Airlines Seek to Tie Transatlantic Knots

A British Airways Boeing 777-200ER descends on its final approach to Washington Dulles Airport. BA, American Airlines and Iberia, all in the oneworld alliance, are seeking anti-trust immunity to combine resources on transatlntic routes. Two other major groupings of airlines from the Star Alliance and the SkyTeam Alliance already have obtained anti-trust immunity for similar transatlantic 'joint ventures.' Credit: BMcD

American Airlines, British Airways and Spain’s Iberia Airlines want to become transatlantic triplets.

They said so Thursday, when the three carriers jointly announced they are asking United States and European Union regulators to grant anti-trust immunity and permit them to share routes, frequent flyer programs and airport lounges, as well as sharing revenues from prime routes over the Atlantic Ocean.

The proposed deal would stop short of a full-blown merger (although BA and Iberia are talking about merging). But a three-way tie-up would allow the airlines to draw closer while still remaining legally independent and maintaining their own brands.

BA, American and Iberia, which already conduct joint marketing as members of the oneworld alliance, argue that they need to strike a closer deal to prosper in an era of high fuel prices and open skies. An "open skies" treaty that went into effect in March allows U.S. and European carriers to fly directly to a widening range of destinations in each other’s home markets, making transatlantic service increasingly competitive.

It’s not certain whether this proposal will clear regulatory hurdles anytime soon — American told me a 6-to-12 month timeline for a decision is likely. In fact, plans by BA and American to partner have twice been scuppered in recent years.

But suppose this time it’s OK. What would it mean for consumers now battered by rising fares, metastatizing fees, flight delays, cancellations and congested airports?

It wouldn’t solve all those problems. But there is potential good in it for air travelers.

For one thing, it would allow the carriers to expand code-share agreements between North America and Europe, booking travelers on each other’s flights, and on to connecting flights.

In theory, as the trio of carriers claimed in a joint statement on Thursday, this would “expand customer choice by supporting routes that would not be economically viable for the individual airlines. This means the airlines will have greater ability to invest in their products, services and fleets."

The proposed plan brought an immediate and predictable retort from Richard Branson, head of BA’s smaller but nimble rival Virgin Atlantic Airways, who called the potential tie-up “a monster monopoly."

It's probably not. With open-skies, barriers to entry have been lowered for a variety of players, many of which also use code-shares and some of which have anti-trust immunity. Four huge members of the rival Star Alliance — Lufthansa, United Airlines, Air Canada and US Airways, which combined form an even larger group than the proposed AA/BA/IB triad — already have been granted anti-trust immunity, enabling them to form a de facto alliance-within-an-alliance.

So too have SkyTeam Alliance airlines Delta, Northwest, Air France-KLM, Alitalia and Czech Airlines. In terms of revenues, Air France-KLM is the largest airline group in the world. The anti-trust immunity granting it and its four partners the ability essentially to operate as one airline for transatlantic flights has created a marketing joint venture far larger than that which American, British Airways and Iberia are proposing.

What airline tie-ups mean for consumers is not that there won’t be competition on popular routes, but that the major players will be larger entities with a broader suite of shared products. Such partnerships still fall short of outright mergers. National prestige and security concerns put formidable obstacles in the way of trans-border mergers, the creation of Air France-KLM notwithstanding.

Until and unless international mergers become more common, partnerships are the most the airlines can do. If this proposal prevails, travelers could see some concrete ease-of-travel changes by this time next year.

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