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BA, American and Iberia sign deal

Big Slick

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BA, American and Iberia sign deal

British Airways PLC, American Airlines and Spain's Iberia SA said Thursday they have signed a revenue-sharing deal that — if approved by regulators — will see the trio set prices and share seat capacity on trans-Atlantic flights.
The airlines said that they planned to file for worldwide antitrust immunity from U.S. authorities for the deal later Thursday.
They will also notify European regulatory authorities.
The agreement is the closest alliance the trio can form under strict U.S. airline ownership laws that all but rule out a full merger.
Rival carrier Virgin Atlantic Airways has already made a pre-emptive strike against the proposal, claiming it will seriously
damage competitiveness of the lucrative trans-Atlantic route and increase fares for passengers. However, BA chief executive officer Willie Walsh argued that customers would benefit from improved connections and flight schedules. He added that current high ticket prices were being driven by surging oil prices, and discounted claims that fares
would rise as a result of the deal.
Walsh also said that closer cooperation will also help the airlines cut costs in the current difficult economic conditions.
"I believe this is also good news for the industry," he said. "It's another small step towards consolidation."
The antitrust filing to the U.S. Department of Transportation includes the trio's fellow oneworld alliance members Finnair and Royal Jordanian. BA and AMR Corp.'s American have failed in the past to win an exemption from U.S. competition laws to work more closely together because of their dominance at London's Heathrow, where the pair have more than half the capacity to and from the U.S.
However, Walsh argued that the competitive situation has changed since the "open skies" agreement between the U.S. and the European Union came into force in March, allowing airlines to fly to and from any point in the U.S. and any point in the EU.
Walsh said that he did not expect regulators to again insist that the carriers give up landing and takeoff slots at Heathrow — as they did in 2002 when the pair sought antitrust immunity — and said he was confident the deal would pass muster.
"I think the environment has significantly changed," he said.
However, Virgin Atlantic president Richard Branson said earlier this week that he had written to senators Barack Obama and John McCain to warn that the proposed alliance between British Airways PLC and American Airlines would severely damage competition on trans-Atlantic routes.
Branson said that a closer relationship between the two carriers would result in higher prices for customers and job losses on both sides of the Atlantic, adding it was "very dangerous" to believe that consolidation was the best response to the current difficult economic conditions.
An exemption from the anti-competition laws would allow BA and American to run their trans-Atlantic operations as a single
company, with cooperation on pricing and schedules — adding to the flight capacity and airline facilities they already share in the oneworld alliance.
Under the agreement, the three airlines will cooperate commercially on flights between the U.S., 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 the U.S., significantly increasing the number of destination choices that the airlines can offer customers.
"We believe our proposed cooperation is an important step towards ensuring that we can compete effectively with rival
alliances and manage through the challenges of record fuel prices and growing economic concerns," said AMR Corp. chairman and chief executive Gerard Arpey. "In addition, we believe we will be more effective competitors with greater ability to invest in our products and services."
 

CaptJax

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EU Opens Probe Into 3 Airline Alliance

European Union opens probe into 3 airline alliance
By CONSTANT BRAND Associated Press Writer
Article Launched: 08/29/2008 05:18:17 AM PDT

BRUSSELS, Belgium—The European Commission has opened an antitrust probe into a revenue-sharing deal between British Airways PLC, American Airlines and Spain's Iberia SA, a spokesman said Friday.

EU spokesman Jonathan Todd said the investigation—to see whether the pact among the three airlines violates competition rules—had been opened by regulators and did not arise from any complaints filed.

"It is not a merger investigation and has no specific deadline," Todd said, but added EU officials will conclude their investigation as soon as possible.

If approved, the airlines will set prices together and share seat capacity on trans-Atlantic flights.

The arrangement is the closest alliance the trio can form under strict U.S. airline ownership laws that all but rule out a full merger. It follows two earlier failed attempts by BA and Fort Worth, Texas-based AMR Corp.'s American to forge closer ties.

Rival carrier Virgin Atlantic claims the deal will seriously damage the competitiveness of the lucrative trans-Atlantic route and increase fares for passengers.

"The proposals would create a monster monopoly, which would mean that BA/AA and Iberia would be way too dominant on key routes into and out of Heathrow airport," said Virgin Atlantic chief executive Steve Ridgway. "We all know that monopolies never work in the consumer's favor."

The three airlines argue that their deal, which includes the fellow Oneworld alliance members Finnair and Royal Jordanian, would allow them to compete more effectively with other major airline alliances Star and SkyTeam, which already have antitrust immunity on trans-Atlantic flights.

