AA-BA Won't Agree To DOT Conditions For Immunity

American Airlines and British Airways today said they will not surrender 224 weekly slots at London's Heathrow Airport, the primary prerequisite set by the U.S. Department of Transportation for an immunized alliance between the two carriers.

"We made it clear from the start that we would not conclude the deal if the regulatory price was too high," said the carriers' CEOs in a joint statement just hours after DOT issued its ruling. "We will not acquiesce to unrealistic, and in our view, unnecessary demands."

The airlines added that they should have the same commercial advantages as competing alliances, such as the recently immunized Delta-Air France-Alitalia-CSA Czech partnership and the various bilateral immunizations within the Star Alliance, including United Airlines/BMI British Midland, which was approved today by DOT with far fewer conditions.

AA and BA said they will continue developing bilateral relationships within the larger Oneworld alliance and cooperate with each other as extensively as possible "within the existing legal boundaries."

DOT, concerned with stifled competition on transatlantic routes, required the two carriers to divest the 224 weekly slots which would have then been allocated to Continental Airlines, Delta Air Lines, Northwest Airlines and US Airways, for 17 new roundtrip flights between Heathrow and U.S. gateways. That number fell well below the number it required in 1999, when the first AA-BA immunity bid crumbled (BTN, Aug. 2, 1999), but well above the 126 slots recommended last month by the U.S. Department of Justice (BTN, Dec. 18, 2001).

Now that AA and BA rejected DOT's decision, it is unclear how Open Skies negotiations between the United States and the United Kingdom will unfold. Regulators from both countries are expected to resume intensive negotiations on Monday in an attempt to hammer out a deal before the European Commission gains jurisdiction over aviation agreements between the United States and Europe, expected as early as next week.

American Airlines CEO Don Carty pointed out such a complication to Business Travel News in an interview last month. Other airlines, he said, are "looking for corporate handouts" in the form of AA's and BA's Heathrow slots, "but the fallacy of their argument is that the whole Open Skies effort collapses if they push too hard."

Also unclear is the status of the United/BMI partership which was included in the same DOT case. DOT had asked BMI to make available enough slots at Heathrow for United to operate daily nonstop service from Boston. At press time, neither carrier had released a statement.

However, other carriers opposing an immunized AA-BA alliance, including Continental and Virgin Atlantic, had voiced disappointment with DOT's decision earlier in the day.

For AA's and BA's corporate clients, antitrust immunity would have meant an integrated approach to multinational corporate contracting already offered by Northwest-KLM and United-Lufthansa.