Setback for BA's joint venture with American Airlines

By KARL WEST
Updated:

British Airways' plan to form a joint venture with American Airlines on lucrative transatlantic routes suffered a setback after the US Department of Justice said it could 'result in competitive harm'.

The watchdog said BA and AA should agree to concessions to secure approval - officials recommended BA sell some precious take-off and landing slots at Heathrow.

BA and AA have twice tried, and failed, to form a joint venture across the Atlantic. On both occasions BA was told to give up Heathrow slots.

British Airways planes

Grounded: BA's plan to share costs with American Airlines has fallen foul of competition watchdogs

The flag-carrier's chief Willie Walsh has resisted suggestions that he hand over slots this time around.

The carriers, along with BA merger partner Iberia, want officials to waive normal competition rules to allow them to work together on routes between the US and Europe.

If the three Oneworld Alliance partners win so-called 'anti-trust immunity', it will mean they will be able to share costs and revenues, and set schedules on transatlantic routes.

But the US authorities said: 'The applicants claim substantial benefits will flow from an expanded alliance but they have not shown that immunity is necessary to achieve these benefits.'

The DoJ also claimed fares on transatlantic flights could rise by up to 15 per cent under the BA/AA plan. The agency identified six routes serving 2.5m passengers annually that would be particularly vulnerable to the dominant Oneworld partners, including Boston to London; Chicago to London; Dallas to London; Miami to London; Miami to Madrid; and New York to London.

Sir Richard Branson's Virgin Atlantic welcomed the DoJ's findings, adding: 'We continue to urge the regulators to reject the proposals.'

Rival alliances, Star and SkyTeam, have already been granted immunity by the US Department of Transportation (DoT), which will again have the final say on BA/AA's application.

BA said it would respond 'robustly' to the DoJ's findings, but noted objections raised by the agency were virtually identical to its conclusion when US carrier Continental joined the Star alliance earlier this year. Yet that alliance went ahead.

BA said it believes the DoT should ignore the arguments put forward by the Justice Department.

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