American Airlines and British Airways, along with Oneworld alliance partner Iberia, today announced a long-anticipated plan to implement an immunized transatlantic joint venture, following similar moves by carriers of the competing SkyTeam and Star alliances. With two failed immunity attempts in the past decade, American and British Airways hope their third time will be charmed.
The three carriers, joined by partners Finnair and Royal Jordanian, said they expect to officially file a joint application for antitrust immunity with the U.S. Department of Transportation today. However, the proposed immunized joint venture will focus on the three anchor carriers, which plan to operate as separate entities but coordinate on schedules, pricing and revenue sharing between North America and Europe, said Kurt Stache, American Airlines vice president and general sales manager.
AA, BA and Iberia also expect to expand codesharing on flights beyond the European Union and United States, while further coordinating frequent flyer and airport lounge programs. The three carriers also plan to engage in trilateral cost-savings initiatives to cope with a difficult operating environment.
The changing alliance landscape on the North Atlantic, the dire need to create new savings opportunities in a high fuel-cost environment and the recently enacted Open Skies agreement-the lack of which sunk an earlier ATI attempt between AA and BA-should help ease the regulatory environment for approval, Stache said.
Oneworld partners have not had good luck with regulators in the past. BA and AA 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 acceptable terms for antitrust immunity. Stache said he doesn't expect DOT to put similar conditions on this attempt, as the competitive landscape has changed dramatically in recent years, and Heathrow has opened up to further competition.
Not everyone agrees. Even before the carriers announced their intention to further cooperate, transatlantic rival Virgin Atlantic cried foul. The carrier today said an immunized alliance "would create a monster monopoly," noting that AA and BA would hold almost 60 percent of all the frequencies between London Heathrow and the United States.
"Heathrow is full and no other carrier can replicate BA/AA's network," Virgin said. "BA/AA won't face enough competition on its huge network to stop it raising prices to consumers."
Stache countered such sentiment, noting that other immunized carriers across the Atlantic hold even greater marketshare in such home markets as Frankfurt.
Preceding Oneworld's plan, Continental Airlines this summer
announced plans to build a four-way joint venture with United Airlines, Air Canada and Lufthansa, in part mimicking the immunized venture that SkyTeam's Delta, Northwest and Air France-KLM are building across the Atlantic.
Oneworld members American, Iberia, Finnair, Malev and Royal Jordanian in June withdrew a request for antitrust immunity "without citing a reason," the U.S. DOT filing said. Stache said the carriers pulled that application in favor of a deeper pact that included British Airways. Though Malev was included in that earlier effort, the Hungarian carrier since has dropped the two routes that comprised its transatlantic schedule.
Meanwhile, British Airways and Iberia late last month disclosed plans for an "all-share merger," though the carriers need "several months" and regulatory approval before a final transaction.