With final approval from both U.S. and European regulators for an antitrust-immunized joint venture seemingly imminent, American Airlines, British Airways and Iberia are well underway in their planning to share transatlantic revenues, sell jointly to corporate accounts and integrate various components of their operations.
The airlines established a three-person executive management committee to govern the joint business, chaired for the first two years by BA executive vice president for the Americas Simon Talling-Smith. He told The Transnationalthat his counterparts on the committee, with whom he meets "regularly," are AA vice president of strategic alliances Kenji Hashimoto and Iberia senior vice president international relations and alliances Elvira Herrero.
"We have been working with Iberia and American for a year and a half or more to plan that business in anticipation of getting regulatory approval," said Talling-Smith. "Clearly, those discussions are quite difficult because we have to be very careful to stay on the right side of the regulation on what we can discuss and what we cannot discuss. We take legal advice every step of the way."
Those topics open for discussion thus far have included training, any public data and governance, which Talling-Smith described as "quite an important thing for any venture. A lot of these partnerships do fall apart because they don't have the right governance, so we are quite pleased that we have it nailed down."
"We could agree on how our sales force would work together to help corporate accounts," he added, "but we can't agree on the kinds of offers they would make to those corporate accounts."
Other topics off limits until final approvals are granted include pricing, confidential data and "policy changes that would distort the marketplace," Talling-Smith explained. "For example, we can't agree on baggage policies--the allowable weights and charges, etc."
Training And Staffing
The three airlines already have begun training 7,500 customer-facing staff, including airport and call center personnel, "so that they really understand the nature of the joint business," Talling-Smith said, noting the particular importance of consistently serving each carrier's elite-level loyalty program members. "You can't underestimate the inertia that many years of intense competition leaves behind." He added that some training classes in Dallas, Madrid, London and New York are operated jointly, including employees from each of the three airlines.
He expects the "first wave" of training to be completed before the anticipated launch of the three-way joint venture this fall.
Considering only British Airways personnel, Talling-Smith said the frontline sales force and back-office support staff in the Americas region during the past two years had been "slimmed down," but any future decisions to change the amount of resources in the region would be made after regulatory approval for the joint venture. "At this stage, we are really not allowed to see what sort of spread of the sales force [AA] has and the penetration of accounts they have," he said. "Once we get to see that, we'll have a better idea of what our expansion plans or hold plans for our sales force may be."
During a oneworld alliance press briefing this week in Berlin, BA CEO Willie Walsh addressed the consumer benefits that would come from antitrust immunity. "One of the key early wins from a customer point of view will be a combined and improved frequent flyer program," he said. "It is often a cause of irritation for our customers where they don't understand that as competitors we can't share all of the benefits of the frequent flyer program. That would be a significant enhanced value proposition for all our customers, and we hope and expect to be able to implement that quickly."
Talling-Smith said the joint transatlantic business of AA, BA and Iberia would amount to $8 billion annually and 100 flights daily, with BA accounting for about half of those operations.