Deal In Works Since 2002

The US Department of Transportation today issued a final decision approving a code-sharing arrangement between American Airlines, recently threatened with bankruptcy and scandal in the front office, and British Airways.

Under the arrangement, each carrier will sell tickets of the other carrier for travel on its own flights (code sharing), thereby expanding each carrier's service.  The arrangement will cover a broad range of operations throughout each carrier's route system.  However, it will not cover nonstop US-London flights.  Unlike applications they previously filed with the department, the carriers did not request antitrust immunity for this arrangement.  The code-sharing rights are effective immediately and will remain in effect for two years.

American Needed This

American Airlines earlier this month won $1.8 billion in concessions from its three major unions, despite a last-minute revelation that the company's top executives, including Chairman and CEO Don Carty - were entitled to millions of dollars in a secret, bankruptcy-proof pension fund. That revelation, just days after the union concession votes, infuriated the unions. They threatened to rescind their agreements. Carty went on national television during a news conference to apologize for his mistake in not revealing details of the pension fund and other executive perks during the union negotiations. It wasn't good enough. The next day, Carty was a goner, having resigned from American's parent corporation, AMR.

In its final decision, the Department of Transportation reaffirmed its tentative conclusion that the proposed code-share services are provided for under the US-UK bilateral aviation agreement, that they would offer enhanced service to the public, and that they would not impair competition. 

In a modification of the tentative decision to which the applicants agreed, DOT said that the carriers initially may offer code-share services between the United Kingdom and specific third-country markets where there are no restrictions that would require a US-carrier selection proceeding.  The final order also requires the carriers to notify the department for its review 30 days in advance if they plan to begin code-share service on any additional routes.

American and British Airways applied for code-sharing rights on Nov. 18, 2002. The code sharing approved today would not permit the carriers to plan and coordinate services as antitrust immunity would allow.  The department has said that an Open Skies agreement, which eliminates restrictions on air services between and beyond the participating countries, is a prerequisite to granting antitrust immunity.  The goal of the United States remains replacing the current restrictive agreement with Open Skies.

FMI: http://dms.dot.gov