London, Tuesday, October 19, 1999: The following statement was issued tonight by British Airways in response to British Midland`s announcement that it is in talks with Lufthansa about the German airline buying 20 per cent of its shares and joining the German/US-led Star alliance:
“This is the beginning of the sale of British Midland to Lufthansa and is the start of consolidation in the European airline industry. British Midland is now under German influence.
“It is a sell out to an alliance which has been given anti-trust immunity to share capacity and fix prices over the Atlantic and which carries out volume-related discount selling of its tickets. British Airways has been denied all these privileges.
“Its immediate effect will be to allow not only Lufthansa but also its partner United Airlines to influence the use of British Midland`s extensive slot bank at Heathrow. (The Star Alliance will now have more than 24 per cent of the slots at Heathrow and nearly 70 per cent at Frankfurt. British Airways has only 38 per cent at Heathrow and a minimal number at Frankfurt.) It will, unless regulated, decimate competition on London-Frankfurt and on London-Scandinavian routes.
“British Midland has by this deal allowed German and US airlines direct influence over who flies from Heathrow and from many English regions. Just as Virgin leased its space to Continental Airlines, thereby allowing Continental direct access to British traffic, so British Midland has sold its rights to overseas rich and powerful carriers with huge domestic markets where they face little competition.
“British Midland`s `Make the Air Fair Campaign` was always dubious - real air fares across the Atlantic have never been lower. It should now be seen as a price-raising initiative, a raise not in fare price but in the price to be asked when trussing British Midland for sale.
“Consolidation in Europe must come but it must be on equal terms. No one carrier or group alliance of carriers should seek to increase its dominance of any given airline route. European carriers should operate to the same laws. The Star axis should operate the same selling tactics as British Airways does and not behave in ways which the European Commission has prohibited. Immunity for alliances is a question which must be re-visited: The Star Axis dominates Frankfurt. British Airways was prohibited from an alliance with American Airlines except on terms which would have emasculated it.
“This deal itself will require regulatory review and probably, in due course, approval as a merger. Slots at Frankfurt and perhaps elsewhere will have to be released, the question of immunity must be revisited and European selling practices harmonised.
“As consolidation continues, if the liberal policies of the British Government, which allow this sale, are not once again to make British skies alone the forum in which a European air war is to be fought, the European Commission and the UK Government need to be on the alert.”