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BA-AA Trans-Atlantic Alliance

British Airways, American Airlines offer to give up slots to win approval for alliance

Stephanie Bodoni and Erik Larson  Mar 10, 2010

British Airways Plc and AMR Corp.’s American Airlines offered to give up at least four takeoff and landing slots in the U.S. and U.K. to win approval for their proposed trans-Atlantic alliance.

The airlines also agreed to allow passengers who travel on carriers that obtain the routes to participate in BA and American frequent flyer programs, the Brussels-based European Commission said in a statement today. The EU regulator will seek comments from the industry before giving final approval to the deal, which also includes Iberia Lineas Aereas de Espana SA.

“The balance of probabilities is that this will get approval,” said Jonathan Wober, an analyst at Societe Generale in London with “hold” recommendations on British Airways and Iberia stock. “The competitive landscape has changed since the last time they applied and the other two main alliances are operating this type of arrangement.”

British Airways and American, the leading carriers in the Oneworld alliance, are seeking approval from U.S. and European regulators to create a joint venture for services across the north Atlantic. United Airlines’s Star Alliance and Delta Air Lines Inc.’s SkyTeam have already received U.S. approval for partnerships.

BA and American offered to give up slots at London’s Heathrow and Gatwick airports and New York’s John F. Kennedy to maintain competition on routes to New York, Boston, Dallas and Miami, the EU said.

U.S. Backing

The alliance won U.S. backing last month to jointly price, market and schedule international flights after making similar concessions to give up four pairs of takeoff and landing slots from Heathrow airport, Europe’s busiest, to competitors.

London-based British Airways rose 3.4 pence, or 1.5 percent, to 226.6 pence at 11:39 a.m. Spanish carrier Iberia increased 0.4 percent to 2.35 euros in Madrid.

“We’ve offered to lease slots to gain EC approval for our joint business which will bring benefits to our customers, shareholders and employees,” said Willie Walsh, the chief executive officer of British Airways, in a statement.

‘Woefully Inadequate’

Virgin Atlantic Airways Ltd., the U.K. long-haul carrier owned by billionaire Richard Branson, said in a statement today that the concessions are “woefully inadequate.” Branson met this week with EU Competition Commissioner Joaquin Almunia to discuss his concerns.

“I hope that the commissioner takes time to consider the proposals through the eyes of consumers before any decision is taken on whether it is given the go-ahead,” Branson said.

The airlines offered two pairs of slots from Heathrow or Gatwick airport to Boston, one daily pair of slots from Heathrow or Gatwick to Dallas Fort Worth and one to Miami. “At some point in the future” the airlines said they may offer two further slot pairs on routes to New York.

The companies offered the remedies after the commission said in October the deal may break rules on “restrictive business practices.”

“If the market test confirms that the proposed commitments remedy the competition concerns,” the commission said it may decide to make them binding.

Carriers are vying to bolster partnerships on sales and scheduling to cut costs amid a slump in demand for air travel caused by the global recession.

While British Airways works to resolve the EU antitrust case, it is also trying to prevent a cabin-crew strike over staffing levels. Talks with the Unite union, which represents 12,000 BA flight attendants, continued into today after they were scheduled to end yesterday, said Laura Goodes, a company spokeswoman.

Unite won backing for a walkout at British Airways in a month-long poll of cabin crew that ended on Feb. 22. The mandate lasts for four weeks, and the union must give the company seven days’ notice of a strike, leaving March 15 as the last day that it could bring workers out.

British Airways, American Airlines offer to give up slots to win approval for alliance
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Source: Bloomberg

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