BA Offering Agents Incentives Again

British Airways has resumed offering incentives to certain British travel management companies on transatlantic routes, EuroBTN has learned. The airline withdrew incentives in 1999 after being fined €6.8 million by the European Commission for what it deemed to be abuse of a dominant position in its home market.

However, BA has now determined that it can no longer be accused of having a dominant position in the transatlantic market because of the European Union-United States Open Skies agreement that came into effect in March 2008. The airline argues that Open Skies effectively created a European Union-wide marketplace for flights to the United States and that in this respect its marketshare is much smaller. On this basis, it has revisited aspects of its agreements with leading travel management companies.

Senior TMC sources confirmed to EuroBTN that BA has changed its approach but, like BA itself, are staying tight-lipped on the details of the changes. However, one said: "Deals are becoming more targeted."

Virgin Atlantic, the airline whose complaint to the European Commission led to BA being fined, reacted furiously to the news. "BA is and always will be the dominant carrier," said a spokesman. "It has the largest number of slots at London Heathrow"-by far the busiest European airport for U.S.-bound flights-"and it has more services to the U.S.A. than anyone else. Judging from the feedback we have had since we heard about this, agents know that too."

The Virgin spokesman dismissed BA's Open Skies argument. "Markets are based on point-to-point routes, such as Heathrow-Los Angeles, not continents. BA has more seats out of Heathrow than the whole of SkyTeam out of Paris or Star Alliance out of Frankfurt."

In a written response to questions from EuroBTN, BA said: "The transatlantic routes have been highly competitive for many years. The Open Skies agreement has further increased competition between routes between Europe and the U.S., which are amongst the most competitive in the world. No single carrier or airline alliance dominates those markets."

The development will be of interest to U.K.-based corporate clients of BA, who may benefit financially. "Those clients on open-book relationships will make it clear to their TMCs that they expect any additional income to be passed on to them," said Tom Stone, director of the consultancy Sirius Management. "However, this would not apply to clients on a transaction fee."

Stone added that BA is reviewing many of its direct agreements with corporate clients. "BA is really thinking outside the box and being as creative as possible," he said. "It is doing things that would have been unthinkable a year ago."