Tuesday, July 20, 2010

American and British Airways Get Antitrust Immunity in Joint Venture As Airline 'Consolidation' Grows

The trend toward U.S. airlines operating jointly on some international routes with foreign carriers is one of the most important, and most overlooked, developing stories in commercial aviation.

Basically, while U.S. carriers can't merge with foreign carriers under federal law limiting foreign ownership, under recent practices they can essentially form quasi-mergers on certain routes, with immunity from anti-trust prosecution for setting fares and limiting competition. The airlines in question, meanwhile, can point to various efficiencies, and to the widening of choices of easier-to-reach destinations such quasi-mergers create for passengers.

American Airlines, British Airways (and BA's partner Iberia) today received approval from the U.S. Department of Transportation to create a joint business governing flights between North America and Europe. Both said they will expand their global cooperation as a result of receiving antitrust immunity. Fellow oneworld alliance members Finnair and Royal Jordanian also received antitrust immunity from the DOT.
The European Union approved the joint business on July 14.

Said Gerard Arpey, American's CEO: "By working collaboratively with our oneworld partners, we will enhance our product offerings, strengthen our route networks, and better position our airlines to compete in the ever-changing global aviation marketplace."

Said British Airways CEO Willie Walsh: "As we have argued all along, the EU-U.S. market is highly competitive, and Heathrow’s liberalization in 2008 opened it up even further. We are delighted that the U.S. and EU authorities have recognized this.

"We’re pleased that the DOT and EU have worked together to ensure that there is consistency in the number of slots that the three airlines have to give up to our competitors to use on services from Heathrow to the U.S. We made the pragmatic decision to give up these slot pairs so that we can start operating the joint business as soon as possible."

Said Iberia’s chairman, Antonio Vazquez: "I am convinced that consolidation is the best and only way to succeed in the airline industry, and the approvals we have received to create a joint business are a very important step towards this consolidation process."

Said airline passengers: What the hell does this "consolidation" trend mean for fares and competition? More on that later.


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