Virgin to launch £3m spoiler campaign against BA-AA alliance

11th Aug 2008

Virgin Atlantic is launching a £3m lobbying campaign to scupper BA’s proposed joint-venture with American Airlines, claiming it would severely damage competition on major transatlantic routes and leave consumers worse off.
The move follows BA’s widely-expected application to the US Department of Transportation for anti-trust immunity to operate a revenue and profit-sharing joint venture with American.
Virgin plans an advertising and lobbying spree once the application is made, according to The Telegraph.
Steve Ridgway, Virgin Atlantic’s chief executive, said the two carriers would account for 62 per cent of all passengers travelling between Britain’s premier airport and the US, with the pair controlling 49 per cent of peak-time arrival slots at Heathrow.
“It is going to be difficult for BA and American to defend the indefensible,” said Ridgway. “They will have such a dominant share at Heathrow and JFK that there is no justification for this being in the consumer interest.”
Ridgway denied that the “open skies” deal between America and the European Union on traffic rights, introduced in March, had increased competition. “Open skies has created hardly any extra competition and in fact there are fewer carriers now operating between the UK and US than there were before,” he said.
Richard Branson has also written to both US Presidential, Senators Barack Obama and John McCain. Sir Richard says that “airlines everywhere are struggling with the current price of oil, but the solution to their problems should not lie in an anti-competitive agreement which will inevitably lead to less competition and higher fares.”

The two airlines have tried twice before to gain permission to bring together their operations and, on both occasions, every regulator that examined the alliance raised serious concerns about the anti-competitive nature of the proposal.

He adds: “BA and AA will argue that their alliance is now acceptable because the competitive environment has changed with the Open Skies accord on UK-US routes. This is a complete red herring. Open Skies (which is only a temporary accord as it may be unwound in 2010) has not significantly increased competition on UK/London-US routes.”

The key issue for the competition authorities is the market dominance that
a combined BA/AA will have in individual markets. Branson says there are six Heathrow routes on which BA and AA overlap and where competition would be reduced.

BA is arguing that the climate has changed amid record fuel and the global downturn, adding that six rivals - Northwest Airlines, Delta Air Lines, Air France, KLM, Alitalia and CSA Czech Airlines - had recently won approval for their own anti-trust deal.



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