworld.

The Star Alliance carriers told the department the addition of the three airlines would add service to 25 cities, and the expansion of the United-Air Canada alliance would add 59 more.

``It enables us to cooperate more closely and efficiently with our Star Alliance partners,'' said Robin Urbanski, a spokeswoman for Elk Grove Township, Illinois-based United. ``We can offer our customer more international service options.''

The Transportation Department will take comments for 21 days before making the decision final.

To contact the reporter on this story: John Hughes in Washington at jhughes5@bloomberg.net

To contact the editor responsible for this story: Dave Versical at dversical@bloomberg.net

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