AA, BA, IB joint partnership

PHL

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http://www.ft.com/cms/s/0/ac3382cc-4881-11...?nclick_check=1


American, Iberia and BA plan joint deal

By Justin Baer in New York and Kevin Done in London

Published: July 2 2008 23:33 | Last updated: July 2 2008 23:33

American Airlines, British Airways and Spain’s Iberia are close to applying for antitrust immunity to form a joint venture that would be one of the most powerful forces in the transatlantic aviation market.

The airlines aim to reach an accord on profit and revenue sharing this month, according to executives at the three carriers.

Record fuel costs, weakening economies and the impact of the “open skiesâ€￾ treaty agreed last year between the US and the European Union have encouraged many of the largest carriers from both sides of the Atlantic to draw closer to old allies or to forge new partnerships.

American’s current bilateral agreement with BA excludes their transatlantic routes, where the relationship would offer most potential benefits.
 
Don't think so. Federal law still prohibits more than 25% foreign ownership of a U.S. airline, and I don't see BA putting any money into AMR without some control over how that money gets spent.

This is a joint venture along the lines of the AF/KLM/DL arrangement that is more than a codeshare, but less than intermingled ownership. It does require anti-trust immunity because there are a lot of common routes where price-fixing could be alleged.
 
With the stock in the 4 dollar range and the weak dollar this is the time for 25% foreign investors.
 
I know that MA sucks monkey balls, but any reason why 1-world member AY is left out of this partnership?
Dunno, but QF & JL are missing, too. My guess is they are starting small with the most troublesome of the partners. AA/BA has been more than a decade in the making, thanks to Branson and the LHR slot restrictions. Now that UA is dropping DEN-LHR and LH is about to gobble up BD, I guess slots concentration for oneworld carriers aren't as much of a concern...

Given the recent ATI approval for Skyteam, l'd be shocked if they get turned down this tim@... but stranger things do happen where AA and Federal approvals go...
 
Perhaps. Thinking about it more, the only places ATI are required are where both carriers operate, so there's no need for AY,MA or RJ on the Atlantic.
 
Perhaps. Thinking about it more, the only places ATI are required are where both carriers operate, so there's no need for AY,MA or RJ on the Atlantic.

Mr. E:

Finnair (AY), Malev (MA, Hunky), and Royal Jordanian (RJ) all (I think) fly Atlantic routes. Not complaining, but why wouldn't ATI be required? Don't they all, to some extent, use JFK or some other large NYC area airport for regular trans-ATL flights, thereby serving the same market?
 
Anti-trust issues arise when two or more airlines dominate a particular route--for instance AFAIK, BA and AA have the total market on non-stops DFW-LHR. JFK is a totally different kettle of fish. The other OneWorld members you mentioned fly routes that we don't. No ATI issue.
 
Anti-trust issues arise when two or more airlines dominate a particular route--for instance AFAIK, BA and AA have the total market on non-stops DFW-LHR. JFK is a totally different kettle of fish. The other OneWorld members you mentioned fly routes that we don't. No ATI issue.

OK - that clears that up for me.

It never ceases to amaze me how something so simple (sometimes) can be turned into such a mess.

"To err is human, but to really screw things up requires either the government or a computer."
Anon.
 
Mr. E:

Finnair (AY), Malev (MA, Hunky), and Royal Jordanian (RJ) all (I think) fly Atlantic routes. Not complaining, but why wouldn't ATI be required? Don't they all, to some extent, use JFK or some other large NYC area airport for regular trans-ATL flights, thereby serving the same market?

The way that I understood "Mr. E" is that ATI would be required only if AA operated USA-BUD; USA-HEL; USA-AMM from the same city/cities as AY, MA, RJ. Is that correct?

I guess it is, jimntx said the same thing more or less before I submitted my post.
 
Y'all covered it pretty well.

BA because of all the ex-LHR routes which have service by both AA and BA. Some of them have a third or fourth player in the market (i.e. LAX, ORD, JFK, MIA). Others don't.

IB because of MIA/JFK to BCN/MAD... Again, direct overlap with minimal competition, but not for a lack of access.

AA first applied for immunity with BA in 1997, and it died in 1999 (slot divestiture and lack of open skies). They next applied in early 2001, and which was dragged out for another year before they withdrew the app for a second time (again, lack of open skies).

So this has been 11 years in the making. With all the broad immunity already granted to Skyteam and Star Alliance, plus open skies, there's really no reason for the US to deny them this time around. The UK might step in an balk at the fact that there isn't any progress on opening up the US domestic market, but it's not the UK who would rule -- it's the EU, and there's more than enough precedent with the other two alliances.
 
It does require anti-trust immunity because there are a lot of common routes where price-fixing could be alleged.

Agreed, with one addition: Price-fixing is the intention here - AA, BA and IB will probably seek to pool revenues on some routes and fix prices on others.