BA creates massive new business with US carrier

Aug 15 2008 by Iain Laing, The Journal

BRITISH Airways has signed a deal with giant US carrier American Airlines (AA) that, if approved, will create a huge transatlantic multi-route, multi-plane business.

BA said the joint business agreement, which also involves its Spanish airline partner Iberia, was good for passengers and good for the aviation industry.

But Virgin Atlantic Airways head Sir Richard Branson described the deal as a monster monopoly that would be bad for everyone.

The deal, which will involve a combined route network serving 443 destinations in 106 countries, with 6,200 daily departures, still needs regulatory approval from American and European authorities.

But BA chief executive Willie Walsh said times had changed since the failed 1997 and 2001 previous BA-AA tie-up attempts, with far more competition now possible on transatlantic routes thanks to the so-called open skies agreement which took effect in March this year.

He denied the agreement was a way for BA to introduce cutbacks and said that hearing people arguing that the deal would lead to higher fares and less competition was like “listening to a broken record”.

The deal means BA, AA and Iberia will revenue-share and jointly market on routes between USA, Canada and Mexico and the EU, Switzerland and Norway while continuing to operate as separate entities.

BA said this would help the three carriers reduce costs, attract new customers and combat high fuel prices.

The three carriers will now apply to US authorities for immunity from competition regulations – known in America as anti-trust regulations.

Mr Walsh said that rival airline alliances already had anti-trust immunity (ATI) on certain flights and that ATI should be open to the one world alliance to which BA, AA and Iberia all belong.

The three airlines will also be notifying European authorities who will have to give the agreement the green light if it is go ahead.

Walsh said: “We are not talking about cutting back. This deal is good news for consumers who will now have more choice.

“I don’t see it leading to higher prices and I think it will increase competition on transatlantic routes.”

He said he was confident the deal would be approved adding that the aviation environment had changed considerably since the two previous failed attempts by BA and AA to forge closer links.

Sir Richard said: “Make no mistake – if this monster monopoly is approved it will be third time unlucky for consumers.

“It will still be bad for passengers, bad for competition, and bad for the UK and US aviation industry.