American, BA Offer to Cede London Airport Slots to Aid Alliance
March 10, 2010, 9:37 AM ESTBy Stephanie Bodoni and Erik Larson
March 10 (Bloomberg) -- AMR Corp.’s American Airlines and British Airways Plc offered to cede at least four takeoff and landing slots in London for flights to New York and three other U.S. cities to win approval for their proposed alliance.
Passengers on carriers that obtain the routes also would be able to earn frequent-flier benefits from American and BA, the European Commission said today. The Brussels-based regulator will seek industry comments before a final ruling on the deal, which also includes Iberia Lineas Aereas de Espana SA.
The effort to form a trans-Atlantic joint venture is the third by American and British Airways, the leading carriers in the Oneworld alliance, after two previous bids were rejected or abandoned. Delta Air Lines Inc.’s SkyTeam alliance and United Airlines’ Star Alliance already have such partnerships in place.
“The balance of probabilities is that this will get approval,” said Jonathan Wober, an analyst at Societe Generale in London with “hold” recommendations on British Airways and Iberia stock. “The competitive landscape has changed since the last time they applied and the other two main alliances are operating this type of arrangement.”
BA and American offered to give up slots at London’s Heathrow and Gatwick airports to maintain competition on routes to New York, Boston, Dallas-Fort Worth and Miami, the EU said. On the New York-London route, a new competitor would get authorization to fly to New York’s Kennedy airport, the EU said.
Dallas-Fort Worth and Miami are among American’s biggest U.S. hubs. Airlines typically prefer overseas routes that feed into their own hubs, not another carrier’s.
U.S. Backing
The American and BA alliance won U.S. backing last month that would allow them to jointly price, market and schedule international flights after making similar concessions to give up four pairs of takeoff and landing slots from Heathrow airport, Europe’s busiest, to competitors.
London-based British Airways rose 2.6 pence, or 1.2 percent, to 225.8 pence at 2:30 p.m. Spanish carrier Iberia increased 0.4 percent to 2.35 euros in Madrid. AMR gained 18 cents, or 1.8 percent, to $9.95 in New York Stock Exchange trading.
“We’ve offered to lease slots to gain EC approval for our joint business which will bring benefits to our customers, shareholders and employees,” said Willie Walsh, the chief executive officer of British Airways, in a statement.
‘Woefully Inadequate’
Virgin Atlantic Airways Ltd., the U.K. long-haul carrier owned by billionaire Richard Branson, said in a statement today that the concessions are “woefully inadequate.” Branson met this week with EU Competition Commissioner Joaquin Almunia to discuss his concerns.
“I hope that the commissioner takes time to consider the proposals through the eyes of consumers before any decision is taken on whether it is given the go-ahead,” Branson said.
The airlines offered two pairs of slots from Heathrow or Gatwick airport to Boston, one daily pair of slots from Heathrow or Gatwick to Dallas-Fort Worth and one to Miami. The airlines said they may offer two further slot pairs on routes to New York “at some point in the future.”
The companies offered the remedies after the commission said in October the deal may break rules on restrictive business practices.
“If the market test confirms that the proposed commitments remedy the competition concerns,” the commission said it may decide to make them binding.
Carriers are vying to bolster partnerships on sales and scheduling to cut costs amid a slump in demand for air travel caused by the global recession.
Cabin Crew Strike
While British Airways works to resolve the EU antitrust case, it is also trying to prevent a cabin-crew strike over staffing levels. Talks with the Unite union, which represents 12,000 BA flight attendants, continued into today after they were scheduled to end yesterday, said Laura Goodes, a company spokeswoman.
Unite won backing for a walkout at British Airways in a monthlong poll of cabin crew that ended on Feb. 22. The mandate lasts for four weeks, and the union must give the company seven days’ notice of a strike, leaving March 15 as the last day that it could bring workers out.
--With assistance from Steven Rothwell in London, Mary Jane Credeur in Atlanta and Mary Schlangenstein in Dallas. Editors: Anthony Aarons, Ed Dufner
To contact the reporter on this story: Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net; Erik Larson in London at elarson4@bloomberg.net; Steven Rothwell in London at srothwell@bloomberg.net
To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net;
