Posted by: Kerry Capell on August 14
British Airways, American Airlines and Spain’s Iberia have applied for antitrust immunity from American and European regulators. If successful, the three airlines will be able to coordinate schedules, fares and marketing as well as share revenues and profits on transatlantic flights.
Under the joint business agreement, the three airlines and fellow oneworld alliance members Finnair and Royal Jordanian Airlines will cooperate commercially on flights between the United States, Mexico and Canada, and the European Union, Switzerland and Norway while continuing to operate as separate legal entities. They will expand their codeshare arrangements on flights within and beyond the EU and U.S., significantly increasing the number of destination choices that the airlines can offer customers, BA said in a statement.
BA, which less than two weeks ago announced its intention to merge with its Spanish rival, is hoping it will be third time lucky. BA and American’s two previous applications for antitrust immunity in 1997 and 2001 failed when the airlines refused to sell off lucrative slots at London’s Heathrow Airport as regulators requested.
Now BA CEO Willie Walsh believes the advent of Open Skies in March has changed the game. The treaty, which opened up competition on transatlantic routes, enables any European or American carrier to fly from anywhere in the European Union to anywhere in the U.S.
With Heathrow now open to competition and BA’s main rivals in Europe Air France KLM and Lufthansa already granted antitrust immunity for similar cooperation arrangements, Walsh says he’s confident that this latest application will be successful.
In April, six Skyteam alliance members including Air France KLM, Delta and Northwest were granted immunity for a similar venture. Meanwhile Star Alliance members Lufthansa, United and Air Canada also have antitrust immunity.
Granting antitrust immunity, BA argues, would enable oneworld airlines, including British Airways, American Airlines and Iberia, to compete more effectively with the other major airline alliances, Star and SkyTeam. BA says that the oneworld alliance holds a smaller share of the non-stop flights between the EU and the U.S.—21% compared to 35% for Star members and 28% for SkyTeam.
BA and American say approving their application for antitrust immunity will simply level the playing field. “This will enable oneworld members to strengthen their businesses at a time when unprecedented oil prices and economic slowdown have created the most difficult trading environment aviation has ever faced,” BA said in a statement.
Not surprisingly, Virgin Atlantic’s owner Richard Branson isn’t sympathetic. He’s already lobbying to block the application. He has written to both U.S. presidential candidates asking them to intervene. Branson says allowing the three airlines to cooperate more closely will be bad for consumers as it will result in higher prices and less choice. Virgin Atlantic says the joint venture will give BA and American too much control over flights from Heathrow to New York’s JFK, the two main airports linking Europe to the U.S.
But as Peter Morris, chief economist at aviation consultancy Ascend Aviation in London points out Star and SkyTeam alliance members already control a majority of the seats between their home markets and the U.S. He says that KLM Northwest control 73% of seats between Holland and the U.S., Air France controls more than 50% of seats between France and the U.S. and Lufthansa holds more than 60% between Germany and the U.S. In contrast, he notes, BA and AA control 41% of the seats between the U.S. and Britain.
Moreover, he says, there are 21 airlines now competing out of Britain to North America since Open Skies. “If any of the airlines did start to abuse that dominant position by increasing fares or reducing frequency of service, other airlines would be quick to come in and compete.”
British Airways, American Airlines and Spain’s Iberia have applied for antitrust immunity from American and European regulators. If successful, the three airlines will be able to coordinate schedules, fares and marketing as well as share revenues and profits on transatlantic flights.
Under the joint business agreement, the three airlines and fellow oneworld alliance members Finnair and Royal Jordanian Airlines will cooperate commercially on flights between the United States, Mexico and Canada, and the European Union, Switzerland and Norway while continuing to operate as separate legal entities. They will expand their codeshare arrangements on flights within and beyond the EU and U.S., significantly increasing the number of destination choices that the airlines can offer customers, BA said in a statement.
BA, which less than two weeks ago announced its intention to merge with its Spanish rival, is hoping it will be third time lucky. BA and American’s two previous applications for antitrust immunity in 1997 and 2001 failed when the airlines refused to sell off lucrative slots at London’s Heathrow Airport as regulators requested.
Now BA CEO Willie Walsh believes the advent of Open Skies in March has changed the game. The treaty, which opened up competition on transatlantic routes, enables any European or American carrier to fly from anywhere in the European Union to anywhere in the U.S.
With Heathrow now open to competition and BA’s main rivals in Europe Air France KLM and Lufthansa already granted antitrust immunity for similar cooperation arrangements, Walsh says he’s confident that this latest application will be successful.
In April, six Skyteam alliance members including Air France KLM, Delta and Northwest were granted immunity for a similar venture. Meanwhile Star Alliance members Lufthansa, United and Air Canada also have antitrust immunity.
Granting antitrust immunity, BA argues, would enable oneworld airlines, including British Airways, American Airlines and Iberia, to compete more effectively with the other major airline alliances, Star and SkyTeam. BA says that the oneworld alliance holds a smaller share of the non-stop flights between the EU and the U.S.—21% compared to 35% for Star members and 28% for SkyTeam.
BA and American say approving their application for antitrust immunity will simply level the playing field. “This will enable oneworld members to strengthen their businesses at a time when unprecedented oil prices and economic slowdown have created the most difficult trading environment aviation has ever faced,” BA said in a statement.
Not surprisingly, Virgin Atlantic’s owner Richard Branson isn’t sympathetic. He’s already lobbying to block the application. He has written to both U.S. presidential candidates asking them to intervene. Branson says allowing the three airlines to cooperate more closely will be bad for consumers as it will result in higher prices and less choice. Virgin Atlantic says the joint venture will give BA and American too much control over flights from Heathrow to New York’s JFK, the two main airports linking Europe to the U.S.
But as Peter Morris, chief economist at aviation consultancy Ascend Aviation in London points out Star and SkyTeam alliance members already control a majority of the seats between their home markets and the U.S. He says that KLM Northwest control 73% of seats between Holland and the U.S., Air France controls more than 50% of seats between France and the U.S. and Lufthansa holds more than 60% between Germany and the U.S. In contrast, he notes, BA and AA control 41% of the seats between the U.S. and Britain.
Moreover, he says, there are 21 airlines now competing out of Britain to North America since Open Skies. “If any of the airlines did start to abuse that dominant position by increasing fares or reducing frequency of service, other airlines would be quick to come in and compete.”
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