The Cartels Running Up Transatlantic Airfares

Quick Overview

The high airfares on the lucrative North Atlantic aviation market stem from the fact that European and American regulators have legally approved cartels, known as joint ventures, among major airlines, effectively eliminating competition and allowing these entities to fix prices and coordinate schedules, which contrasts sharply with non-immunized partnerships that maintain price competition.

Key Points: Three major transatlantic joint ventures—United/Lufthansa, Delta/Air France/KLM/Virgin Atlantic, and American/BA/Iberia/etc.—control 75% of all Europe-bound flights from New York, acting as single colluding entities. These airlines operate under exemptions from antitrust law, specifically referencing Article 101 of the EU treaty that prohibits price fixing, because European and American regulators grant antitrust immunity based on purported public benefits. The stated public benefit justifying immunity, such as improved network reach for connecting smaller cities, was often already implemented by airlines before receiving approval, as demonstrated by United and Lufthansa coordinating networks in 1993 before applying for immunity in 1996. Non-immunized partnerships, like American's with Qatar Airways or United's with Emirates, demonstrate that network integration and schedule coordination can be achieved without antitrust immunity, resulting in genuine price competition on routes. Analysis of Italian and Spanish routes shows a clear economic trend: the more competition a route has (e.g., multiple carriers), the lower the airfares, suggesting consolidation due to immunity increases pricing power and overall fares. Dominant carriers leverage their immunized positions to aggressively drive out competition; for example, British Airways' parent company IAG launched matching routes against low-cost carrier Norwegian Air Shuttle until Norwegian's long-haul operations ceased. Regulators appear to be approving new antitrust immunity waivers based on precedent rather than public benefit necessity, following a logic of 'that's the way it's always been done,' which harms consumers.