Last month's joint venture approval for American Airlines
and British Airways came more than 10 years after the carriers first applied
for antitrust immunity, more than two years since competitors Delta Air Lines
and Air France-KLM received approval to launch their own joint venture and more
than six months past the U.S. Department of Transportation's statutory deadline
to approve their application to jointly set fares, align capacity, plan
services and share revenues across the Atlantic.
As the last transatlantic antitrust immunity request pending
before DOT, American Airlines and British Airways, along with Iberia and other
Oneworld partners Finnair and Royal Jordanian, now have permission to compete
in the new realm of joint venture corporate contracting, currently dominated by
Star Alliance and SkyTeam competitors.
Implementation should come faster than approval, but an
offering to corporates still remains months away. "We've been in planning
discussions with both Iberia and American on a fairly regular basis for over a
year now," British Airways executive vice president for the Americas Simon
Talling-Smith said this month. "Of course, those conversations have been a
bit limited, pre-antitrust immunity. Now, we can really complete the conversations
and venture into this territory that we were unable to discuss before."
Talling-Smith said the carriers should "hit the ground
running fairly fast," with plans this fall to formally launch the first
benefits of the joint venture—including frequent flyer reciprocity between AA
and BA—with other benefits to be rolled out gradually over the course of the
next year. Talling-Smith expects the carriers to begin coordinating
transatlantic schedules by the middle of next year, while a more singular approach
to corporate clients, including joint contracting, should come even sooner.
"I think in general terms we'll be doing that in early
2011—so pretty soon after the launch. Then, we can evolve it fairly quickly to
more benefits for the corporates," Talling-Smith said. "That
evolution includes being able to move through various degrees of sophistication
on the way we deal with a corporate through the joint venture."
The growing dominance of transatlantic joint ventures is
fundamentally changing how airlines sell services to corporate travel buyers,
as government approvals for antitrust immunity are converting nearly one dozen
distinct transatlantic competitors into three dominant entities that in total
control 80 percent of the North Atlantic market.
The four-way joint venture of Star Alliance carriers
Continental, Lufthansa, United and Air Canada went live on Jan. 1 after
antitrust immunity approval last year, enabling the four entities to coordinate
transatlantic corporate contracts. Delta Air Lines and Air France-KLM,
meanwhile, are furthest along in their joint venture development, having
secured antitrust approval in 2008 and offering joint corporate contracts
across the Atlantic.
BA and American, meanwhile, are working through their own
account management strategy and overall corporate contracting approach in
addition to the more challenging aspect of melding two distinct airline
cultures into one joint venture.
"We understand that grappling with the cultural and
behavioral changes that exist in the next 12 months or so is probably one of
the most difficult things we'll do," Talling-Smith said. "It's going
to be hard to align rules and policies and data and measures and all of those
things, but we have a very strong interest to do that. The cultural things run
deeper and are generally harder to change. We have trained successfully both of
our sales forces to compete on a very strong basis with each other, and only
until literally a few weeks ago in the eyes of the law, we were competitors and
economically we still are competitors. That move from competitive working to
partnership is easily said, and relatively difficult to deliver."
American CEO Gerard Arpey added, "While we've had a
very impactful and great partnership with British Airways, we have been
fighting a huge battle to get customers to ride on American and not ride on
British Airways, even though they're our partner. So, one of the first seminal
things that happens in that deal is that we don't care about that anymore."
The Oneworld partners were the last to apply for antitrust
immunity in the latest round of efforts, though the carriers have not had good
luck with regulators prior to that attempt. British Airways and American
Airlines in January 2002 retracted their second application for antitrust
immunity after regulators demanded they surrender 224 weekly slots at London
Heathrow Airport. The two carriers also failed in 1999 to obtain what they
considered acceptable terms for antitrust immunity.
DOT's final antitrust immunity approval last month, however,
maintained the conditions placed on the carriers' tentative approval, requiring
American and British Airways to relinquish to competitors four daily slot pairs
at Heathrow Airport "with two pairs to be used for Boston-London service
and the other two for service from any other U.S. cities," DOT said, while
prior European Commission conditions required the carriers to make slots
available "to facilitate the entry or expansion of competitors on routes
between London and New York, Boston, Dallas and Miami."
"We're obliged to make slots available to new entrants
or existing players on the routes, as specified by the DOT and EU rulings, but
making available and giving up are two different things," BA's
Talling-Smith said, noting the timing for such a transaction would come next
summer and the carriers could maintain the slots if competitors don't come
This story originally
appeared in the August 9, 2010, edition of Business Travel News.