Branson's fury at BA 'monster' tie-up with American Airlines

Published on 14/08/2008 21:50

CRITICS last night warned of a "monster monopoly" if British Airways' plans to form an alliance with American Airlines is given regulatory approval.

BA and its US partner yesterday revealed plans to apply to competition authorities in the United States for immunity from rules governing market share.

The companies said they would also notify regulators in the European Union.

But Sir Richard Branson, head of rival Virgin Atlantic, branded the proposed alliance as a monopoly that would be bad for passengers and the industry.

Earlier this week, Branson wrote to senators and presidential contenders Barack Obama and John McCain to warn that the proposed alliance would severely damage competition.

BA said it hoped the agreement – which also involves Iberia, the Spanish airline that BA plans to merge with – would receive regulatory approval by the end of the year and could begin operating next summer.

Willie Walsh, BA's chief executive, said times had changed since the failed 1997 and 2001 BA-AA tie-up attempts, with far more competition now possible on transatlantic routes thanks to the so-called "open skies" agreement which took effect in March this year. He denied the agreement was a way for BA to introduce cutbacks and said that hearing people arguing the deal would lead to higher fares and less competition was like "listening to a broken record".

Under the proposed deal – which falls short of a full merger – BA, AA and Iberia would share revenues on routes between the US, Canada and Mexico and the EU, Switzerland and Norway while continuing to operate as separate entities.

BA said this would help the three carriers reduce costs, attract new customers and combat high fuel prices.

The link-up would involve 443 airports in 106 countries and 6,200 daily departures.

The three carriers will now apply to US authorities for immunity from competition regulations – known in America as anti-trust regulations.

Walsh said that the rival airline alliances already had anti-trust immunity (ATI) on certain flights and ATI should be open to the "oneworld" alliance to which BA, AA and Iberia belong.

The three airlines will also notify EU authorities that will have to give the agreement the green light.

Walsh said: "We are not talking about cutting back.

"I don't see it leading to higher prices and I think it will increase competition on transatlantic routes."

Branson said: "Make no mistake – if this monster monopoly is approved it will be third time unlucky for consumers.

"BA/AA and Iberia would still be unacceptably dominant, with nearly half of all of the slots at Heathrow, leaving competitors powerless to take them on.

"The current economic slowdown is also no justification for agreeing to this alliance.

"The job of the regulators is to assess the long-term impact of the alliance on competition, not to provide special protection."