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Norwegian competition prompts US approve Aer Lingus join oneworld

The United States Department of Transportation (DoT) announced tentatively approving Aer Lingus to join the oneworld alliance and antitrust immunity. The Irish airline would join British Airways and Iberia, its International Airlines Group (IAG) (IAG) counterparts, in oneworld.

Aer Lingus would also be included in the Atlantic Joint Business Agreement (AJBA) that American Airlines (A1G) (AAL), British Airways, Finnair Iberia, and LEVEL are already a part of. All aforementioned airlines are part of the oneworld alliance. In joining the alliance fully, the Irish airline would integrate the planning, pricing and sales activities with other alliance and AJBA members.

In order for the DoT to fully green light Aer Lingus’ plans, all involved parties must continue to comply with regulations, initially laid out by the European Commission (EC) in 2010. The investigation was continued by the United Kingdom’s Competition Market Authority (CMA), since the joint venture covers six routes, five of which are in the UK, in addition to Brexit.

Non-existent competition?

While compliance with slot remedies at London Heathrow Airport (LHR) was one of the reasons why the DoT approved Aer Lingus’ newest business development, the competition was another.

According to the department’s analysis, the Irish airline had a 44% share of the marker between the US and Ireland prior to the outbreak of COVID-19, specifically during Q1 2019. If it were to join oneworld, the joint-market share would grow to 60%.

“However, with the combination of Aer Lingus with the Existing JB carriers, four carriers remain in the market, with the second-largest carrier being Norwegian, a low-cost carrier (LCC) that has shown an aggressive ability to challenge established carriers in the transatlantic market with its low-fare pricing model,” argued the DoT.

Norwegian, already prior to the current coronavirus outbreak, ended transatlantic services from Ireland in August 2019. The low-cost carrier cited the fact that the Boeing 737 MAX groundings, coupled with high wet-lease rates to replace the grounded aircraft, were the reasons why it was doing so.

The US government agency further argues that with the introduction of such aircraft as the Boeing 737 MAX and the long-range derivatives of the Airbus A321neo the competition will only intensify. In addition, “the presence of an LCC with substantial market share pre-COVID, the relatively low barriers to entry that will be further reduced, and the presence of three other competitors to Aer Lingus,” continued the DoT’s competition analysis.

JetBlue (JBLU) could be used as one example. The New York-based low-cost carrier has massively increased its presence on the East Coast and has set its eyes on launching flights from New York to London, its first entry into the transatlantic market. Utilizing the long-range A321neo derivatives, hints of services to other cities are also seemingly there. However, the airline has had an airline partnership agreement with Aer Lingus since 2008. In 2013, the partnership was expanded to a codeshare agreement, further streamlining the experience for both airlines’ customers.

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