Press Release 2000

Star Alliance saving customers $100 million annually

Star Alliance today cited the findings of a recently released University of Illinois study on the benefits of code-sharing and anti-trust immunity as further evidence of the overwhelming customer benefits of alliances between airlines.

The study, based on international fare data compiled by the United States Department of Transportation during the third quarter of 1999, found that customers flying itineraries involving two allied carriers benefited from lower fares. In the specific case of itineraries involving two allied airlines that both code-share and hold U.S. anti-trust immunity, the result was fares that on average were 27% lower than fares where inter-airline (interline) pricing methods were employed. The study also specifically credited Star Alliance airlines with saving customers $100 million annually as a result of the combination of code-sharing and anti-trust immunity that some members of Star Alliance currently hold.

University of Illinois economist Jan K. Brueckner prepared the July 2000 study. Brueckner also predicted that if U.S. anti-trust immunity were extended in the future to airlines within Star Alliance that do not currently have it, an additional $20 million in annual savings would be generated for passengers making two-carrier trips on airlines within Star Alliance.

In the study, Professor Brueckner concluded that, "In addition to enjoying the convenience gains made possible by airline cooperation, interline passengers reap substantial benefits in the realm of pricing, paying substantially lower fares as a result of cooperative behavior." Brueckner also attributed much of the savings to the anti-trust immunity held by several members of Star Alliance, saying "The immunity enjoyed by Star Alliance partners generates an aggregate benefit of about $80 million per year for interline passengers. Code- sharing among Star partners yields a further annual benefit of around $20 million. Thus, these two existing forms of cooperation generate a benefit for the alliance's interline passengers of approximately $100 million per year."

Welcoming the results of the study, Star Alliance CEO Friedel Roedig said, "These results clearly demonstrate that the anti-trust immunity held by members of Star Alliance is resulting in significantly lower air fares. From its inception, Star Alliance has been about providing customers with access to the world through a travel experience that's as seamless as flying on just one airline. The July 2000 study shows that when the seamless standard is allowed to be extended to pricing, the flying public saves tens of millions of dollars every year."

The study attributed fare reductions on itineraries involving two allied airlines to three levels of cooperation:

Level of cooperation       Percentage fare reduction

 Code-sharing                     7%
 Alliance membership          4%
 Anti-trust immunity             16%
 Total                                 27%

Brueckner's study was based primarily on itineraries that originate or terminate in the United States and involve two allied airlines flying across the Atlantic or between the U.S. and Canada, comparing them to two-carrier itineraries from the same origin to the same destination on carriers that do not hold anti-trust immunity. Star Alliance members Air Canada, Lufthansa German Airlines, SAS Scandinavian Airlines and United Airlines currently hold anti-trust immunity.

Complete copies of the report can be obtained at http://www.brueckner-report.com/

NOTE: Professor Brueckner's study relied on United States Department of Transportation data from the third quarter of 1999. The welfare computations considered only those carriers who were members of Star Alliance as of the summer of 1999. As a result, the savings do not include the benefits of extending U.S. anti-trust immunity to carriers who joined since that time, including All Nippon Airways, Austrian Airlines Group (which comprises Austrian Airlines, Lauda Air and Tyrolean Airways), British Midland, Mexicana or Singapore Airlines.

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