British Airways seeking alliance with American Airlines and Continental Airlines

16 May, 2008: British Airways, the largest airline and flag carrier of the United Kingdom, is “exploring opportunities’ to join in an alliance with two of the biggest airlines in the United States.

The move by British Airways to link up with its major rivals in the United States – American Airlines, based in Fort Worth, Texas, and Continental Airlines, based in Houston, Texas – is aimed at positioning itself in the forefront of the lucrative trans-Atlantic market, the British newspaper Guardian has reported.

The talks between British Airways and the American carriers, adds the report, are focusing on ties for frequent-flier programs, code-sharing that would let one carrier sell the other airlines’ flights under its own reservations system code and share in the income, and possibly a renewed attempt to get antitrust immunity for the existing trans-Atlantic alliance between American Airlines and British Airways.

British Airways – which had had suffered a setback on account of operational difficulties after the opening of Heathrow’s Terminal 5 in London on March 27, 2008 – said in a terse statement: “British Airways is exploring opportunities for cooperation with American Airlines and Continental Airlines. Further details will be announced when appropriate.”

According to the Guardian report, proposed the deal is unlikely to involve a full merger of British Airways with either American Airlines or Continental Airlines since a full merger would be blocked by the foreign-ownership laws of the United and the European Union.

The news agency Reuters quoted an expert on negotiations as saying: “If the three carriers can secure limited immunity from US competition laws, they will be able to offer smoother connections by coordinating schedules and route planning. And, such an agreement would help the companies streamline costs while sharing revenues.”

An alliance with American Airlines would allow British Airways to extend its reach into Latin American, via the American Airlines’ hub in Miami, Florida.

Already, British Airways and American Airlines cooperate through the 10-member Oneworld alliance.

Airline regulators in the United Kingdom and the United States had, in 1997 and 2001, disallowed the two airlines’ application for antitrust immunity in order to forge an alliance, saying that the application would be approved only if the two airlines disposed of some of their valuable landing slots at Heathrow airport.

British Airways and American Airlines dropped their latest efforts in 2002 after antitrust regulators said the airlines would have to surrender a large number of takeoff and landing slots at London’s Heathrow Airport.

Media reports said airline regulators are concerned that stronger ties between British Airways and American Airlines “would jeopardise competition at Heathrow airport for other US carriers.” However, restrictions on air travel between the United States and the European Union have been relaxed under an “Open Skies” agreement.

The website dallasnews.com reported Charley Wilson, spokesman for American Airlines, as confirming that American Airlines “has had conversations with British Airways, its partner in the Oneworld alliance, and Continental Airlines.” On the plans of American Airlines, Wilson said, “there are a number of possibilities.”