BA merger hopes dealt further blow

22nd Dec 2008

Following the collapse of merger talks with Qantas,

British Airways‘s plans for a global alliance have been dealt a further blow after the US Department of Transportation requested further details of its proposed tie-up with American Airlines.

The DoT has this weekend asked all three parties in the proposed tie-up - BA, AA and Iberia - to supply details of their take-off and land slots, fares, and data on how the alliance would affect capacity and pricing decisions. It is seeking a reply by 15 January, five days before President George W. Bush leaves office.The DoT is reviewing the bid to form an alliance that would be exempt from some competition provisions under US law. Antitrust immunity allows carriers to share routes, pricing and scheduling data without actually merging.

An attempted alliance by the two airlines ran aground several years ago, over US regulatory concerns about how this might harm access to Heathrow for other airlines.

But BA and AA are now arguing that a US/EU treaty reached last March relaxing restrictions on transatlantic service will increase competition across the Atlantic, benefiting passengers and carriers wishing to begin or expand services.


A spokesperson for BA rejected the notion that the DoT request would cause delays. He told The Independent newspaper: “As part of normal procedure, we expected requests for further information. We don’t anticipate any difficulty in responding to the requests, nor would we expect it to cause a delay. We have said all along that we expect approval well before the end of 2009.”

However rivals are expected to welcome the request. Virgin Atlantic has been lobbying particularly hard in the US to prevent what it describes as a “monster monopoly”. The airline has claimed that it would lead to BA/AA controlling 63 per cent of the Heathrow to New York JFK market.

Willie Walsh argues that the current economic climate is the bleakest he has known in 30 years in the industry, and that consolidation is essential for survival. The view is echoed by others in the industry, including Ryanair’s chief executive, Michael O’Leary, who reckons that just four European airlines - Air France, British Airways, Lufthansa and Ryanair - will survive the recession.

BA’s talks with Qantas fell apart last week after BA said that it would not agree to Qantas, currently the bigger of the two companies, owning more than 50 per cent of the combined firm.

Under Australian law, Qantas must remain majority-owned by Australian investors and its head office and major facilities must stay in Australia.


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