Richard Branson determined to block British Airways-American Airlines tie-up

Saturday, September 13, 2008, 6:55 by Aviation Correspondent
Richard Branson: The BA / AA deal is anti-competitive

Richard Branson: The BA / AA deal is anti-competitive

He said he would mount a strong campaign against the proposed link-up, and unveiled a slogan to be painted on all Virgin Atlantic planes, which read: ‘No way BA/AA.’

British Airways and its United States-based rival are not going for a full merger, but aiming at agreeing on fares, routes and schedules.

Twice before, British Airways has tried and failed to form a tie-up with American Airlines – in 1997 and 2001.

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

American Airlines, a wholly owned subsidiary of the AMR Corporation, is headquartered in Fort Worth, Texas, the United States. It is the world’s largest airline in total passengers-miles transported as well as in 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. American Airlines operates scheduled flights throughout the United States, as well as flights to Canada, Latin America, the Caribbean, Europe, Japan, China, and India.

Richard Branson has said the British Airways-American Airlines tie-up would create a “monster monopoly” and likened a merger between the two giant airlines to “allowing Coca-Cola and Pepsi to merge.”

An alliance between the two carriers, according to him, would have “a hugely damaging impact for the travelling public” and would give British Airways and American Airlines “a virtual stranglehold over travel agents and corporate customers.”

The proposed British Airways-American Airlines deal would involve 443 destinations in 106 countries and a total of 6,200 departures.

Virgin Atlantic, based in the United Kingdom, is owned by Richard Branson’s Virgin Group (51%) and Singapore Airlines (49%). Virgin Atlantic, the flagship-carrier of the Virgin Group, 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’s Heathrow Airport and London’s Gatwick Airport.

Richard Branson told BBC in an interview: “We are going to wage a major battle to stop the two largest airlines in the world effectively working as one carrier. Allowing the two biggest carriers in the world to effectively act as one will be anti-competitive.”

He insisted that both British Airways and American Airlines had “failed to give regulators and the public a true picture of their market share between London’s Heathrow Airport and the United States, by leaving out bookings made direct with the airlines and passengers making connecting journeys.” The data given by British Airways and American Airlines, which said that they had a 40% share of passengers across the Atlantic, was around 20% below the true figure, Branson alleged.

“It was vital,” Branson told BBC, “that the competition regulators maintained a level playing field at what is a very difficult time for airlines.”

Willie Walsh, chief executive of British Airways, refuted Richard Branson’s arguments in a BBC programme by arguing that the proposed tie-up would be good news for both passengers and the wider industry.

“A growing number of global airlines,” Walsh added, “are seeking mergers or other forms of tie-ups as they battle high fuel prices. A tie-up with American Airlines would be great news for the consumer. This is an issue that will be accessed by the competition regulators, the experts in this field.”

Walsh asserted that, “this time around,” he was confident the deal would get regulatory approval because of the increased competition in the airline industry following the ‘Open Skies’ deal between the United States and European Union.

‘Open Skies’ – which came into effect in March 2008 – has ended limits on which airlines can fly between the United States and Europe.

Robert Crandall , who was chief executive of American Airlines between 1985 and 1998, told the website telegraph.co.uk that he favoured a tie-up between British Airways and American Airlines.

Crandall said: “American Airlines needs an agreement with British Airways to provide services beyond Heathrow into Europe; otherwise, it has no way to compete with United Airlines and Delta Air Lines, which have similar rights with their partners Air France beyond Paris and Lufthansa beyond Frankfurt. The Virgin founder knows that the BA-AA combination will have a smaller share of Heathrow operations than the other two alliances already have at Paris and Frankfurt.”

Going further, Crandall told the Virgin Atlantic boss: “Having gotten your own operation in the transcontinental US markets, you do not want to allow British Airways and your US competitors equivalent opportunities. Had you opposed the other alliances, or stayed out of the US market, your protestations might have had some validity. As the world is, however, you are merely seeking protection from the very competition you inflict on others.”