Partnership would dominate key routes into Heathrow

British Airways, American Airlines and Iberia Airlines – all members of the Oneworld alliance – have forged a new transatlantic partnership agreement and filed a request for antitrust approval that would allow them to coordinate schedules and fares, essentially operating as a single company. But Virgin Atlantic Chairman Richard Branson has launched a lobbying effort of his own to block the approval, claiming it would hurt competition.

BA and American have tried twice before to win antitrust approval for a transatlantic partnership, and both times the effort failed. The U.K. newspaper the Daily Mail reported that British Airways plans to tell U.S. regulators at the Justice Department that it is willing to give up a number of slots at London Heathrow to secure approval for the alliance. BA and American are arguing that the Open Skies pact between the U.S. and Europe has already opened up Heathrow to plenty of new competition; before that agreement, only United and American were allowed to fly into Heathrow. American, BA and Iberia said that under the joint business agreement that they signed, all three would remain separate legal entities, but they would cooperate commercially on transatlantic services, with expanded code-sharing and greater reciprocity in their frequent flyer programs. The application also asks that Oneworld members Finnair and Royal Jordanian be included in the antitrust immunity, although they are not part of the proposed commercial partnership. The airlines said their pact would be “a significant step towards strengthening customer choice,” and that it would permit the Oneworld alliance to compete more effectively with Star Alliance and SkyTeam, both of which already have antitrust immunity.

But Branson, in a letter to presidential candidates Barack Obama and John McCain, argued that if the U.S. approves the alliance, “BA/AA would have a combination of high frequencies and a transatlantic network that could not be replicated by any other airline/alliance, and which would make it impossible for other carriers to compete for time-sensitive corporate or business travelers.” Virgin argued that a combined American/British Airways partnership would control 63 percent of the capacity between JFK and Heathrow, 66 percent between Chicago-LHR, 82 percent form Boston, 72 percent from Miami, 49 percent from LAX and 100 percent from DFW. “Airlines everywhere are struggling with the current price of oil, but the solution to their problems should not lie in an anticompetitive agreement, which will inevitably lead to less competition and higher fares,” Branson said. He said Virgin plans to mount “a major lobbying and advertising campaign” in a bid to block the alliance. The Allied Pilots Association, which represents pilots at American, also had reservations about the proposed partnership, calling it “problematic on several fronts.” The pilots claim that their contract with American requires the company to secure their approval before the deal can go forward. They also said that American’s management “should focus first on running a more reliable operation before embarking on a new venture of this magnitude and complexity.”