Continental Airlines, State Attorney General Warn Against American-British Airways Alliance

21st Dec 2001

Continental Airlines (NYSE: CAL) today
will file comments with the U.S. Dept. of Transportation warning that the
proposal by British Airways and American Airlines, the number one and two
carriers between the U.S. and the U.K., to jointly set fares and schedules
will suppress competition in transatlantic, intra-North American and intra-
European markets.

Today`s filing echoes comments by the U.S. Dept. of Justice and five major
U.S. and European airlines, who urge regulators on both sides of the Atlantic
to reject the proposed alliance—tantamount to a merger of the transatlantic

Underscoring today`s filing is a letter from the attorney general of New
York who urged U.S. Transportation Secretary Norman Mineta to ensure adequate
competition between New York (NYC) and London Heathrow (LHR), one of the
world`s busiest routes and the busiest intercontinental route from the U.S.
“AA and BA, the two biggest carriers on the NYC - LHR route, have the two
greatest frequencies, with a combined share of 64 percent,” wrote New York
Attorney General Eliot Spitzer.  “AA/BA`s weekly number of flights
(approximately 105) would dwarf those of the two smaller players, United and
Virgin Atlantic (approximately 28 each).  This combined share is analogous to
the combined share of AA and United, the number one and two domestic carriers,
between New York and Los Angeles or New York and Chicago O`Hare, and would be
at levels that raise serious antitrust concerns.  AA and BA, without
substantial divestitures, would be insulated from meaningful new competition
at Heathrow and could raise fares.”

Under the proposed alliance scheme, American and British Airways would be
a whopping 300 percent larger than the nearest competitor on U.S.-U.K. routes,
with nearly 81 percent of all U.S.-Heathrow travelers seeing competition
reduced or eliminated.  Proposed combinations among AA-BA and United-bmi
(British Midland) would create a level of U.S.-London Heathrow seat
concentration greater than a merger between the six largest domestic U.S.
carriers or combining the top 21 European airlines.

Today`s filing comes two days after two former high-ranking DOT officials
said in their own DOT filing that they were concerned an AA/BA alliance was
“likely to harm competition and lead to higher fares for consumers in numerous
U.S.-London and U.S.-Heathrow city-pair markets.”


Also filing in opposition to the proposed AA/BA alliance are civic parties
from New Jersey, Houston and Cleveland.



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