British Airways, American Airlines move closer to merger

Thursday, August 7, 2008, 11:46 by Aviation Correspondent

British Airways, the national airline and flag carrier of the United Kingdom and one of the biggest airlines in Europe, is getting closer to signing a merger agreement with the United States-based American Airlines, the world’s largest  airline, media reports say. An official announcement regarding the merger deal between British Airways and American Airlines, both members of the Oneworld alliance, is expected within two weeks.

British Airways has been trying over a period of time for a merger with American Airlines, which is a subsidiary of AMR Corporation along with American Eagle Airlines.

According to aviation experts, British Airways is bent on merging with American Airlines especially in the backdrop of all carriers around the world are finding it more and more difficult to cope with skyrocketing costs of aviation fuel as well as a decline in the number of passengers owing to fears of a recession.

The proposed merger is seen as one of the most effective ways to cut down on costs for both carriers. The deal, if and when it comes to pass, would enable the two airlines to work more closely to try to cut costs in areas such as technology, ticketing and administration.

Besides the plan to merge with American Airlines, the British flag carrier is exploring possibilities of a merger with Iberia, the flag carrier of Spain.

Since both American Airlines and Iberia are members of the Oneworld alliance, British Airways already cooperates with the two carriers regarding code-share agreements as well as allowing frequent fliers to collect and redeem reward points on all flights.

Willie Walsh, chief executive of British Airways, has already announced that he intends to go ahead with both mergers as soon as possible.

BBC quoted unconfirmed reports as saying that if the merger happens, British Airways and American Airlines would essentially operate as a single carrier in terms of trans-Atlantic flights. However, some analysts are of the opinion that this possibility is difficult to come true since aviation regulators have rejected similar proposals in both 1997 and 2002.

British Airways and American Airlines have failed in the past to gain immunity from United States competition laws for an alliance. However, a spokesman of British Airways expressed the hope that relaxations in regulations under the Open Skies agreement may make the merger easier.

British Airways, which had suffered an 88% decline in profits between April and June 2008, has announced that it would cut 3% of flights this winter to cut overheads.

Meanwhile, Virgin Atlantic has reportedly said it would oppose any joint venture between the trans-Atlantic carriers British Airways and American Airlines on the ground that the alliance would create “a dominant mega-power” on routes between Europe and the United States.

Virgin Atlantic Airways Limited, a British airline owned by Richard Branson’s Virgin Group and Singapore Airlines, operates long-haul routes between the United Kingdom and North America, the Caribbean, Africa, the Middle East, Asia, and Australia from its main bases at London Heathrow Airport and London Gatwick Airport.