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BA links with AA and Iberia on transatlantic flights

[August 15th 2008]

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British Airways has signed a joint business agreement with American Airlines and Spanish airline Iberia on flights between Europe and North America.

Under the agreement, the airlines will cooperate commercially on flights between the US, Mexico and Canada, and the EU, Switzerland and Norway. "The joint business agreement will enable the airlines to reduce costs and attract new customers, helping to mitigate pressure on fares from record fuel costs. This means that the airlines will have greater ability to invest in their products, services and fleets," BA said in a press statement.

The airlines have filed for worldwide anti-trust immunity in the US and are notifying the regulatory authorities in the EU. All three are members of the oneworld airline alliance, together with Finnair and Royal Jordanian, also included in the US immunity application. The other two major worldwide air alliances, Star alliance and SkyTeam, already have transatlantic anti-trust immunity.

"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 Gerard Arpey, chairman and chief executive of AMR Corp, parent company of American Airlines.

Iberia chairman and chief executive, Fernando Conte, says the agreement "will increase competition as the three global airline alliances will play under the same rules".

But rival airline, Virgin Atlantic, says the tie up between BA, AA and Iberia would reduce competition on transatlantic routes and lead to higher air fares. “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," blasts Virgin president, Sir Richard Branson.

Virgin claims that BA and AA would have 60% of the market on flights between Heathrow and the US. "Open Skies has not delivered the greater competition that was promised because Heathrow is full. BA/AA and Iberia would still be unacceptably dominant, with nearly half of all of the slots at Heathrow, leaving competitors powerless to take them on," Branson claims.

Commenting on Sky News, airline expert and senior strategist at BGC Partners, Howard Wheeldon welcomed the agreement and said that Virgin Atlantic could still compete by linking with Star alliance, which already includes its part owner Singapore Airlines plus United Airlines and bmi, and has 35% of the US/EU market.

Written by: Nick Purdom


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