Hawaiian Airlines’ Antitrust Request Turned Down: U.S. regulator says the benefits from increased cooperation with Japan Airlines could be secured without antitrust immunity

U.S. regulators turned down a request by Hawaiian Airlines and Japan Airlines Co. for antitrust immunity to allow them to expand their cooperation, a rare blow that could further dent the patchwork of global alliances between carriers.

The U.S. Department of Transportation on Thursday said the airlines could secure the commercial benefits from increased cooperation without the antitrust immunity they need to coordinate fares and schedules and share revenues and profits.

Airlines in the three big global alliances that dominate most markets rely on antitrust immunity for much of their cooperation, but the benefits have frayed in recent years and led some carriers to pursue alternative pacts.

Critics also argue that the arrangements inflate fares, though airlines with immunity say they expand consumer choice by offering more routes.

The application from Hawaiian Airlines parent Hawaiian Holdings Inc. was closely watched as it is the first U.S. carrier not tied to the three alliance groupings—Star, SkyTeam and Oneworld—to seek antitrust immunity. Japan Airlines is part of Oneworld, alongside American Airlines Group Inc.

Hawaiian is already under pressure from the launch of flights to and within the islands by Southwest Airlines Co. , while All Nippon Airways Co. —a member of Star alongside United Airlines Holdings Inc. —has boosted capacity to and from Hawaii using giant Airbus SE A380 jets.

Hawaii’s decision to restrict some Airbnb operations in the state has also hit travel bookings.

Hawaiian Holdings shares fell after the announcement and closed down 2.3% at $25.53 apiece.

The Transportation Department did provide tentative approval for Hawaiian and Japan Airlines to expand their existing cooperation, including selling seats on each others’ flights and other marketing ties. The two carriers had previously said they needed immunity to proceed with a new deal.

“The evidence in the case indicates that the proposed benefits from this commercial cooperation can be achieved without [antitrust immunity],” the department said.

The airlines have 14 days to respond to the department’s tentative findings.

Hawaiian said it was disappointed and planned to press its case. “The tentative decision recognizes the consumer benefits of our joint venture, but it overlooks the importance of antitrust immunity that major global airline alliances already enjoy, harming a small U.S. carrier like Hawaiian by preventing it from being able to compete on equal footing,” the airline said.

Japan Airlines didn’t respond to requests for comment.

It is the first time an application has been turned down since one from American and Qantas Airways Ltd. was declined three years ago, though the carriers secured approval this year with an updated request.

American’s failure to secure antitrust approval from Chilean regulators for an expanded joint venture with Latam Airlines Group SA led the latter to dump its U.S. partner in favor of a deal with Delta Air Lines Inc.

Delta Chief Executive Ed Bastian said last week that alliances hadn’t fulfilled all of their promises, with more carriers seeking bilateral deals with other airlines outside the framework of the big groupings.