Star Alliance Saving Customers $100 Million Annually

New University of Illinois study cites code-sharing and anti-trust

immunity enjoyed by allied airlines with lower airfares for consumers

flying two-carrier itineraries

Air Canada (AC.TO) and its Star Alliancepartners 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, Air Canada Vice President, Marketing, Danielle Poudrette said, ``These results clearly demonstrate that in addition to the wider network access and seamless service benefits that customers of Star Alliance have enjoyed for the past three years, the anti-trust immunity held by members of Star Alliance results in an attractive, competitive fare structure that benefits the consumer.''

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%

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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.

A full copy of the report can be obtained at www.brueckner-report.com. Current members of Star Alliance members are: Air Canada, Air New Zealand, All Nippon Airways, Ansett Australia, Austrian Airlines Group (which comprises Austrian Airlines, Lauda Air and Tyrolean Airways), British Midland, Lufthansa German Airlines, Mexicana, Scandinavian Airlines System - SAS, Singapore Airlines, Thai Airways International, United Airlines and VARIG Brazilian Airlines. The Star Alliance network offers more than 9,200 daily flights to more than 800 destinations in 130 countries. Star Alliance's Internet address is www.staralliance.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.