BA's proposed deal raises Virgin's hackles

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Posted by: Economist.com | LONDON
Categories: American Airlines British Airways Virgin
BRITISH AIRWAYS (BA) is expected to approach America’s Department of Transportation this week to request the antitrust immunity that would allow it to establish a joint venture with American Airlines. BA is already planning for a full merger with Iberia, Spain’s flag-carrier, and apparently wants an alliance with American that would allow the further sharing of costs and revenues.

The two airlines have tried to bring their operations together twice before, but were rebuffed both times on anti-competition grounds. To get over that hurdle this time, BA is reported to be willing to give up some transatlantic flights.

Virgin Atlantic, BA's main British competitor, is desperate to prevent the tie-up. Sir Richard Branson, Virgin’s boss, has written to America's presidential candidates, John McCain and Barack Obama referring to the proposed alliance as “an anti-competitive agreement which will inevitably lead to less competition and higher fares”.

He said, "BA/AA would have a combination of high frequencies and a transatlantic network that could not be replicated by any other airline/alliance, and which would make it impossible for other carriers to compete for time-sensitive corporate or business travelers.”

Virgin’s objection relates to the amount of traffic that such an alliance would control at Heathrow airport. For example, it would have 63% of the market to New York JFK and 100% of the market to Dallas Fort Worth.

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