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Wed, Sep 03, 2008

European Commission Looks At Proposed BA-AA-Iberia Agreement

Two Previous Attempts At American/British Airways Partnership Shot Down

The European Commission is examining a transatlantic alliance which 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, this deal would also give American Airlines increased access to profitable European routes... without technically violating US laws prohibiting foreign ownership of a US carrier. 

The Chicago Tribune reports US and European regulators have blocked two previous attempts by American and British Airways to form an alliance. They are the two largest airlines flying across the Atlantic, and most analysts believe BA would have to give up some of its landing slots at Heathrow for the deal to have any chance of passing muster.

"A lot of this is going to come down to British Airways and what it is willing to give up," said Henry Harteveldt, a travel industry analyst with Forrester Research.

So... what do the two airlines think will be different this time? For one thing, American notes that access to Heathrow has been expanded under an Open Skies agreement signed earlier this year, allowing competitors to launch or expand service to London. 

American CEO Gerard Arpey tells the Tribune competitors such as the Star Alliance, started by United Airlines, and SkyTeam, which includes Delta, have been given antitrust immunity on many of the same routes.

"All we are trying to do with British Airways and Iberia is to be able to compete on a level playing field with SkyTeam and Star Alliance," Arpey said. "We think the regulators will see it that way."

Virgin Atlantic CEO Steve Ridgway isn't buying the arguments, and Friday praised the European investigation. "The proposals would create a monster monopoly, which would mean that BA/AA and Iberia would be way too dominant on key routes into and out of Heathrow airport."

The new alliance proposal would also include smaller carriers Finnair, and Royal Jordanian.

The EU says there's no particular timetable for reviewing the deal, but it will be done expeditiously.

FMI: www.britishairways.com, www.aa.com, www.iberia.com, http://ec.europa.eu/index_en.htm

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