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Tuesday, February 16, 2010

American, British Airways Accord Accepted by U.S.

Business Week
AMR Corp.’s American Airlines and British Airways Plc won tentative U.S. government permission to deepen their trans-Atlantic alliance as they counter competition created by the 2008 lifting of flight restrictions between the U.S. and Europe.

American Airlines, the second-largest U.S. carrier, and British Airways, Europe’s third-biggest, may jointly price, market and schedule international flights in their Oneworld alliance without fear of antitrust prosecution, the U.S. Transportation Department said today.

As a condition of approval, American and British Airways must yield four pairs of takeoff and landing slots at London’s Heathrow Airport, Europe’s busiest, to rivals that would provide new U.S. service, the Transportation Department said. That’s a fourth of the 16 pairs of slots the department asked the carriers to give up in 2002, when an earlier request for antitrust immunity fell through.

The decision “beggars belief,” said Richard Branson, president of Virgin Atlantic Airways Ltd., a British Airways competitor that had campaigned against the agreement, in an e- mailed statement. “Four slots pairs is a complete joke, and those responsible for this decision should hang their heads in shame.”

The decision may become final after a 60-day comment period, the Transportation Department said.

‘Valuable Benefits’

“The potential benefits outweigh the potential harm,” Susan Kurland, the department’s assistant secretary for aviation and international affairs, wrote in the decision. “Oneworld could provide the traveling and shipping public with a wide range of valuable benefits, including lower fares.”

Carriers restricted by law from cross-border mergers seek such grants of antitrust immunity to act more like single entities. Iberia Lineas Aereas de Espana SA, Finnair Oyj and Royal Jordanian Airlines are also part of the agreement, which is still being evaluated by the European Union.

American and British Airways also won tentative approval for a separate joint venture with Iberia, according to the Transportation Department order.

Airlines use each others’ routes to expand networks and compete with other large alliances. Oneworld is the third- largest global airline alliance behind Star and SkyTeam.

Airlines Respond

“We are pleased that DOT has agreed that it is in the best interest of the traveling public” for the carriers to have immunity, Will Ris, an American senior vice president, said in a statement. The “order is a key step in the process towards allowing Oneworld alliance members to cooperate more effectively,” British Airways said in a statement.

American Airlines, based in Fort Worth, Texas, and British Airways of London won the immunity after two previous requests in 1997 and 2001 failed. A hurdle to past approval was removed with “Open Skies,” a treaty that ended a four-carrier monopoly on flights between the U.S. and Heathrow.
British Airways, Virgin Atlantic, American Airlines and UAL Corp.’s United Airlines had been the only carriers that could compete on flights between the U.S. and Heathrow, which are popular with business travelers willing to pay high fares. Since 2008, all carriers can pursue the routes.

Justice Department

The U.S. Justice Department advised the transportation agency in December that the American Airlines-British Airways alliance should gain antitrust immunity only if some takeoff and landing slots are surrendered or routes exempted from the partnership.

The European Union said in a statement Feb. 1 that it was evaluating proposed antitrust remedies by the carriers aiming to alleviate concerns that the alliance would hurt competition.

The Transportation Department in July approved antitrust immunity for Continental Airlines Inc. to coordinate flights abroad with United and eight other carriers as part of the Star Alliance, the world’s largest airline group.

Northwest Airlines Corp. and Delta Air Lines Inc., before they merged in 2008, also received antitrust immunity to collaborate with Air France-KLM, Italy’s Alitalia SpA and Ceske Aerolinie AS in SkyTeam, the second-largest alliance.

An American-British Airways alliance with antitrust immunity would be “comparable and more competitive with the product and service offerings of Star Alliance and SkyTeam,” Kurland of the Transportation Department said.

The European Commission said Oct. 2 it sent complaints to American Airlines, British Airways and Iberia concerning their agreement on coordinating operations and marketing. The Brussels-based commission said the deal may break EU rules on “restrictive business practices.”