Joint ventures between airlines result in consumer benefits: CCS

A recent market study on the aviation industry in Singapore has found consumer benefits resulting from joint ventures between airlines.

The Competition Commission of Singapore (CCS) had commissioned the study, which focused on two joint ventures in particular -- the agreement between Japan Airlines and American Airlines and the one among United Airlines, Continental Airlines and All Nippon Airways.

In a statement on Tuesday, CCS noted that airline joint venture agreements are inherently anti-competitive, as they typically involve price fixing, market sharing or output limitation.

But it said there is a need to carefully assess such agreements, as they can sometimes generate substantial benefits to consumers, such as lower airfares, more choices in connectivity and better service.

When an agreement generates such benefits, CCS may grant it anti-trust immunity.

The study, which was carried out by external consultants ICF SH&E, found that the two joint ventures have resulted in higher passenger numbers and lower fares.

But the improvements were smaller than those reported in Western literature on airline joint ventures in the US and Europe.

In particular, the significant drop in passenger fares found in literature based on US flight data were not replicated in the joint ventures formed in, or operate in, Singapore and the Asia Pacific region.

Still, the agreements resulted in other benefits such as improved flight schedules and increased capacity.

CCS said to date, it has reviewed eight airline joint ventures agreements, with the consideration that any substantial lessening of competition should be carefully weighed against the extent of consumer benefits that the agreement may generate.

It said it will continue to monitor developments in the aviation market in Singapore.

More information on the study may be found at the CCS website.

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