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U.S. Clears Continental for Alliance

Rep. James Oberstar, (D.-Minn.) and chairman of the House Transportation Committee, also a strong opponent of alliances, recently introduced legislation that would require a study of their impact, potentially leading to their dissolution. On Thursday, Oberstar released a letter backing the Justice Department objections, arguing that "the granting of antitrust immunity is a de facto merger of these airlines over the routes involved (and) when immunity is granted to an alliance, there is a substantial decline in competition."

Yet, the case is often made that if airlines are monopolistic fare-gougers, they are not so good at it. The U.S. airline industry has losses (excluding one-time accounting adjustments) of $34 billion since 2000, and will likely lose money this year as well. Since 1978, while the consumer price index has risen by 230%, the cost of domestic air travel has increased by just 63%, according to the Air Transport Association.

Bill Swelbar, a research engineer in MIT's International Center for Air Transportation, says the clearly evidenced value of alliances should overwhelm any objections.

"Everything about opposing alliances takes me back to the law of unintended consequences," Swelbar says. "Alliances deliver to the consumer a much more convenient travel experience, and also create jobs: At any of the big airlines, there are 50 to 80 domestic airplanes that feed the international flights (enabled by) alliances. Yet some people want to put the brakes on them."

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