BA, American Airlines seek tie-up

15-08-2008

BA, American Airlines seek tie-up
British Airways, American Airlines and Iberia are seeking regulatory permission to form a close alliance that will effectively be a merger on their transatlantic flights.

Iberia recently announced intentions to merge with British Airways (BA) to cope with the economic downturn by pooling their resources, while BA has been attempting to strike a deal with American Airlines for years, but has been thwarted by US anti-trust laws.

Willie Walsh, British Airways' chief executive, said: "This strategic relationship strengthens competition by providing consumers with easier journeys to more destinations with better aligned schedules and frequencies."

Under the joint business agreement, the three airlines will cooperate commercially on flights between the US, Mexico and Canada, and the EU, Switzerland and Norway while continuing to operate as separate legal entities.

The agreement will mean customers will have better connections, improved flight schedules and enhanced frequent flyer benefits, according to the companies.

However, Virgin Airlines is opposed to a strengthening of the alliance between BA and American Airlines, claiming diminished competition will be harmful to consumers.

Richard Branson, Virgin's head, has already written to US presidential candidates Barack Obama and John McCain asking for their help in blocking the deal.

The regulatory framework governing airlines is complex. Normally companies are not allowed to cooperate under anti-trust laws, but some airlines are given anti-trust immunity to form alliances.

The main alliances are Star Alliance, Sky Team and Oneworld, which BA and American Airlines is part of. Alliances allow customers to book with one carrier but fly on another airline, making journeys with several stages easier.

BA claims the Oneworld alliance has been at a competitive disadvantage to the other groups, as authorities have not given the company anti-trust immunity to cooperate with American Airlines closely enough.

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