EU launches anti-trust probe into pact between 3 airlines

Sunday, August 31, 2008, 5:18 by Aviation Correspondent

The European Commission (EU) has begun an anti-trust investigation into a revenue-sharing pact signed between British Airways, American Airlines and Spain’s Iberia Airlines. Jonathan Todd, a spokesman for the Brussels-based European Commission, said in an official release: “The investigation – to see whether the pact among the three airlines violates competition rules – had had been opened by regulators and did not arise from any complaints filed. It is not a merger investigation and has no specific deadline, but EU officials will conclude their investigation as soon as possible.”

If the revenue-sharing pact is approved, the three airlines will set prices together and share seat capacity on trans-Atlantic flights.

The arrangement is the closest alliance the three airlines can form under the United States’ strict airline ownership laws, which bans a full merger.

American Airlines, headquartered in Fort Worth, Texas, the United States, is the world’s largest airline in total passengers-miles transported and passenger fleet size; the second largest airline in terms of aircraft operated; and the second-largest airline company in the world in terms of total operating revenues. A wholly owned subsidiary of the AMR Corporation, American Airlines operates scheduled flights throughout the United States, as well as flights to Canada, Latin America, the Caribbean, Europe, Japan, China, and India.

British Airways is the national airline and flag carrier of the United Kingdom and is one of the largest airlines in Europe. Its main hubs are London’s Heathrow Airport and London’s Gatwick Airport. It is a founding member of the Oneworld airline alliance.

Iberia Airlines is largest airline in Spain and the nation’s flag carrier.

As a part of the investigation, the European Commission will weigh up whether the agreement reached by the three companies raises any anti-trust issues.

American Airlines had, earlier in August 2008, said it reached an agreement to strengthen its business partnership with British Airways and Iberia under the Oneworld international travel programme.

The proposed agreement, which still requires the approvals of the United States’ Department of Transportation and regulators of the European, would result in expansion of the three airlines’ relationship, letting them share jointly revenue and also make decisions about marketing, flight schedules and other business-related issues without running into anti-trust issues.

The planned revenue-sharing agreement stipulates that AMR Corporation, the parent company of American Airlines, will cooperate with Iberia and British Airways on commercial flights between the United States, Mexico, Canada, the European Union, Switzerland, and Norway.

However, despite the global partnership, which is expected to create a network of 443 possible destinations in 106 counties with 6,300 daily departure options, the three companies will continue to operate as separate business entities.

Sir Richard Branson, president of Virgin Atlantic airlines, has already written to United States Presidential candidates John McCain and Barack Obama warning them about the proposed alliance’s potential to stifle competition on “major trans-Atlantic routes,” according to media reports.

In a statement, Richard Branson said he “believes that customers will inevitably pay the price for the combined carriers ending up with nearly half of all takeoff and landing slots at London’s Heathrow Airport.”

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