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Are you paying too much for that flight to France?

Yes, but maybe not for the reason you thought.

Authorities had generally looked benignly on airline alliances, apparently swayed by arguments that the benefits to passengers that come from shared flight codes, coordinated frequent flier programs and combined lounge access generally outweigh competition worries.

Just this month, the U.S. Department of Transport granted tentative antitrust immunity to Continental Airlines joining a joint-venture with Star Alliance partners Lufthansa, Air Canada and United Airlines. However, such moves by the airlines to take their cooperation to higher levels are raising alarms.

The DOT is seeking more information about a proposed closer link between Oneworld members including British Airways, American Airlines and Spain’s Iberia. BA’s preeminent position at Heathrow, Europe’s busiest airport, has raised particular concerns. Back in 2002, an attempt to link BA and American was thwarted by DOT demands for concessions at Heathrow.

The EU antitrust office says the level of collaboration among the Star Alliance quartet and the three Oneworld members is “far more extensive” than is usual, involving plans to “jointly manage schedules, capacity, pricing and revenue management.”

The airlines have denied infringing the rules and say they will cooperate with the probe. However, critics contend that the alliances could be circumventing merger controls and rules limiting foreign investment in airlines.

“The concern is that you end up with some kind of complex monopoly,” Cunningham said. “If you’re going to have a merger then it has to got through the proper merger procedures. Merger by stealth is not acceptable.”

U.S. legislation prevents foreign investors from taking more than a 25 percent stake in American carriers, while European rules limit non-EU investment to 49 percent of airlines based within the 27-nation bloc.

European officials are hoping negotiations due to resume in June will lead to a relaxation of the foreign investment rules and allow European airlines to operate domestic routes in the United States by broadening the 2007 “Open Skies” agreement, which liberalized trans-Atlantic aviation markets.

Todd, the EU spokesman, said the Open Sky principles would be undermined if the alliances were permitted to stifle competition. “The whole point of the Open Skies is to increase competition and if you allow airlines to fix prices then potentially you’re neutralizing those benefits,” he told GlobalPost.

Although there is no deadline for the EU probe, such investigations generally last at least two years, although the airlines could cut it short with concessions to allay the antitrust concerns.

Meanwhile, travelers are unlikely to notice any immediate changes. The economic recession has driven ticket prices down despite the fears of price-fixing.

“The airlines are in such distress, there is so much over-capacity around and therefore there is such cheap pricing available that it’s difficult to establish there is very much price-fixing going on per se,” Cunningham said.

More GlobalPost Dispatches on regulation:

Branding American regulation

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