David Robertson, Business Correspondent
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British Airways and American Airlines announced plans yesterday to reshape the airline industry with a deal that could herald the creation of a supercarrier.
BA and AA have applied to regulators in the United States and Europe for antitrust immunity that would permit them to combine their route networks, pricing, sales, marketing and purchasing power. Iberia, the Spanish airline; Finnair and Royal Jordanian are included in the submission but are secondary players.
All five carriers are members of oneworld, a marketing group that allows airlines to sell connecting flights offered by other members. The new alliance would go much farther:
- BA and AA would no longer compete against each other on key routes; rather than offering head-to-head flights, they would spread them to provide greater flexibility.
- Passengers would be offered both BA and AA fares when they booked.
- Frequent-flyer miles would be honoured throughout the alliance, enabling passengers to redeem BA miles with AA, for example.
- There would be cost-saving opportunities through the bulk purchase of fuel, aircraft and ground services.
Ownership of the airlines would not change, although the proposed alliance is regarded as a precursor to a full merger, should the US Government amend its rules on the foreign ownership of domestic airlines. BA and Iberia are already engaged in talks on a full merger.
Willie Walsh, the chief executive of BA, said: “This will allow us to combine our networks so we can sell a greater range of destinations to passengers.” This is the third attempt by BA and AA to join forces. The previous efforts, in 1997 and 2001, failed because regulators insisted on the pair giving up Heathrow landing slots to reduce their dominance at the world’s busiest international airport.
Mr Walsh said that this would no longer be an issue because of the US-EU open-skies agreement that began this year, whereby any airline, in theory, can operate from Heathrow.
Virgin Atlantic has said that it will challenge the alliance on antimonopoly grounds because the proposal would make BA even more powerful over the North Atlantic.
Sir Richard Branson, of Virgin Atlantic, said: “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.”
Mr Walsh said: “Branson has been beating this drum for years. He has not come up with one new or convincing argument against this deal.”
BA noted that antitrust immunity had been granted to other airline alliances, such as Air France and Delta and United and Lufthansa, so there was no reason why its own should be blocked.
The proposed tie-up emerged on the day Washington recommended that AMR, the parent of AA, be fined $7.1 million (£3.8 million) for allegedly flying aircraft it knew needed repairs. Aviation authorities accused AMR of flying two aircraft without attending to necessary maintenance throughout last year and of having poor alcohol and drug-testing procedures.
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BA should stay BA and beat the competition instead of combining with the hope of making some super power air force one style service. Business and First class improvements are on to something, keep it that way
dave, cheltenham, uk
BA + AA + Iberia = what? Certainly a dilution of the service standards since BA will be unable to raise average AA and below-awful Iberia to its own level.
Still, I forecast massive career opportunities for Puerto Rican flight attendants on Britamberia Air :-))
JohnnyFox, London, UK
No American airline gives worse service than AA and no European airline gives worse service than BA. A marriage made in heaven?
Phil Linehan, Mexico City, Mexico
Airfares will more than likely rise as a result, but it makes perfect sense for this partnership, given the rise in oil prices and increased competition. To compete against the likes of Qatar and Emirates (who dont have the same oil costs) in the next decade, its essential there is consolidation.
Neil, Belfast, UK
AA is unquestionably the worst airline I've ever flown...and considering Delta's in that mix, that's sayng something. I agree with others here who say BA needs to get its own house back in order rather than diluting its service and brand even further.
DC, London,
What possible advantage to the consumer is combining the two most jncompotent airlines in the world. They are both famous for executive greed, arrogance and complete disdain for their customers ( or as they view them revenue units). A merger will be a disaster for passengers all over the world.
David, Dallas , US
The plea for immunity is so absurd there must be an ulterior motive.
Our response will show whether we have learned anything from BAA; and from BA's collusion with Virgin, that cost it two nine-figure fines from the US and UK authorities, that has four of its top executives now under indictment.
Noel Falconer, COUIZA, France
Good old BA, now thyey have the ability, and capacity to lose even more laptops/baggage
Rob Bain, Derby,
Mr Walsh transformed the irish national carrier Aer Lingus to a dynamic lower cost national carrier that has survived despite now extensive competition, a merger / cost savings for BA is the right thing in the current climate as I'm sure Richard Branson / Virgin realise they must do too.
James, Oxford,
I am surprised on how negative the comments on this are . This merger is probably BA'a only chance to remain a major world player - yet apparently people would rather see it overtaken by Air France (and will that really improve the lot of passengers?)
Dave Scott, Loughborough,
AA is the only major american airline not to have been through chapter 11 , mr. patrick
dove, tel aviv,
I think this is the worst of news, Anything that reduces competition is always bad news to my ears, When Mr Walsh was running the Irish national carrier it had little competition and was the most expensive air carrier in Europe and here he goes again.I think its time to get rid of Mr Walsh.
Peter, Vancouver. BC., Canada
Let's hope that service doesn't slip to that of the lowest carrier!
As bad as BA has become, be very afraid as AA is much much worse.
Judith, New York/London,
BA is diluting a bad brand even more and will rue the day that it got involved with AA, a airline continually in Chapter 11. Bad passenger service will get worse and people will use other airlines from the UK. The answer is to get BA's house in order and to restore the brand.
Patrick, Taipei, Taiwan
Who cares about BA anyway? They are no longer our national airline. They have abandoned operations everywhere but Heathrow and Gatwick, forcing their passengers in Glasgow, Edinburgh, Manchester and Newcastle to fly through London's awful airports to go anywhere else in the world.
Paul Kempsey, Clitheroe, United Kingdom
BA must be planning to cut staff with this plan in mind, and trying to control the main flights
oliver, colchester,
Perhaps because that is what Star Alliance and Skyteam already have? Is it right that Oneworld is competing with one arm tied behind its back?
Paul Smith, brighton, uk
Why on Earth, given how bad BA is and its proven propensity to abuse its market power, should we allow it further monopoly powers? I can see absolutely no reason why regulators should change their minds.
Ian, Frederick, USA