15 FEBRUARY 2010

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Article from BTNews 15 FEBRUARY 2010

COMMENT: British Airways again

The news late Friday night that the US Department of Justice had ruled in favour of British Airways, American Airlines and its oneworld colleagues regarding immunity from the anti-trust laws has to be good news for travellers, the airlines concerned and the air travel community in general. 

The trade-off is minimal, just four pairs of slots at Heathrow.

Mind you it’s taken some time to get this far.  In January 1999, the then Colin Marshall told a business audience in Los Angeles: "It is now two-and-a-half years since we announced plans to create an alliance with American Airlines.......When it comes down to it, I believe that the liberal economic philosophies of our respective governments and the precedents in globalisation being set in other business sectors, will come to support the logic of a full partnership between BA and AA – and with it, the introduction of a fair and equitable open skies regime between our two countries."

Fifteen years of negotiations and four BA bosses but the benefits for both airlines should be substantial with a more integrated operational programme, engineering and purchasing savings, and a proper co-ordinated commercial agenda.  Ticket prices can be more competitive and the returns for shareholders improved.

Clearly the fact that even with American Airlines slots at Heathrow included in BA’s total, the British carrier will still have less percentage-wise than Air France at Charles de Gaulle, KLM at Amsterdam and Lufthansa at Frankfurt, all of whom have anti-trust immunity.  One assumes it was a factor in the judgement.  One assumes it was a factor in the judgement.  And one would hope that the European Commission does not enter the fray at this stage and upset the applecart.  No meddling please.

Naturally Sir Richard Branson has reacted badly to the news.  “It beggars belief,” he is reported to have said.  In truth Virgin Atlantic has since its inception in 1984 failed to get into bed with a US carrier, or indeed join one of the three big airline alliances.  Other than various code-shares, and one in particular with Continental Airlines, it has always preferred to be independent, with all the advantages that it brings, and the consequences.  In 2000 Singapore Airlines acquired 49% of Virgin Atlantic, but commercial tie ups between the two airlines since that time have been very limited.

This judgement should be only the beginning.

When it comes to transport it is a British company, Stagecoach, that is a substantial investor in the American bus market.  When Lehman Brothers collapsed Barclays Bank, another UK corporation, bailed out most of the North American operation.  Rolls-Royce own Allison Engines, a major supplier to the American military, and the US operations of BAE Systems are one of the largest contractors to the US fighting machine.

Elsewhere in this issue of AERBT you will find reference to Glenn Tilton, very much in charge of United Airlines.  He is strongly in favour of overseas investment in US airlines and has made it quite clear that the present 25% maximum ruling is outdated.  Tilton is first and foremost a businessman having arrived at United from Texaco, the petroleum giant. 

Assuming it goes ahead (there is a 45-day objection period – but these decisions are rarely overturned) the judgment is a breakthrough.  However, and here Sir Richard has to swallow pride and be realistic, it is only the start.  What is needed now is for the United States to throw away the rules regarding friendly overseas investment in the nation’s air transport infrastructure.

Today (Monday 15 February) discussions begin in Madrid regarding phase two of last year's successful “Open Skies” deal between the USA and Europe.  Now that there appears to be a level playing field between all the main international American airlines and their counterparts this side of the Atlantic, there has to be progress on both ownership and fifth freedom allowing European carriers to sell seats on US domestic legs.  The 25% rule has to go too.

Hopefully immunity for British Airways on the anti-trust laws has been achieved.  But it is only a step on the ladder (but an important one) of opening up the United States to true airline competition.  The US domestic air transport scene is a mess.  Let us hope it can be shaken up.

Malcolm Ginsberg
Editor in Chief

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