BA and American Airlines have failed in the past to win an exemption from U.S. competition laws to work more closely together because of their dominance at London's Heathrow, where the pair have more than half the capacity to and from the United States.

An exemption from the anti-competition laws would allow BA and American to run their trans-Atlantic operations as a single company, with cooperation on pricing and schedules—adding to the flight capacity and airline facilities they already share in the oneworld
 

CaptJax

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BA, AA Dispute Their Dominance at LHR

BA, American dispute their dominance at Heathrow
AP ONLINE
Posted: 2008-09-03 17:38:00

DALLAS (AP) _ British Airways PLC and American Airlines, seeking antitrust immunity for a trans-Atlantic alliance, dispute a rival carrier's claims that they dominate traffic in and out of London's Heathrow Airport.

In a filing Wednesday with the Department of Transportation, American and BA said Virgin Atlantic Airways overstated the AA-BA strength on some routes.

American, the largest U.S. carrier, and BA want antitrust immunity so they can work together on pricing and scheduling of trans-Atlantic flights.

Virgin opposed the request, saying it would hurt competition. Virgin claimed that American and BA carry 66 percent of all U.S.-Heathrow traffic and 74 percent of traffic between Heathrow and New York's Kennedy Airport.

American and BA said Wednesday that the most recent data, from July, shows they have 43.6 percent of all U.S.-Heathrow bookings and 52.3 percent of JFK-Heathrow bookings. As a source, they cited booking data that is sold to airlines.

BA and American have failed twice before to win antitrust immunity from U.S. regulators. They argue, however, that conditions have changed since a new "open skies" agreement took effect in March let airlines fly between any points in the U.S. and the European Union.

Virgin President Richard Branson said in recent letters to the two major U.S. presidential candidates that the open-skies deal has not significantly increased competition or cut fares on routes between the U.S. and the U.K., and that the agreement could be scrapped in 2010.

Several other airlines, including UAL Corp.'s United, Continental Airlines Inc., Northwest Airlines Corp., US Airways Group Inc. and Lufthansa have asked to see secret documents filed by BA and American as part of their application, according to Transportation Department records.

Mary Frances Fagan, a spokeswoman for American, said her airline was not concerned about the requests.

"It's sort of part of the process," she said. "No big deal."

Last week, the European Commission opened an antitrust investigation into the pending revenue-sharing deal between BA, American — a unit of AMR Corp. — and Spain's Iberia SA.
 

CaptJax

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AA Pilots Protest Deal With BA

American Airlines pilots protest deal with BA
AP ONLINE
Posted: 2008-09-17 16:00:00

FORT WORTH, Texas (AP) _ The union representing American Airlines pilots asked the federal government Wednesday to delay a decision on the carrier's proposed closer alliance with British Airways to consider the deal's effect on job outsourcing and competitiveness.

Union President Lloyd Hill said American must negotiate with the union first, and that under the union contract an American Airlines pilot must fly the plane on any trip that generates revenue for the carrier.

There are exceptions, such as for commuter airline affiliate flights, but they don't apply to the BA deal, union officials said.

The Allied Pilots Association asked for speedy arbitration in the dispute over terms of the proposed alliance between American, BA and three other airlines.

The union represents about 7,900 active pilots at American, said spokesman Karl Schricker.

The union told members that its labor contract prohibits American, a unit of AMR Corp., from having financial and operational arrangements with other airlines without negotiating first with the union.

Such disputes over "scope," as it's called in the airline business, are critical to unions because of fears that members' jobs could be farmed out to other carriers.

American Airlines spokeswoman Tami McLallen said the alliance complied with all of the company's labor contracts. She said the union's position would undermine its goal of protecting jobs and offering more flying to pilots.

McLallen said the BA deal would generate more revenue and "create opportunities for employee growth and advancement."

McLallen said the grievance would be heard by an arbitrator selected mutually by the union and company.

American and the union have been negotiating on a new contract for two years but report little progress. Talks were set to resume later Wednesday.

American and BA are seeking immunity from U.S. antitrust laws to work together in setting prices and schedules on trans-Atlantic flights. The alliance would also include Iberia, Finnair and Royal Jordanian.

The alliance with an antitrust exemption is the closest thing to a full merger that the airlines can form without violating limits on foreign ownership of U.S. airlines. The airlines are already part of the oneworld alliance, in which they sell tickets on each other's airlines and give reciprocal miles but can't work together on ticket pricing.

AMR shares fell $1.86, or 14.3 percent, to end at $11.14 after dipping briefly to $10.70. Airline shares fell sharply after oil prices rose and United Airlines parent UAL Corp. gave a disappointing preview of third-quarter earnings.
 
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