Big Slick
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- Oct 18, 2004
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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."
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."