Calls Joined Airline A "Monster Monopoly"
Virgin Atlantic Airways urged the
European Commission this week to reject the planned alliance
between two of the world's largest airlines, British Airways and
American Airlines.
As ANN reported, the EC is examining a
transatlantic alliance which would allow American Airlines, British
Airways and Spain's Iberia SA to coordinate their loyalty programs,
schedules and fares on flights between North America and Europe. In
addition to avoiding all the usual hassles of a formal merger, the
deal would also give American Airlines increased access to
profitable European routes... without technically violating US laws
prohibiting foreign ownership of a US carrier.
It's that last part that is of greatest concern to carriers like
Virgin Atlantic -- which, while smaller than British Airways and
other trans-Atlantic rivals, still has managed to achieve some
parity in competing with larger airlines through London's
Heathrow Airport.
In an extensive document submitted Tuesday to European
competition authorities, Virgin Atlantic said that BA and American
Airlines -- if allowed to combine -- would use their market power
to raise fares, adjust schedules to keep out competitors and cut
off connecting feeder traffic to other carriers (namely, them --
Ed.) at Heathrow. In addition, they would reinforce their market
power through a combined Frequent Flyer Program, which no
competitor at Heathrow could replicate.
"We urge the European Commission to reject outright this third
attempt by BA and AA to stifle competition between Heathrow and the
US," said Steve Ridgway, Chief Executive of Virgin Atlantic. "Their
virtual merger would lock-up one of the world's busiest air
corridors against new and existing competition, increase BA's grip
on the most constrained international airport in the world, and
cause grave harm to consumers with higher prices."
Virgin maintains six routes between Heathrow and the US
currently benefit from BA and AA operating independently, competing
fiercely for corporate customers, independent travelers and
connecting passengers. Five of these six routes, including LHR-JFK;
LHR-ORD; LHR-BOS; LHR-MIA and LHR-LAX are in the top seven for
Heathrow-US passenger numbers, with Heathrow being by far the
busiest and most important European gateway for traffic to and from
the US.
By combining these routes, Virgin maintains, BA and AA would
form a virtual merger which would dominate all six of the overlap
routes in capacity, traffic and schedules, and would dominate
traffic between Heathrow and the US... particularly for
time-sensitive travelers and corporate customers.
The airlines says BA/AA would have a monopoly or be dominant on
some of the busiest and most profitable routes between the US and
Heathrow. BA/AA would control 64% of the capacity between JFK-New
York and Heathrow; 64% between Chicago and Heathrow; 80% between
Boston and Heathrow; 73% between Miami and Heathrow; and 100%
between Dallas-Fort Worth and Heathrow and Seattle and
Heathrow.
"Even if BA and AA were forced to give up slots at Heathrow,
these so-called slot remedies on their own would not be suitable as
they would be insufficient to reinstate any effective level of
competition," Ridgeway added. "They would not cancel out
anticompetitive effects arising out of the increased network reach
planned by BA and AA."
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