United seeks deal with Continental, All Nippon Airways

An aviation agreement between the U.S. and Japan could usher in a new period of closer alliances among the major carriers in both countries.

United Airlines wasted no time in declaring that it will seek antitrust immunity for a joint venture with Continental Airlines Inc. and Japan’s All Nippon Airways in which the three would work together to set prices and flight schedules on trans-Pacific routes.

But the real drama concerns the next deal. Japan Airlines, that country’s largest carrier, is likely to seek antitrust immunity with Delta Air Lines Inc. or American Airlines, the two largest U.S. carriers.

Delta and American are already waging an unusually public fight over Japan Airlines. After Delta pledged $1 billion to prop up financially troubled JAL, American and its partners said they would invest $1.1 billion. The U.S. carriers are attracted by JAL’s strong routes in Japan and China.

The aviation deal reached late Friday by the U.S. and Japan came together during an intense round of talks this week. It still needs formal approval by both nations, and no date was announced for its implementation.

The agreement would relax limits on passenger and cargo flights between the two countries. U.S. Transportation Secretary Ray LaHood called it “good news for air travelers and businesses on both sides of the Pacific.”

“Once this agreement takes effect, American and Japanese consumers, airlines and economies will enjoy the benefits of competitive pricing and more convenient service,” LaHood said.

Japanese transport minister Seiji Maehara also welcomed the agreement, calling it “extremely meaningful,” as air traffic connecting the two countries provides the biggest aviation market for Japan.

“I hope Japanese and U.S. aviation industries would actively take advantage of the scheme to provide better service and benefits for passengers and shippers and help promote further development of Japan-U.S. aviation ties,” Maehara said in a statement.

The U.S. already has so-called open-skies treaties with about 90 countries, including European Union members and Australia. The agreements are designed to increase competition and cut fares by giving airlines more power to pick routes and set prices.

The U.S.-Japan agreement would give American carriers the chance to expand at Narita Airport outside Tokyo and compete at Haneda Airport near downtown Tokyo, according to the Transportation Department. The deal would replace a 1950s treaty that gives Delta and United more access to Japan than other U.S. carriers.

Will Ris, an American Airlines vice president, said open-skies agreements “end discriminatory aviation policies and are in the best interest of American and Japanese people as well as the nations’ airlines.”

AMR Corp.’s American has a code-sharing arrangement with Japan Airlines, meaning that the two sell seats on each other’s flights and share the revenue. But Delta is trying to break up the decade-old relationship.

JAL is likely to seek antitrust immunity for a joint venture with either Delta or American and leave the loser in a weakened position in the Japanese market.

“This agreement opens the door to antitrust immunity, which would enable Delta and Japan Airlines to engage in deeper and more effective cooperation, producing greater benefits for the carriers and their customers,” Delta spokesman Trebor Banstetter said.

Japan Airlines lauded the agreement, saying in a statement that it intended to use the deal “with a strategic U.S. partner as soon as possible, so as to seize this opportunity to strengthen our network and bring added benefits to our valued customers.”

United, which already has a deal with All Nippon to sell seats on each other’s flights, soon will file an antitrust immunity application for a trans-Pacific joint venture that also would include Continental, said Glenn Tilton, CEO of United parent UAL Corp. He said a joint venture would strengthen United’s Pacific network and give customers access to more seats and cargo capacity.

Winning antitrust immunity is no cinch, however. American is still waiting for a ruling on its bid for an immunized trans-Atlantic joint venture with British Airways and Spain’s Iberia. The Transportation Department was supposed to rule by Oct. 31.